Building a resilient tech strategy: The future of tech

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There's a vision of the future that looks a lot like a film, a Matrix style landscape where humans are mostly plugged into devices and living in the virtual world. When people talk about the Metaverse, that's what they mean. It’s an immersive online space where you put on your VR headset and exist as an avatar. You meet other people virtually, go to concerts, go shopping and walk past virtual advertising billboards. Bill Gates is predicting that remote work meetings will be held in the Metaverse within three years and big brands are scrambling to get into this space.

And what about the physical world of the future? What does that look like? There is a lot of innovation taking place right now that can give us a clue. The private sector is increasingly looking skyward to space, and consumers are demanding better environmental credentials for their tech. So what does all of this mean for business?

We asked Nathan Searle and Phoebe Wilkinson, two partners at Hogan Lovells, about the legal and practical stumbling blocks that companies might face along the way and get advice on how business leaders can stay on top of the risks. Nathan is based in London and is a partner in Hogan Lovells International Arbitration Practice, and Phoebe is a partner in the litigation practice based in New York.

Q: The Metaverse is getting a lot of press at the moment, but what is it and how does it work practically?

Nathan: Practically, it's an online marketplace. It's somewhere where you can go or your virtual avatar can go. You can move through the environment, you can interact with other users, you can interact with companies, you can buy stuff, you can build stuff, and you can sell stuff.

Q: We're seeing a lot of companies buy real estate in the metaverse. Why are they so keen to get involved?

Nathan: They're keen to get involved because you can interact with a global client base. Anyone can dial into the metaverse from their living room, from their kitchen. What better way to get your products right into someone's home? And it's not just someone's home down the road or in the city you operate, it's anywhere on the globe where you can access the metaverse via an internet service provider.

Q: Do you think it’s just a bit of hype? Or are companies actually preparing to operate in the Metaverse?

Nathan:. Companies are  making their initial investment and those who get this right have the ability to unlock huge potential in terms of a global marketplace without borders.

Q: What are some of the rules in the metaverse? Are people liable if things go wrong?

Nathan: Like any new jurisdiction, there's an overall legal framework. And that framework starts with the terms of use. It's that agreement between the Metaverse operator and each of the users. And where you've got a huge number of users that can mean that they have both rights individually against the operator, but also potentially grouping together as classes and seeking to exercise rights as a group.

Q: When we talk about some of the legal frameworks, let's talk about a contract between a metaverse operator and each of the users. Can you walk us through that?

Nathan: The  terms of use may state which law they're governed by, or they may have left that as a gap. So when you've got avatars or people entering into these agreements, you could have users in different countries. And when you're buying a piece of virtual land, where does that land sit? It's easy to know if I'm buying a piece of land in Australia, I know where it sits, but when I'm buying it in the metaverse, there’s a question of where these contracts are being performed.

And so that can have an impact on what the governing law is. But once you start getting into user to user contracts, you're actually getting layers of contracts because both the users are bound by the terms of use and then they're contracting within the Metaverse to buy or sell or provide this product.

And then of course, the person whose product it is may then sell it to one user, who then sells it onto a further user. So you've got potential for a chain of contracts. Of course, when you're sitting at your desk or in your living room and are in the Metaverse, you're not necessarily thinking through the legal consequences. For example, if the terms of use say it's governed by English law, you could be entering into an English law contract when you're sitting in Tanzania or New York City. And those are some of the basic building blocks of the Metaverse that give rise to a variety of legal issues.

Phoebe: As a parent and a lawyer, I find one of the challenging questions that will come up is that in many places, minors don't have the ability to enter into a contract legally. They wouldn't necessarily be held to a standard that's in the contract. So what will that mean? How will that all be worked out going forward if you have a minor who has signed or agreed to the terms of conditions, but down the road there's an issue. Is that binding? I think it leads to a whole host of questions. In Nathan's and my world of disputes, disruption is a key driver of new legal principles, and there is no question that the Metaverse is going to disrupt legal regimes. And I see that disruption as being a source of enormous change in terms of legal issues. Especially if you think of who the primary users might be in the Metaverse, which is children.

Q: What happens if a system goes down or a user gets kicked out of the Metaverse? What are the ramifications?

