Blockchain Archives - The National Law Forum

Exploring the Future of Information Governance: Key Predictions for 2024

Information governance has evolved rapidly, with technology driving the pace of change. Looking ahead to 2024, we anticipate technology playing an even larger role in data management and protection. In this blog post, we’ll delve into the key predictions for information governance in 2024 and how they’ll impact businesses of all sizes.

Embracing AI and Automation: Artificial intelligence and automation are revolutionizing industries, bringing about significant changes in information governance practices. Over the next few years, it is anticipated that an increasing number of companies will harness the power of AI and automation to drive efficient data analysis, classification, and management. This transformative approach will not only enhance risk identification and compliance but also streamline workflows and alleviate administrative burdens, leading to improved overall operational efficiency and effectiveness. As organizations adapt and embrace these technological advancements, they will be better equipped to navigate the evolving landscape of data governance and stay ahead in an increasingly competitive business environment.
Prioritizing Data Privacy and Security: In recent years, data breaches and cyber-attacks have significantly increased concerns regarding the usage and protection of personal data. As we look ahead to 2024, the importance of data privacy and security will be paramount. This heightened emphasis is driven by regulatory measures such as the California Consumer Privacy Act (CCPA) and the European Union’s General Data Protection Regulation (GDPR). These regulations necessitate that businesses take proactive measures to protect sensitive data and provide transparency in their data practices. By doing so, businesses can instill trust in their customers and ensure the responsible handling of personal information.
Fostering Collaboration Across Departments: In today’s rapidly evolving digital landscape, information governance has become a collective responsibility. Looking ahead to 2024, we can anticipate a significant shift towards closer collaboration between the legal, compliance, risk management, and IT departments. This collaborative effort aims to ensure comprehensive data management and robust protection practices across the entire organization. By adopting a holistic approach and providing cross-functional training, companies can empower their workforce to navigate the complexities of information governance with confidence, enabling them to make informed decisions and mitigate potential risks effectively. Embracing this collaborative mindset will be crucial for organizations to adapt and thrive in an increasingly data-driven world.
Exploring Blockchain Technology: Blockchain technology, with its decentralized and immutable nature, has the tremendous potential to revolutionize information governance across industries. By 2024, as businesses continue to recognize the benefits, we can expect a significant increase in the adoption of blockchain for secure and transparent transaction ledgers. This transformative technology not only enhances data integrity but also mitigates the risks of tampering, ensuring trust and accountability in the digital age. With its ability to provide a robust and reliable framework for data management, blockchain is poised to reshape the way we handle and secure information, paving the way for a more efficient and trustworthy future.
Prioritizing Data Ethics: As data-driven decision-making becomes increasingly crucial in the business landscape, the importance of ethical data usage cannot be overstated. In the year 2024, businesses will place even greater emphasis on data ethics, recognizing the need to establish clear guidelines and protocols to navigate potential ethical dilemmas that may arise. To ensure responsible and ethical data practices, organizations will invest in enhancing data literacy among their workforce, prioritizing education and training initiatives. Additionally, there will be a growing focus on transparency in data collection and usage, with businesses striving to build trust and maintain the privacy of individuals while harnessing the power of data for informed decision-making.

The future of information governance will be shaped by technology, regulations, and ethical considerations. Businesses that adapt to these changes will thrive in a data-driven world. By investing in AI and automation, prioritizing data privacy and security, fostering collaboration, exploring blockchain technology, and upholding data ethics, companies can prepare for the challenges and opportunities of 2024 and beyond.

Jim Merrifield, Robinson+Cole’s Director of Information Governance & Business Intake, contributed to this report.

New York Enacts Crypto Mining Moratorium

On November 22, 2022, New York Governor Kathy Hochul signed into law a two-year moratorium against granting permits to crypto mining operations that “are operated through electric generating facilities that use a carbon-based fuel.” Renewable sources of energy are not impacted.

The legislation, among the first of its kind in the nation, prohibits the state’s Department of Environmental Conservation from issuing any new or renewal permits to electricity generating facilities reliant on carbon-based fuel supporting crypto mining operations that use proof-of-work authentication methods to validate blockchain transactions. The law applies to all permits and renewal applications filed after its effective date, and therefore grandfathers certain businesses that held permits prior to the date of enactment. The Department of Environmental Conservation and the Department of Public Service are also tasked under the legislation with preparing an environmental impact statement on cryptocurrency mining operations that use proof-of-work authentication techniques.

For more Environmental Law news, click here to visit the National Law Review.

Could the Crypto Downturn Lead to a Spike in M&A?

In 2021, we saw a cryptocurrency boom with record highs and a flurry of activity. However, this year, the cryptocurrency downturn has been significant. We have seen drops in various cryptocurrencies ranging from 20 to 70 percent, with an estimated $2 trillion in losses in the past few months.

Industry watchers had already predicted a spike in crypto M&A from the beginning of 2022, and in a recent interview with Barron’s, John Todaro, a senior crypto and blockchain researcher at Needham & Company, said he believes this downturn could lead to a wave of mergers and acquisitions in the crypto space for the second half of this year and even into 2023.

Valuations have dropped across the board this year as the market has faced incredible volatility, and Todaro told Barron’s, “The valuations for public crypto companies have fallen by about 70% this year.” These lower valuations could make these companies increasingly attractive targets for acquisition, and this activity has already started to pick up.

