I posted this article on our China Law Blog Facebook page yesterday: I have seen the future of media, and it’s in China. That spurred the following comment from one of our readers:
Wow, you posted something positive about China. Congratulations.
We have been unusually downbeat about China both here and even more so on our Facebook page, which mostly focuses on China business, economics and political news. Our excuse is that our views of China are colored in large part by the views of companies doing business in China that we represent and their views are going to be colored in large part by the economy.
But it important to make clear that a trend does not a 100% reality make. By that I mean that just because we are now dealing with a slowing economy does not for a mean that everything in China is slowing and it most certainly is not. I thought of this yesterday after running into a friend-client in the elevator of my building yesterday. Very loosely, here was our conversation:
Client: We will be getting our [fill in internet of things related App] back from __________ in early April and we will then be meeting again with _________ about _________. At that time, we should sit down again and discuss how we protect our IP.
Me: Absolutely. I swear, this is about all we are doing these days. Figuring out how to protect our clients who are involved with IoT software and devices.
And we LOVE it. We love it because it is so cutting edge, so important, so complicated and — let’s be honest — so infused with legal issues that require companies hire China attorneys.
Let me explain.
Just as China has become an innovation hub for new media (as pointed out in the article I used to lead off this story), it has become the innovation hub for the Internet of Things, which Wikipedia defines as “the network of physical objects—devices, vehicles, buildings and other items which are embedded with electronics, software, sensors, and network connectivity, which enables these objects to collect and exchange data.” Think fitbit, Nest thermostats, Phillips Hue Lighting, Simplisafe home security systems. More generally, think M2M (machine to machine), smart home, smart home, connected home, internet appliance, smart devices, ubiquitous computing, smart grid, and smart objects. Call it whatever you want, but just be sure to call it hot. A large proportion of our new China clients are involved in the internet of things and nearly all of them are doing their manufacturing in or near Shenzhen.
- What happens if an IoT thermostat device goes awry and thinks that it is incredibly hot out and it is actually incredibly cold out and it turns down the temperature and babies freeze to death? Would the company’s liability disclaimers be enough to prevent liability? See Nest Thermostat Glitch Leaves Users in the Cold.
- What happens if a fitness tracker tells someone that they have run two miles when they have actually run five miles and that someone therefore decides to run another three miles and then dies of a heart attack during the last mile?
- What happens if an IoT flood tracking device tells someone that their basement floor has flooded and that someone then rushes home from a business trip and thereby loses a big sale?
- What happens if someone hacks into your fitness tracker so as to figure out where you are at all times, and then robs your house when you are away. Or worse?
- What happens if someone hacks into your IoT door lock and your IoT lighting?
All of the above we have pondered just for fun. I do not even want to list the real life issues we have pondered for our clients because to do so might expose them.
But it extends way beyond tort and privacy laws and most of what our China lawyers deal with for our IoT clients is similar to what we deal with for all of our China clients, “but on steroids.”
Because IoT devices are a combination of both hardware and software, just about every contract involving them is in at least some respects like two contracts. This is especially so with respect to the IP issues. Speaking very generally, IP related to hardware is usually protected in and from China by contract, by patent, and by trademark. Software on the other hand, is usually protected by contract, copyright, and by trademark.
What has been so surprising to us is how often IoT companies do not fully realize all of the IP they have a need to protect. Many times we have been told that “there are no IP issues because we are buying the hardware off the shelf.” To which we often respond by pointing out that their software is what will distinguish their product from others and their software needs IP protections. For more on protecting IoT IP, check out China NNN Agreements and China Product Development Agreements, both of which we wrote this month with the Internet of Things squarely in mind.
Go to Shenzhen to see the future.