Nathan: That’s going to be an evolving area. So what happens if on the day that you are expected to make a transaction, you're kicked out of the Metaverse or you simply can't connect? I think it's an area we're going to see increasing litigation and arbitration over these terms of use and whether you can stay in the Metaverse universe or not. And what happens when it goes down. What we're also seeing is interoperability or connectivity between different Metaverses. Will you be able to take an asset from one Metaverse into another? What happens if one shuts down? How do you extract the value? And we're seeing things like cryptocurrency and tokens that are almost becoming a currency or a way of connecting between the different Metaverses.

Q: Do either of you have an avatar yet?

Phoebe: Not me. I'm not there yet.

Nathan: Not yet. But we are seeing it in arbitrations in a testing phase. I have seen a virtual meeting room or virtual arbitration room where people have been trying out the technology. So it's not far away.

Q: What about the physical world and the concerns about physical safety. For instance, safety issues about wearing equipment.

Phoebe: That will certainly be a concern and something that people watch. I think there are issues, even just physically wearing the headset where you will potentially hear people complaining of headaches or other physical manifestations of even wearing the equipment. There are hazardous materials that are in the products when you take them apart - nickel, mercury, lead. So if the e-cycling of the e-waste is not done properly and regulated, you're in a situation where there's a physical safety issue to people who are handling the e-waste. So I think you're going to see this issue in the actual use of the product as it's intended, but also the dangers that are associated with handling what's in the electronics when you're in the e-cycling phase of life of that product.

Q: Staying in the physical world, what are some of the things that companies should be thinking about when it comes to tech like electric cars and what are the risks?

Phoebe: As I said before, with disruption comes new legal regimes, and I think anytime you have technology that speaks to new areas, the technology comes first followed by the disruption, and then the law catches up. There's an explosion of electronic equipment that comes with this new technology, and even traditional everyday appliances are now considered electronics. Your refrigerator is really now a piece of electronics. Your washer is a piece of electronics. All of that has become a huge new issue of e-cycling and e-waste and that applies to electric cars, that applies to the hardware that we're all talking about, the avatar, the phones we all use, which now everyone tends to replace on a much faster basis than they used to. And it has meant a very significant new issue that the world has to deal with because there are a lot of health and safety issues associated with e-waste and e-cycling.

Q: China has said it will not take any more waste. Is that something that you're watching?

Phoebe: Yes. For many years, China accepted a lot of waste from the world. It’s also generated a lot of that waste because of the amount of manufacturing they do. A few years ago, they said they will no longer accept the importation of e-waste, and that has meant there's a lot of e-waste and we're trying to figure out where in the world where it should go. Unfortunately, it tends to go to underdeveloped countries where there are a lot of people who are very, very impoverished. It is typically not regulated in terms of the e-waste and the e-cycling. And we're seeing some very significant concerns articulated by world bodies who are saying we have to address this situation because it is creating significant risk, typically for women and children, who are the least able to be advocates for themselves or be protected in many of these countries. So it's a very significant issue and one that is only growing.

Q: As we look at the rise in technology, whether it's sustainable tech or the buying a plot of land in the Metaverse, things are obviously changing. So how can companies keep up with all the changes and what are the big questions that they should be thinking about?

Nathan: What we're seeing is that those companies that are getting out there ahead of the curve are  engaging with the regulators around their new products, adopting a risk based approach, looking at jurisdictions where the regulators are active and the laws are coming through quite quickly and progressively and then using those as a baseline to assess some of the other, perhaps slower moving countries in order to ensure that you are complying with the law everywhere and not exposing themselves to unnecessary risks. It's about having a system and a strategy in place to identify these risks and get out ahead of them.

Phoebe: That’s very true, and because of the disruption and things moving so quickly, you do need to have a risk based approach. And Nathan and I do a tremendous amount of risk counselling for clients, linking them up to the right people who know how to guide the client through this. So when you draft a terms of conditions for your website, you need to think  about where the risks lie. What are the worst jurisdictions? Let's draft for the worst case scenario. In terms of environmental compliance issues,  we tell clients to identify the most onerous, difficult jurisdiction. If you want a program that is robust, we'll build it around the worst case scenario.

We recently had a situation with a client who was doing an analysis in terms of data privacy to be compliant, and during that time, four sets of new laws came out. So it is evolving extremely quickly. And as Nathan noted, the best way for companies to think about this is to think about it from a risk mitigation strategy. Link yourself up with folks that can give you real time current information so you can be at the forefront of the change.

Authored by Nathan Searle and Phoebe Wilkinson.