According recent coverage from CNBC, some larger crypto companies are already looking for acquisition targets in order to drive industry growth and to help them acquire more users. Todaro feels most of the M&A activity we will see will be this kind of crypto to crypto acquisition as opposed to traditional buyers, although there is still opportunity for non-crypto companies to capitalize on these lower valuations and some are already doing so.

With more government regulation coming for the crypto sector this year, it could also impact the activity level as well. Achieving some legal and regulatory clarity could have implications for this uptick in M&A for crypto companies. Our analysis of the SEC’s recent proposed regulations, other government activity in this area, and their potential implications can be found here.

We could of course see a growing number of acquisitions across industries as valuations remain lower than a year ago, but as the crypto sector continues to see this kind of a downturn, the level of activity in this area could be much greater than it has previously seen. With that said, both the target company and the acquirer should be looking at any transactions with the same level of due diligence instead of rushing into any deal fueled by panic or haste.

Article By Louis Lehot of Foley & Lardner LLP

For more mergers and acquisitions legal news, click here to visit the National Law Review.

Are You Being Served? Court Authorizes Service of Process Via Airdrop

In what may be the first of its kind, a New York state court has authorized service via token airdrop in a case regarding allegedly stolen cryptocurrency assets. This form of alternative service is novel but could become a more routine practice in an industry where the identities of potential parties to litigation may be difficult to ascertain using blockchain data alone.

Background on the Dispute

According to the Complaint in the case, the plaintiff LCX AG (“LCX”) is a Liechtenstein based virtual currency exchange. As alleged in the Complaint, on or about January 8, 2022, the unknown defendants (named in the Complaint as John Does 1-25) illegitimately gained access to LCX’s cryptocurrency wallet and transferred $7.94 million worth of digital assets out of LCX’s control. Cryptocurrency wallets are similar in many ways to bank accounts, in that they can be used to hold and transfer assets. In the same way a thief can transfer funds from a bank account if they gain access to that account, thieves can also transfer cryptocurrency assets if they gain access to the keys to the wallet holding digital assets.

Following the alleged theft, LCX and its third-party consulting firm determined that the suspected thieves used “Tornado Cash,” which is a “mixing” service designed to hide transactions on an otherwise publicly available blockchain ledger by using complicated transfers between unrelated wallets. While Tornado Cash and other mixing services have legal purposes such as preserving the anonymity of parties to legitimate transactions, they are also utilized by criminals to launder digital funds in an illicit manner.

Even the use of these mixing services, however, can often also be unwound. This is especially true in transactions of large amounts of cryptocurrency, similar to how transactions utilizing complex money laundering schemes in the international banking system can be unwound. According to the blockchain data platform Chainalysis, although Illicit crypto transactions reached an all-time high of $14 billion in 2021, these suspected nefarious transactions accounted for 0.15% of crypto volume last year, down from 0.62% in 2020.

While the Complaint alleges the suspected thieves used Tornado Cash, LCX believes its hired consultants were able to unwind those mixing services to identify a wallet which is alleged to still hold $1.274 million of the allegedly stolen assets.

Unlike bank accounts which have associated identifying information, there are often no registered addresses or other identifying information connected to digital wallets. This makes it difficult to provide the actual proof of service required to institute an action or obtain a judgement against an individual where the only known information is their digital wallet addresses. Service via token airdrop into those wallet addresses solves that issue.

Service Via Airdrop

Service of lawsuits is traditionally made on the defendant personally at a home or business address via special process servers. In cases where service on the individual is not possible for some reason, many states authorize alternative means of service if the plaintiff can show that the alternative means of service likely to provide actual notice of the litigation to the defendant. For example, courts have historically allowed notice via newspaper publication as an alternative means of service where the defendant cannot be serviced personally.

Here, the Court permitted service via “airdrop” in which a digital token is placed in a specific cryptocurrency wallet, similar to how a direct deposit can place funds in a traditional bank account. This particular token contained a hyperlink to the associated court filings in the case, and a mechanism which allowed the data of any individual who clicked on the hyperlink to be tracked. While this is a novel way to serve notice of a lawsuit, similar airdrops have been used to communicate with the owners of otherwise anonymous cryptocurrency wallet owners. Such was the case recently when actor Seth Green had his Bored Ape non-fungible token (“NFT”) stolen and the unknowing buyer of the stolen NFT was otherwise difficult to locate.

While this type of digital service is new, it could be implemented in many disputes in the future regarding digital assets. Similar to the authorization of service that was seen recently in the Facebook Biometric Information Privacy Act litigation (where notice was served on potential class members via email and directly on the Facebook platform), service via airdrop may be the most efficient way to inform potential lawsuit participants of the pending dispute and how they can protect their rights in that dispute.

This type of airdropped service is not without issues, though. First, transactions on the blockchain are largely publicly available, meaning any individual with the wallet address would also be able to see service of the lawsuit notice. Additionally, many users are hesitant to click on unknown links (such as the one in the airdropped LCX) due to legitimate cybersecurity concerns.

While service via airdropped token is unlikely to replace traditional methods of service, it may be a useful means of serving process on unknown persons where there is a digital wallet linked to the acts which the applicable lawsuit relates.

Article By Bryan M. Westhoff, Daniel L. McAvoy, and Jonathan E. Schmalfeld of Polsinelli PC

For more litigation legal news, click here to visit the National Law Review.

The Metaverse: A Legal Primer for the Hospitality Industry

The metaverse, regarded by many as the next frontier in digital commerce, does not, on its surface, appear to offer many benefits to an industry with a core mission of providing a physical space for guests to use and occupy. However, there are many opportunities that the metaverse may offer to owners, operators, licensors, managers, and other participants in the hospitality industry that should not be ignored.

