If You Can't Beat Them, Join Them! How to Make
Disruptive Technology Work For You
Roger Bickerstaff, Partner, Bird & Bird LLP
Michelle Chan, Partner, Bird & Bird LLP
Martin Felli, Chief Legal Officer, Corporate Secretary, JDA Software
David Kennedy, Executive Vice President, General Counsel and Chief
Compliance Officer, Infosys
Digital transformation impacts many industries. Increasingly, companies must embrace
digital transformation both in order to combat the impact of new market-entrants and to
place themselves in an advantageous position in relation to their competitors. This
presentation and accompanying materials will identify four key areas of legal and
commercial challenge along the following lines:

Structuring Issues - once a company has decided that it wants to engage in a
disruptive project it needs to think about how it will acquire the technology. Main
routes:
o
In-house development – less likely: difficult for a company to disrupt itself
without external input;
o
Supplier-customer purchase arrangements – possible but lacks extensive buy-in
on an on-going basis from both sides;
o
Joint venture between customer and tech provider – becoming increasingly
common;
o
Corporate acquisition – can appear attractive but requires the acquirer to
potentially "bet the business" on one technology.

Additional considerations:
o
Geographical variations – what are the common approaches in the US, Asia and
Europe?
o
Pros and cons of each approach –

Complexities of JVs: difficult to set up, not easy to operate; can be
competition law issues; IP ownership is a particularly tricky issue;
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
Corporate acquisition: when does it make sense, how to retain talent,
should acquired entity be integrated into purchaser?

Supplier- customer: useful for "building-blocks" of disruptive services
(e.g. use of cloud solutions – quick + cheap to set up)

Regulatory Issues – Is the Project Legal? The company needs to ensure that the
proposed activities are legal or take the business decision that it will proceed and figure
out compliance as it goes.
o
Sector specific regulation: each area of business has its sector specific regulation:
key role for in-house lawyer in leading the assessment of the new activities with
the regulatory environment. Regulation often does not cover the new activities
and requires engagement with the regulatory authorities.

Examples:

Early crowd-funding companies engaging with the UK Financial
Services regulator;

Autonomous cars – good example of a technology where the tech is
pretty much ready, but the regulatory environment needs a lot of
work;

Risks with figuring it out as you go – compare Uber and Aereo.
The Aereo case is included in materials.

o
Human gene editing - CRISPR/Cas9 & other biotech innovations.
General regulatory environment:

Consumer legislation

Competition law – particularly for JVs

Data protection – there are different US, Euro, and Asian perspectives on
this – for EU issues - see Bird & Bird "Guide to the GDPR" (included in
materials)

Trade mark issues: impact of digital transformation on established trade
mark protection arrangements – see e.g. Merck case (case analysis
available at http://www.twobirds.com/en/news/pressreleases/2016/global/bird-and-bird-successful-in-uk-breach-of-contractand-trade-mark-action-for-merck )
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
Data Ownership and Security - companies impacted by disruptive technologies will
produce a lot more data about their customers, supply chains, business operations, etc.
What they can and should do with the data is likely to have a significant impact on the
overall success of the disrupted company. It may be that the commercial exploitation of
the data becomes the main focus of the disrupted company.
o
Data ownership – who controls the use of the data? Other than privacy, are there
other restrictions that need to be taken into account? Different perspectives in the
US, Europe and Asia.

For a general overview of the issues - see "Unlocking the Value of
Personal Data: From Collection to Usage", World Economic Forum
(included in materials)

Presentation on data ownership in Europe (included in
materials) – for an English perspective on data ownership – see
"Information Ownership in the Cloud", Chris Reed, Queen Mary
University of London available at
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1562461

Other issues: copyright protection for databases - EU Database Right
gives a sui generis right which exists alongside but is different to copyright
protection explored in the Feist case.

For the EU approach to Database protection see Football Dataco
case (case analysis available at
http://www.twobirds.com/en/news/articles/2012/footballdataco-ltd-v-stan-james-plc-sportradar-gmbh0213)

For comparison, see Feist Publications, Inc. v. Rural Telephone
Service Company, Inc. (included in materials)
o
Security – what are the relevant security constraints? E.g. in the EU the NIS
(Network and Information Systems) Directive imposes obligations on providers
of "essential services".

What are the different constraints in other locations? For a resume of the
NIS Directive obligations see
http://www.twobirds.com/en/news/articles/2016/global/new-security3
and-reporting-requirements-for-infrastructure-providers-and-certaindigital-businesses

Artificial Intelligence - the use of AI in the business environment is increasing
rapidly.
o
Popular examples include: Infosys’ Mana, IBM's Watson + the Ross legal spin-off.
DeepMind is being used by Google to optimise power usage in data centres and
Accenture is building a new business around IPsoft’s Amelia AI.

See various press reports on the use of IBM Ross by Baker Hostetler
available at
http://www.forbes.com/sites/amitchowdhry/2016/05/17/law-firmbakerhostetler-hires-a-digital-attorney-named-ross/
o
The legal implications of AI and – in particular – machine learning are
significant: how are liability issues to be addressed when a machine (as opposed
to a programmer or the user) takes a decision (or makes a mistake) or produces
IP? Are there possible legal liabilities where no one may be at fault?
o
What policy issues will arise around AI and should efforts be proprietary or open?
See the OpenAI efforts sponsored by Sam Altman and Elon Musk at
https://openai.com/blog/introducing-openai/.
o
What are the different approaches to liability issues around the world? In most
places the regulatory environment has not yet caught up. Countries that already
have strict liability of the owner may be better placed.

Registration and compulsory insurance schemes?

Concept of limited legal personality for some instances of AI

For a detailed analysis of the legal implications of AI in specific sectors –
see http://www.robolaw.eu/

See also Draft Report to the Commission on Civil Law Rules on Robotics,
EU Committee on Legal Affairs available at
http://www.europarl.europa.eu/sides/getDoc.do?pubRef=//EP//NONSGML%2BCOMPARL%2BPE582.443%2B01%2BDOC%2BPDF%2BV0//EN
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