Transformative technology and their legal risks

This article was first published in Connect magazine.

Investment in the technology sector continues to boom, creating potentially transformative technologies which naturally attract businesses seeking to enhance their competitive advantage. However, these potentially transformative technologies do pose legal risks that must be adequately considered.

Machine Learning and Artificial Intelligence (AI)

The transformative potential machine learning and AI have to improve and streamline performance is now being realised, but the reputational and legal risks of using them continue to grow. The European Union’s proposed AI regulation is being viewed with particular interest given that it is the first such piece of legislation proposed by any major regulator. Businesses seeking to harness the unquestionable potential of these processes must be aware of the reputational and legal risks.

The metaverse

The metaverse has been hailed as the new frontier for business. Businesses will no doubt want to explore how this space can supplement or even enhance existing business practices. It is expected that the metaverse will create a “direct-to-avatar” economy where businesses sell digital assets to the avatars themselves. This will most likely be achieved by businesses partnering with the digital platforms hosting the metaverse. Businesses will have to consider how to protect their valuable intellectual property within a virtual world and how our existing laws may apply, be enforced and evolve in a virtual reality world.

Responsible tech

Businesses will have seen the demand for ethical business practices and responsible innovation has greatly enhanced in recent years. Whilst principles such as fairness, transparency, accountability, access and explainability have been a key focus for businesses for quite some time in discrete areas of business such as data protection and cyber security, it is becoming increasingly apparent that there is a desire for these principles to be expanded into other areas of business practice. For example, businesses are coming under increasing pressure (whether that be from their suppliers or their customers) to have regard to ethical sourcing (where businesses have to examine supply chain visibility and management on a broad range of matters). The combination of regulatory pressure, litigation risk and public awareness will make ethical considerations key for business owners going forward. We also expect that investors are likely to become increasingly interested in a business’s ethical practices and this may become a key measure when it comes to determining the value of a business.

We have seen many businesses seeking to demonstrate their ethical practices by investing in or diversifying into ‘climate tech’ and ‘infratech’ (the integration of technology with infrastructure). Businesses operating in these fields have the potential to bring about world-changing results. However, to maximise the potential of those potential results and to preserve the value of those businesses they must ensure that the business moats they have established (be that talent pools or intellectual property) are adequately protected through robust legal mechanisms, as without those, the value of a business could quickly dissipate.

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