What is the Metaverse?

The metaverse is a term used to describe a digital space that allows social interactions, frequently through use of a digital avatar by the user. Built largely using decentralized, blockchain technology instead of centralized servers, the metaverse consists of immersive, three-dimensional experiences, persistent and traceable digital assets, and a strong social component. The metaverse is still in its infancy, so many of the uses for the metaverse remain aspirational; however, metaverse platforms have already seen a great deal of activity and commerce. Meanwhile, technology companies are working to produce the next-generation consumer electronics that they hope will make the metaverse a more common location for commerce.

The Business Case for the Hospitality Industry

The hospitality industry may find the metaverse useful in enhancing marketing and guest experiences.

Immersive virtual tours of hotel properties and the surrounding area may allow potential customers to explore all aspects of the property and its surroundings before booking. Operators may also add additional booking options or promotions within the virtual tour to increase exposure to customers.

Creating hybrid, in-person and remote events, such as conferences, weddings, or other celebrations, is also possible through the metaverse. This would allow guests on-site to interact with those who are not physically present at the property for an integrated experience and possible additional revenue streams.

Significantly, numerous outlets have identified the metaverse as one of the top emerging trends in technology. As its popularity grows, the metaverse will become an important location for the hospitality industry to interact with and market to its customer base.

Legal Issues to Consider

Select the right platform for you. There are multiple metaverse platforms, and they all have tradeoffs. Some, including Roblox and Fortnite, offer access to more consumers but generally give businesses less control over content within the programs. Others, such as Decentraland and the Sandbox, provide businesses with greater control but smaller audiences and higher barriers to entry. Each business should consider who its target audience is, what platform will be best to reach that audience, and its long term metaverse strategy before committing to a particular platform.
Register your IP. Businesses should consider filing trademark applications covering core metaverse goods or services and securing any available blockchain domains, which can be used to facilitate metaverse payments and to direct users to blockchain content, such as websites and decentralized applications. Given the accelerating adoption of blockchain domains along with limited dispute resolution recourse available, we strongly encourage businesses to consider securing intellectual property rights now.
Establish a dedicated legal entity. Businesses may want to consider setting up a new subsidiary or affiliate to hold digital assets, shield other parts of their business from metaverse-related liability, and isolate the potential tax consequences.
Take custody of digital assets. Because of their digital character, digital assets such as cryptocurrency, which may be the primary method of payment in the metaverse, are uniquely vulnerable to loss and theft. Before acquiring cryptocurrency, businesses will need to set up a secure blockchain wallet and adopt appropriate access and security controls.
Protect and enforce your IP. The decentralized nature of the metaverse poses a significant challenge to businesses and intellectual property owners. Avenues for enforcing intellectual property rights in the metaverse are constantly evolving and may require multiple tools to stop third-party infringements.
Reserve metaverse rights. Each Business that licenses its IP, particularly those that do so on a geographic or territorial basis, should review existing license agreements to determine what rights, if any, its licensees have for metaverse-related uses. Moving forward, each brand owner is encouraged to expressly reserve rights for metaverse-related uses and exercise caution before authorizing any third party to deploy IP to the metaverse on a business’ behalf.
Tax matters. Attention needs to be paid to how the tax law applies to metaverse transactions, despite the current tax law not fully addressing the metaverse. This is particularly the case for state and local sales and use, communications, and hotel taxes.

Ready to Enter?

As we move into the future, the metaverse appears poised to provide a tremendous opportunity for the hospitality industry to connect directly with consumers in an interactive way that was until recently considered science fiction. But like every new frontier, technological or otherwise, there are legal and regulatory hurdles to consider and overcome.

Article By Charles B. Ferguson, Jr. and Kimberly A. Wachen of ArentFox Schiff LLP

For more technology legal news, click here to visit the National Law Review.

Uncle Sam Wants to Protect Blockchain Technology

On August 27, 2020, the head of the U.S. Department of Justice’s Antitrust Division (“DOJ”), Makan Delrahim, spoke at the Thirteenth Annual Conference on Innovation Economics and emphasized that one of the DOJ’s top priorities is to protect innovation and ensure that antitrust laws do not act as an impediment to the burgeoning cryptocurrency market. COVID-19 has illuminated the importance of innovative solutions, as businesses develop new ways to operate during the pandemic. In particular, Delrahim highlighted blockchain as an innovative technology that the DOJ seeks to protect because of its potential to topple existing monopoly structures.

Blockchain technology is essentially a shared ledger of information and transactions that is distributed across a number of computers on the network, the ledger updates with every transaction on each computer and is viewable by anyone with access to that particular blockchain at any time. In traditional networking solutions, the company that owns or controls the network infrastructure (the intermediary) may be able to raise the cost of doing business on the network as it becomes larger. In contrast, blockchain technology can operate a network without a centralized intermediary, resulting in potentially lower networking costs and limiting the concentration of market power.

Although blockchain technology offers tremendous value, Delrahim also underscored the potential for abuse. He noted that those with current market power could use blockchain technology in an anti-competitive manner. This is particularly a concern with closed or permissioned blockchain networks where only insiders are allowed to operate a computer on the network. For example, seafood harvesters could collusively condition access to a permissioned blockchain, which tracks useful supply chain data, on agreeing to certain prices or output. Such collusive activity would cause tremendous harm to competition and consumers.

