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Freshfields Risk & Compliance

| 3 minutes read

Innovation risks: legal implications of new technologies

A new drone enters a market, a self-driving car is developed – what are the legal threats which can arise during the lifetime of such innovative products? In October, the Law Commission for England and Wales and Scottish Law Commission published their second consultation paper on automated vehicles highlighting key legal questions (see here). In our latest Risk Academy held in London, we examined the impact of new technologies and the innovation risks in the fields of intellectual property, antitrust law and product liability, explaining how some of the threats might be avoided or minimised. Three different spotlights on the subject from the three different fields:

Intellectual property: Monitoring patent filings offers an opportunity to see the technologies of the future, today. In November 2018 the European Patent Office reported an increase in the annual number of patent applications relating to self-driving vehicles of more than 330% compared with 2011, a growth rate more than 20 times faster than that for patent applications in general. The top-filers include not only traditional car manufacturers, but also tech giants such as Intel and Qualcomm. It is yet to emerge whether these companies will be adopting a licensing or a manufacturing / distribution model to exploit their technologies. In a crowded field, freedom to operate is a challenge. At the Risk Academy we addressed the practical steps companies should take to ensure they can enter the market freely, and also discussed pan-European litigation strategies which could be deployed by (or against) patentees. There has been only limited litigation in the self-driving vehicle space to date: mostly focused on ‘lidar’ technology, a system of lasers that allows an autonomous vehicle to create a 3D map of its environment. A billion-dollar trade secrets suit brought by Waymo (originally a Google project) against Uber settled in 2018. Recently Velodyne, the world’s largest producer of lidar sensors, has brought patent actions in California against two Chinese companies, Hesai and Robosense. The volume of IP litigation in this field is only likely to escalate.

Antitrust and competition: Antitrust agencies around the world are increasingly interested in the implications of new technologies for competition and consumer choice. Historically, collaboration between competitors on R&D was not a priority area for enforcement by antitrust authorities because of the inherent benefits for innovation.  But some recent developments, including the European Commission’s ongoing antitrust investigation into cooperation between car manufacturers regarding clean emissions technology, suggest this is a space to watch. Where will authorities draw the line between possible restrictions of competition and other legitimate discussions between competitors about technical issues, such as in standard setting? Moreover, safety is of course a primary concern with ground-breaking technology like driverless cars and commercial drones. However the approach to safety assurance can also have an impact on competition. If quantity restrictions were to be imposed on automated cars, for example, this could potentially stifle further innovation or lead to de facto market allocation. The Law Commission recognizes that “for automated services … the first developed will not necessarily be the best” and a cap on the number of automated cars on the road could also protect incumbents against competitors. Agencies and policy makers therefore face a difficult balancing act to ensure that the actions they take in innovative tech markets avoid creating an uncertain regulatory climate, preserve incentives for innovation and enable wide consumer choice. For more analysis on the issues around regulating the disruptors and heightened antitrust scrutiny when investing in tech, see our “10 key themes in antitrust 2019” here.

Product liability: Finally, new technologies also challenge the current system of product liability (the system by which consumers can bring legal claims for compensation against producers of defective products that cause them harm). The European Product Liability Directive was established at a time when products such as drones and automated vehicles were pure science fiction so that the law was based on analogue products. However, it is currently being intensively discussed whether the present regime is capable of dealing with highly complex, interconnected products or whether, and if so how, it needs to be adapted (see first Law Commission paper here). At a European level, an Expert Group on liability and new technologies has been set up in order to assist the European Commission in examining whether changes to the current EU regime are needed (for more information about this expert group, see here). Subjects of discussion are for example: Is software a product? What is the effect of software updates and continuously self-learning, autonomous systems for assessing a defectiveness? And is there a need to reverse the burden of proof? We considered these and other issues at the Risk Academy. In particular, we considered the need for producers of innovative products to give particularly careful consideration to product warnings and to the instructions given to users. We also looked at how making sure that a producer has the right contractual protections in place with its suppliers and customers can help it mitigate liability and even recover defence and other costs, if something does go wrong with its product and it faces litigation.

Our Risk Academies are regular workshops for in-house lawyers, on a range of risk topics.  Please contact Ashmita Garrett if you would like to be invited to the next one.


retail and consumer goods, product liability, antitrust and competition, intellectual property, manufacturing