In an effort to combat such potentially anticompetitive activities, Delrahim noted that the DOJ is taking proactive measures to understand how emerging technologies work and how they can affect competition. The Antitrust Division has implemented a new initiative to train its attorneys and economists in innovative technologies such as blockchain technology, machine learning, and artificial intelligence, to prepare itself for monopolists who may take advantage of these new technologies.

Delrahim’s speech is an acknowledgement that the DOJ looks favorably on innovative technologies, in particular blockchain solutions. The DOJ wants to protect and promote the growth of these technologies by combating anticompetitive behavior. Delrahim’s speech is also an important signal that the DOJ is focused on potentially anti-competitive applications of blockchain technology. Any group of firms that are considering working together in developing a blockchain technology solution in their industry should take appropriate precautions to make sure their activities do not constitute a violation of U.S. anti-trust laws.

© Polsinelli PC, Polsinelli LLP in California

ARTICLE BY Melissa Ho, Richard B. Levin and

G. Phillip Kim of Polsinelli PC

For more articles on Cryptocurrency, visit the National Law Review Communications, Media & Internet section.

Patentablity of COVID19 Software Inventions: Artificial Intelligence (AI), Data Storage & Blockchain

The Coronavirus pandemic revved up previously scarce funding for scientific research. Part one of this series addressed the patentability of COVID-19 related Biotech, Pharma & Personal Protective Equipment (PPE) Inventions and whether inventions related to fighting COVID-19 should be patentable. Both economists and lawmakers are critical of the exclusivity period granted by patents, especially in the case of vaccines and drugs. Recently, several members of Congress requested “no exclusivity” for any “COVID-19 vaccine, drug, or other therapeutic.”[i]

In this segment, the unique issues related to the intellectual property rights of Coronavirus related software inventions, specifically, Artificial Intelligence (AI), Data Storage & Blockchain are addressed.

Digital Innovations

Historically, Americans have adhered to personalized healthcare and lacked the incentive to set up a digital infrastructure similar to Taiwan’s which has fared far better in combating the spread of a fast-moving virus.[ii] But as hospitals continue to operate at maximum capacity and with prolonged social distancing, the software sector is teeming with digital solutions for increasing the virtual supply of healthcare to a wider network of patients,[iii] particularly as HHS scales back HIPAA regulations.[iv] COVID-19 has also spurred other types of digital innovation, such as using AI to predict the next outbreak and electronic hospital bed management, etc.[v]

One area of particular interest is the use of blockchain and data storage in a COVID/post-COVID world. Blockchains can serve as secure ledgers for the global supply of medical equipment, including respirators, ventilators, dialysis machines, and oxygen masks.[vi] The Department of Homeland Security has also deemed blockchain managers in food and agricultural distribution as “critical infrastructure workers”.[vii]

Patentability

Many of these digital inventions will have a hard time with respect to patentability, especially those related to data storage such as blockchains. In 2014, the Supreme Court found computer-related inventions were “abstract ideas” ineligible for patent protection in Alice v. CLS Bank.[viii] Because computer-implemented programs execute steps that can theoretically be performed by a human being but are only automated by a machine, the Supreme Court concluded that patenting software would be patenting human activity. This type of patent protection has long been considered by the Court to be too broad and dangerous.

Confusion

The aftermath of Alice is widespread confusion amongst members of the patent bar as well as the USPTO as to how computer-related software patents were to be treated henceforth.[ix] The USPTO attempted to clarify some of this confusion by a series of Guidelines in 2019.[x] Although well-received by the IP community, the USPTO’s Guidelines are not binding outside of the agency, meaning they are have little dispositive effect when parties must bring their cases to the Federal Circuit and other courts.[xi] Indeed, the Federal Circuit has made clear that they are not bound by the USPTO’s guidance.[xii] The Supreme Court will not provide further clarification and denied cert on all patent eligibility petitions in January of this year.[xiii]

The Future

Before the coronavirus outbreak, Congress was working on patent reform.[xiv] But the long-awaited legislation was set aside further still as legislators focused on needed measures to address the pandemic. On top of that, both Senator Tillis and Senator Coons who have spearheaded the efforts for patent reform are now facing reelection battles, making the future congressional leadership on patent reform uncertain.

Conclusion

Patents receive a lot of flak for being company assets, and like many assets, patents are subject to abuse.[xv] But patents are necessary for innovation, particularly for small and medium-sized companies by carving out a safe haven in the marketplace from the encroachment of larger companies.[xvi] American leadership in medical innovations had been declining for some time prior to the pandemic[xvii] due to the cumbersome US regulatory and legal environments, particularly for tech start-ups seeking private funding.[xviii]

Not all data storage systems should receive a patent and no vaccine should receive a patent so broad that it snuffs out public access to alternatives. The USPTO considers novelty, obviousness and breadth when dispensing patent exclusivity, and they revisit the issue of patent validity downstream with inter partes review. There are measures in place for ensuring good patents so let that system take its course. A sweeping prohibition of patents is not the right answer.

The opinions stated herein are the sole opinions of the author and do not reflect the views or opinions of the National Law Review or any of its affiliates

[i] Congressional Progressive Leaders Announce Principles On COVID-19 Drug Pricing for Next Coronavirus Response Package, (2020), https://schakowsky.house.gov/media/press-releases/congressional-progressive-leaders-announce-principles-COVID-19-drug-pricing (last visited May 10, 2020).

[ii] Christina Farr, Why telemedicine has been such a bust so far, CNBC (June 30, 2018), https://www.cnbc.com/2018/06/29/why-telemedicine-is-a-bust.html and Nick Aspinwall, Taiwan Is Exporting Its Coronavirus Successes to the World, Foreign Policy (April 9, 2020), https://foreignpolicy.com/2020/04/09/taiwan-is-exporting-its-coronavirus-successes-to-the-world/.

[iii] Joe Harpaz, 5 Reasons Why Telehealth Is Here To Stay (COVID-19 And Beyond), Forbes (May 4, 2020), https://www.forbes.com/sites/joeharpaz/2020/05/04/5-reasons-why-telehealth-here-to-stay-COVID19/#7c4d941753fb.

[iv] Jessica Davis, OCR Lifts HIPAA Penalties for Telehealth Use During COVID-19, Health IT Security (March 18, 2020), https://healthitsecurity.com/news/ocr-lifts-hipaa-penalties-for-telehealth-use-during-COVID-19.

[v] Charles Alessi, The effect of the COVID-19 epidemic on health and care – is this a portent of the ‘new normal’?, HealthcareITNews (March 31, 2020), https://www.healthcareitnews.com/blog/europe/effect-COVID-19-epidemic-health-and-care-portent-new-normal and COVID-19 and AI: Tracking a Virus, Finding a Treatment, Wall Street Journal (April 17, 2020), https://www.wsj.com/podcasts/wsj-the-future-of-everything/COVID-19-and-ai-tracking-a-virus-finding-a-treatment/f064ac83-c202-40f9-8259-426780b36f2c.

[vi] Sara Castellenos, A Cryptocurrency Technology Finds New Use Tackling Coronavirus, Wall Street Journal (April 23, 2020), https://www.wsj.com/articles/a-cryptocurrency-technology-finds-new-use-tackling-coronavirus-11587675966?mod=article_inline.

[vii] Christopher C. Krebs, MEMORANDUM ON IDENTIFICATION OF ESSENTIAL CRITICAL INFRASTRUCTURE WORKERS DURING COVID-19 RESPONSE, Cybersecurity and Infrastructure Security Agency (March 19, 2020), available at https://www.cisa.gov/sites/default/files/publications/CISA-Guidance-on-Essential-Critical-Infrastructure-Workers-1-20-508c.pdf.

[viii] Alice v. CLS Bank, 573 U.S. 208 (2014), available at https://www.supremecourt.gov/opinions/13pdf/13-298_7lh8.pdf.

[ix] David O. Taylor, Confusing Patent Eligibility, 84 Tenn. L. Rev. 157 (2016), available at https://scholar.smu.edu/cgi/viewcontent.cgi?article=1221&context=law_faculty.

[x] 2019 Revised Patent Subject Matter Eligibility Guidance, United States Patent Office (January 7, 2019), available at https://www.federalregister.gov/documents/2019/01/07/2018-28282/2019-revised-patent-subject-matter-eligibility-guidance.

[xi] Steve Brachmann, Latest CAFC Ruling in Cleveland Clinic Case Confirms That USPTO’s 101 Guidance Holds Little Weight, IPWatchDog (April 7, 2019), https://www.ipwatchdog.com/2019/04/07/latest-cafc-ruling-cleveland-clinic-confirms-uspto-101-guidance-holds-little-weight/id=107998/.

[xii] Id.

[xiii] U.S. Supreme Court Denies Pending Patent Eligibility Petitions, Holland and Knight LLP (January 14, 2020), https://www.jdsupra.com/legalnews/u-s-supreme-court-denies-pending-patent-55501/.

[xiv] Tillis and Coons: What We Learned At Patent Reform Hearings, (June 24, 2019), available at https://www.tillis.senate.gov/2019/6/tillis-and-coons-what-we-learned-at-patent-reform-hearings.

[xv] Gene Quinn, Twisting Facts to Capitalize on COVID-19 Tragedy: Fortress v. bioMerieux, IPWatchDog (March 18, 2020), https://www.ipwatchdog.com/2020/03/18/twisting-facts-capitalize-COVID-19-tragedy-fortress-v-biomerieux/id=119941/.

[xvi] Paul R. Michel, To prepare for the next pandemic, Congress should restore patent protections for diagnostic tests, Roll Call (April 28, 2020), https://www.rollcall.com/2020/04/28/to-prepare-for-the-next-pandemic-congress-should-restore-patent-protections-for-diagnostic-tests/.

[xvii] Medical Technology Innovation Scorecard_The race for global leadership, PwC (January 2011), https://www.pwc.com/il/en/pharmaceuticals/assets/innovation-scorecard.pdf.

[xviii] Elizabeth Snell, How Health Privacy Regulations Hinder Telehealth Adoption, HealthITSecurity (May 5, 2015),https://healthitsecurity.com/news/how-health-privacy-regulations-hinder-telehealth-adoption.

Copyright (C) GLOBAL IP Counselors, LLP

ARTICLE BY Wen Xie at Global IP Counselors.

For more on patentability, see the National Law Review Intellectual Property law section.

Reflections on 2019 in Technology Law, and a Peek into 2020

It is that time of year when we look back to see what tech-law issues took up most of our time this year and look ahead to see what the emerging issues are for 2020.

Data: The Issues of the Year

Data presented a wide variety of challenging legal issues in 2019. Data is solidly entrenched as a key asset in our economy, and as a result, the issues around it demanded a significant level of attention.

Clearly, privacy and data security-related data issues were dominant in 2019. The GDPR, CCPA and other privacy regulations garnered much consideration and resources, and with GDPR enforcement ongoing and CCPA enforcement right around the corner, the coming year will be an important one to watch. As data generation and collection technologies continued to evolve, privacy issues evolved as well. In 2019, we saw many novel issues involving mobile, biometric and connected car Facial recognition technology generated a fair amount of litigation, and presented concerns regarding the possibility of intrusive governmental surveillance (prompting some municipalities, such as San Francisco, to ban its use by government agencies).
Because data has proven to be so valuable, innovators continue to develop new and sometimes controversial technological approaches to collecting data. The legal issues abound. For example, in the past year, we have been advising on the implications of an ongoing dispute between the City Attorney of Los Angeles and an app operator over geolocation data collection, as well as a settlement between the FTC and a personal email management service over access to “e-receipt” data. We have entertained multiple questions from clients about the unsettled legal terrain surrounding web scraping and have been closely following developments in this area, including the blockbuster hiQ Ninth Circuit ruling from earlier this year. As usual, the pace of technological innovation has outpaced the ability for the law to keep up.
Data security is now regularly a boardroom and courtroom issue, with data breaches, phishing, ransomware attacks and identity theft (and cyberinsurance) the norm. Meanwhile, consumers are experiencing deeper and deeper “breach fatigue” with every breach notice they receive. While the U.S. government has not yet been able to put into place general national data security legislation, states and certain regulators are acting to compel data collectors to take reasonable measures to protect consumer information (e.g., New York’s newly-enacted SHIELD Act) and IoT device manufacturers to equip connected devices with certain security features appropriate to the nature and function of the devices secure (e.g., California’s IoT security law, which becomes effective January 1, 2020). Class actions over data breaches and security lapses are filed regularly, with mixed results.
Many organizations have focused on the opportunistic issues associated with new and emerging sources of data. They seek to use “big data” – either sourced externally or generated internally – to advance their operations. They are focused on understanding the sources of the data and their lawful rights to use such data. They are examining new revenue opportunities offered by the data, including the expansion of existing lines, the identification of customer trends or the creation of new businesses (including licensing anonymized data to others).
Moreover, data was a key asset in many corporate transactions in 2019. Across the board in M&A, private equity, capital markets, finance and some real estate transactions, data was the subject of key deal points, sometimes intensive diligence, and often difficult negotiations. Consumer data has even become a national security issue, as the Committee on Foreign Investment in the United States (CFIUS), expanded under a 2018 law, began to scrutinize more and more technology deals involving foreign investment, including those involving sensitive personal data.

I am not going out on a limb in saying that 2020 and beyond promise many interesting developments in “big data,” privacy and data security.

Social Media under Fire

Social media platforms experienced an interesting year. The power of the medium came into even clearer focus, and not necessarily in the most flattering light. In addition to privacy issues, fake news, hate speech, bullying, political interference, revenge porn, defamation and other problems came to light. Executives of the major platforms have been on the hot seat in Washington, and there is clearly bipartisan unease with the influence of social media in our society. Many believe that the status quo cannot continue. Social media platforms are working to build self-regulatory systems to address these thorny issues, but the work continues. Still, amidst the bluster and criticism, it remains to be seen whether the calls to “break up” the big tech companies will come to pass or whether Congress’s ongoing debate of comprehensive data privacy reform will lead to legislation that would alter the basic practices of the major technology platforms (and in turn, many of the data collection and sharing done by today’s businesses). We have been working with clients, advising them of their rights and obligations as platforms, as contributors to platforms, and in a number of other ways in which they may have a connection to such platforms or the content or advertising appearing on such platforms.

What does 2020 hold? Will Washington’s withering criticism of the tech world translate into any tangible legislation or regulatory efforts? Will Section 230 of the Communications Decency Act – the law that underpins user generated content on social media and generally the availability of user generated content on the internet and apps – be curtailed? Will platforms be asked to accept more responsibility for third party content appearing on their services?

While these issues are playing out in the context of the largest social media platforms, any legislative solutions to these problems could in fact extend to others that do not have the same level of compliance resources available. Unless a legislative solution includes some type of “size of person” test or room to adapt technical safeguards to the nature and scope of a business’s activities or sensitivity of the personal information collected, smaller providers could be shouldered with a difficult and potentially expensive compliance burden. Thus, it remains to see how the focus on social media and any attempt to solve the issues it presents may affect online communications more generally.

Quantum Leaps

Following the momentum of the passage of the National Quantum Initiative at the close of 2018, a significant level of resources has been invested into quantum computing in 2019. This bubble of activity culminated in Google announcing a major milestone in quantum computing. Interestingly, IBM suggests that it wasn’t quite as significant as Google claimed. In any case, the development of quantum computing in the U.S. has progressed a great deal in 2019, and many organizations will continue to focus on it as a priority in 2020.

Reports state that China has dedicated billions to build a Chinese national laboratory for quantum computing, among other related R&D products, a development that has gotten the attention of Congress and the Pentagon. This may be the beginning of the 21^st century’s great technological race.
What is at stake? The implications are huge. It is expected that ultimately, quantum computers will be able to solve complex computations exponentially faster – as much as 100 million times faster — than classic computers. The opportunities this could present are staggering. As are the risks and dangers. For example, for all its benefits, the same technology could quickly crack the digital security that protects online banking and shopping and secure online communications.
Many organizations are concerned about the advent of quantum computing. But given that it will be a reality in the future, what should you be thinking about now? While not a real threat for 2020 or the near-term thereafter, it would be wise to think about it if one is anticipating investing in long-term infrastructure solutions. Will quantum computing render the investment obsolete? Or, will quantum computing present a security threat to that infrastructure? It is not too early to think about these issues, and for example, technologists have been hard at work developing quantum-proof blockchain protocols. It would at least be prudent to understand the long-term roadmap of technology suppliers to see if they have even thought about quantum computing, and if so, to see to how they see quantum computing impacting their solutions and services.

Artificial Intelligence

We have seen significant level of deployment in the Artificial Intelligence/Machine Learning landscape this past year. According to the Artificial Intelligence Index Report 2019, AI adoption by organizations (of at least one function or business unit) is increasing globally. Many businesses across many industries are deploying some level of AI into their businesses. However, the same report notes that many companies employing AI solutions might not be taking steps to mitigate the risks from AI, beyond cybersecurity. We have advised clients on those risks, and in certain cases have been able to apportion exposure amongst multiple parties involved in the implementation. In addition, we have also seen the beginning of regulation in AI, such as California’s chatbot law, New York’s recent passage of a law (S.2302) prohibiting consumer reporting agencies and lenders from using the credit scores of people in a consumer’s social network to determine that individual’s credit worthiness, or the efforts of a number of regulators to regulate the use of AI in hiring decisions.

We expect 2020 to be a year of increased adoption of AI, coupled with an increasing sense of apprehension about the technology. There is a growing concern that AI and related technologies will continue to be “weaponized” in the coming year, as the public and the government express concern over “deepfakes” (including the use of voice deepfakes of CEOs to commit fraud). And, of course, the warnings of people like Elon Musk and Bill Gates, as they discuss AI, cannot be ignored.

Blockchain

We have been very busy in 2019 helping clients learn about blockchain technologies, including issues related to smart contracts and cryptocurrency. 2019 was largely characterized by pilots, trials, tests and other limited applications of blockchain in enterprise and infrastructure applications as well as a significant level of activity in tokenization of assets, cryptocurrency investments, and the building of businesses related to the trading and custody of digital assets. Our blog, www.blockchainandthelaw.io keeps readers abreast of key new developments and we hope our readers have found our published articles on blockchain and smart contracts helpful.

Looking ahead to 2020, regulators such as the SEC, FinCEN, IRS and CFTC are still watching the cryptocurrency space closely. Gone are the days of ill-fated “initial coin offerings” and today, security token offerings, made in compliance with the securities laws, are increasingly common. Regulators are beginning to be more receptive to cryptocurrency, as exemplified by the New York State Department of Financial Services revisiting of the oft-maligned “bitlicense” requirement in New York.

Beyond virtual currency, I believe some of the most exciting developments of blockchain solutions in 2020 will be in supply chain management and other infrastructure uses of blockchain. 2019 was characterized by experimentation and trial. We have seen many successes and some slower starts. In 2020, we expect to see an increase in adoption. Of course, the challenge for businesses is to really understand whether blockchain is an appropriate solution for the particular need. Contrary to some of the hype out there, blockchain is not the right fit for every technology need, and there are many circumstances where a traditional client-server model is the preferred approach. For help in evaluating whether blockchain is in fact a potential fit for a technology need, this article may be helpful.

Other 2020 Developments

Interestingly, one of the companies that has served as a form of leading indicator in the adoption of emerging technologies is Walmart. Walmart was one of the first major companies to embrace supply use of blockchain, so what is Walmart looking at for 2020? A recent Wall Street Journal article discusses its interest and investment in 5G communications and edge computing. We too have been assisting clients in those areas, and expect them to be active areas of activity in 2020.

Edge computing, which is related to “fog” computing, which is, in turn, related to cloud computing, is simply put, the idea of storing and processing information at the point of capture, rather than communicating that information to the cloud or a central data processing location for storage and processing. According to the WSJ article, Walmart plans on building edge computing capability for other businesses to hire (following to some degree Amazon’s model for AWS). The article also talks about Walmart’s interest in 5G technology, which would work hand-in-hand with its edge computing network.

Our experience with clients suggest that Walmart may be onto something. Edge and fog computing, 5G and the growth of the “Internet of Things” are converging and will offer the ability for businesses to be faster, cheaper and more profitable. Of course this convergence also will tie back to the issues we discussed earlier, such as data, privacy and data security, artificial intelligence and machine learning. In general, this convergence will increase even more the technical abilities to process and use data (which would conceivably require regulation that would feature privacy and data security protections that are consumer-friendly, yet balanced so they do not stifle the economic and technological benefits of 5G).

This past year has presented a host of fascinating technology-based legal issues, and 2020 promises to hold more of the same. We will continue to keep you posted!

We hope you had a good 2019, and we want to wish all of our readers a very happy and safe holiday season and a great New Year!

ARTICLE BY Jeffrey D Neuburger of Proskauer Rose LLP.

For more in technology developments, see the National Law Review Intellectual Property or Communications, Media & Internet law sections.

Utah to Test Blockchain Voting Through Mobile Apps

As we head toward 2020, expect significant public debate relating to smartphone applications designed to increase turnout and participation in upcoming elections. The Democratic Party has dipped its toe in the water by announcing in July plans to allow telephone voting in lieu of appearing for neighborhood caucus meetings in the key early primary states of Iowa and Nevada.

Given concerns regarding security and reliability of submitting votes over the internet, jurisdictions around the country have begun to test solutions involving blockchain technology to allow absentee voters to submit voting ballots. Following initial pilot programs in Denver and West Virginia, Utah County, Utah will be the next jurisdiction to utilize a blockchain-based mobile in connection with its upcoming municipal primary and general elections.

The pilot program, which will utilize the mobile voting application “Voatz”, will allow active-duty military, their eligible dependents and overseas voters to cast absentee ballots. Eligible voters will need to apply for an absentee ballot with the county clerk and then download the mobile application. The ballot itself will be unlocked using the smartphone’s biometric data (i.e., a fingerprint or facial recognition) and then will be distributed into the blockchain framework for tabulation.

This article was written by Benjamin C. Jensen of Robinson & Cole LLP.

For more voting-related updates, see the National Law Review Election Law & Legislative News page.

Wyoming Cements Position as Leading U.S. Jurisdiction for Blockchain with Sweeping New Legislation

In its most recent legislative sessions, Wyoming has undertaken substantial efforts to build on the momentum created by its 2018 enactment of legislation friendly to the blockchain and digital assets industries. In the months that followed that enactment, industry participants and legislators alike ascertained that further reforms and legislation were needed to cement Wyoming’s position as the leading jurisdiction in the sector. Through the public comment and legislative meeting protocols unique to Wyoming, eight blockchain-related bills made it to the floor of the legislature for a vote, all of which were passed and are now poised to become law.

Wyoming’s latest wave of blockchain legislation is, in sum, intended to facilitate the creation of blockchain ventures within the state and to further cement Wyoming’s status as the leading corporate jurisdiction in the United States for blockchain-related ventures.

HB 74- Special purpose depository institutions

In what is perhaps the most groundbreaking legislation among the bills passed, the Wyoming legislature recognized that blockchain businesses in general have difficulty opening and maintaining traditional banking relationships due to FDIC and OCC inclusion of blockchain ventures in the same buckets as firearms and cannabis. Wyoming now will permit corporate entities to charter “special purpose depository institutions,” which will perform all traditional bank functions except for lending. With the lending exclusion, these institutions will be under the primary supervision of the Wyoming Banking Commission and not the federal government. These banks will be required to maintain at least 100 percent of reserves against deposits as well as (a) $5 million of capital, (b) three years of operating expenses and (c) private insurance against theft, cybercrime and other wrongful acts.

SF 125- Digital assets (UCC & Custody)

Custody of digital assets has been a global challenge for investors and industry participants. Wyoming has addressed this concern by specifically authorizing banks (including special purpose ones under HB 74) to hold digital assets in custody under their charter trust powers and in accordance with Rule 206-4(2) of the Investment Advisers Act of 1940. In addition, Wyoming amended its provisions of the Uniform Commercial Code to facilitate the custody of these assets along with the means by which security interests may be perfected. Wyoming is now the only U.S. state with comprehensive UCC provisions to address digital assets, which makes it a favorable jurisdiction for those lending or securing funds through digital assets.

HB 57- Financial technology sandbox (includes reciprocity for overseas regulators)

Those entrepreneurs in the blockchain industry who may require special treatment or waivers of unclear regulation in Wyoming may now seek to avail themselves of a “regulatory sandbox” much akin to the one enacted in Arizona last year. Use of the “sandbox” will require applications to state agencies that may have interests in the requested waiver, including the Wyoming Banking Commission and the Wyoming Securities Commission. The “sandbox” will provide a two-year period of relief from legislation for those ventures, all of which must be domiciled and operating within Wyoming.

HB 62- Utility token amendments

Wyoming broke ground in 2018 with its widely reported utility token “exemption” for digital assets having a pure utility function and were not created for investment purposes or for trading on exchanges. Amendments to this legislation were made to further clarify the definition of “utility token” and define when parties may properly seek a token utility designation from Wyoming authorities.

HB 70- Commercial filing system

Wyoming has legislatively determined that records maintained by the Wyoming Secretary of State, including corporate formation records, are to be implemented on blockchain media. In combination with the Series LLC legislation enacted in Wyoming last year, this provision will provide the basis for the swift formation of corporate entities and other related corporate records through blockchain.

HB 185- Tokenized corporate stock

In recognition of the migration of the blockchain industry from “initial coin offerings” to “security tokens,” Wyoming enacted legislation authorizing and permitting the creation of digital assets that represent certificated shares of stock. A “certificate token” under this legislation has been defined as “a representation of shares” that is (a) entered into a blockchain or other secure, auditable database, (b) linked to or associated with the certificate token and (c) electronically transmittable to the issuing corporation, the person to whom the certificate token was issued and any transferee.

HB 113- Special electric utility agreements

Given that Wyoming utilities produce some of the cheapest and most abundant electricity in the United States, Wyoming has through HB 113 enabled those utilities to negotiate power rates with blockchain companies (including miners) and others without approval from Wyoming’s Public Utility Commission.

SF 28- Electronic bank records

This legislation enables banking institutions to issue securities and maintain corporate records on blockchain to an extent not permitted by other provisions of Wyoming law. In particular, this provision allows for the creation of non-voting shares of Wyoming banking institutions in tokenized form.

Summary

In short, Wyoming has further honed its regulatory ecosystem to become the most blockchain-friendly jurisdiction in the United States. While all legislation will be effective as of July 1, 2019, it should be noted that many blockchain industry participants are already undertaking significant efforts to take advantage of the opportunities this legislation presents. Blockchain companies in United States and abroad should carefully examine Wyoming’s new blockchain legislation with counsel to ascertain suitable business opportunities.

This post was written by Robert V. Cornish Jr. of Wilson Elser.

Read more news about Blockchain on the National Law Review’s Finance Type of Law Page.

Tag: Blockchain

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