In recent years, there has been a tremendous growth in the adoption of Internet of Things (IoT) technology across all sectors globally. IoT technology has demonstrated an ability to enhance many aspects of how we work and live, from more accurately tracking cargo as it journeys across the globe, to enhancing predictive maintenance of manufacturing equipment, to allowing your refrigerator to tell you when you’re running low on your favourite yoghurt.
This rapid adoption has been fuelled by the ability to pair IoT not just with cloud computing but also with edge computing, allowing businesses to benefit from the unlimited computing resources of the cloud to run artificial intelligence (AI) capabilities or more detailed diagnostics, and to pivot to edge computing where more processing is required closer to the IoT device. The ability to adopt both cloud and edge computing allows businesses to operate IoT technology across their entire operations, even where there is reduced latency or where faster response times are required. As a result of this, we are seeing more and more businesses developing and installing new IoT devices to enhance their products and services. By some estimates, there may be as many as 25 billion installed end-point IoT devices by 2020, with a further 1 million more devices expected to come online each hour thereafter.
IoT and the IP risk
The explosion in the number of IoT devices naturally brings with it several risks. These include risks relating to data privacy, cybersecurity, data sovereignty and intellectual property (IP). There has been a traditional focus on the three former risks due to high profile data breaches and several new laws being enacted in the region such as Singapore’s Cybersecurity Act, Thailand’s new Personal Data Protection Act, and Vietnam’s Cybersecurity Law. The risks associated with IP are therefore not often the foremost consideration when undertaking IoT-related innovation projects.
What then is this IP risk? In short, the development of new IoT technology by a company brings with it the risk of IP infringement claims by third parties that this ‘new’ technology incorporates or copies the third party’s IP without permission. Such litigation can be costly to undertake and may result in very high settlements or awards. According to a recent study, there has been a steady increase in IoT-related patent litigation in the past seven years in the US, the majority of which are brought by non-practicing entities (NPE), or patent trolls, and this scenario is very likely to play out in South-East Asia as the region develops. Simply put, the risk of litigation in the IoT space is growing and is likely to continue.
IP infringement claims can be potentially damaging to a small business, especially start-ups that often rely on their IP portfolios to raise capital and expand. In spite of this, businesses often do not have the time or capacity to run checks on all IP that they are relying on for their product development, especially in a fast-paced product development environment where solutions are built using a combination of cloud platforms and open source software.
The South-East Asia Perspective
The IP risk associated with IoT technologies is compounded in South-East Asia. Although companies tend to approach the region as a unified territory, the reality is that the region is made up of a patchwork of laws with little harmonization. Growing awareness of IP rights in the region has also resulted in more patents being filed here, especially as companies seek to capitalise on fast-growing economies such as Vietnam and Indonesia. As such, it can be even costlier and time consuming for a small start-up to run checks on all IP registries across the region when developing new IoT technology.
Aside from hefty litigation costs or settlement amounts, the consequences of IP infringement in South-East Asia are also potentially more severe. Patent infringement in the region may also give rise to criminal liability, as is the case in Indonesia, Cambodia, Laos, Thailand and Vietnam. This is in addition to the right of the patent owner to claim for damages or to seek an injunction through a civil claim.
Three things you should keep in mind
The IP risks associated with IoT innovation are therefore important for businesses to manage, especially in light of the growing number of litigated IoT patents. We outline below three key points your business should look out for when innovating in this area:
1. Look for third party providers or partners that can offer reliable and “clean title” to IP rights.
The service providers that your business partners with can make or break you. Whether it be the cloud services provider, the IoT sensor manufacturer or the external software development house you may engage, you should always ensure that these parties have the appropriate rights to use, and to allow you to use, the IP that you are building on.
2. Understand the scope of any underlying licences and whether sub-licences can be granted or whether there are restrictions.
As above, IoT-based solutions often build upon other IP, including open source software code and that of the cloud platform that underpins the solution. Your business should ensure that your partners have granted you the appropriate rights to use all necessary underlying IP, and that the licenses granted to your business are broad enough to allow the commercialization of the resulting IoT solution.
3. Consider third-party providers that offer comprehensive protections against IP risk, as developers and businesses innovate in the cloud and at the edge.
Cloud or edge computing providers that offer comprehensive IP protections to their customers help to provide an additional peace of mind to businesses that innovate heavily using cloud, edge and IoT technologies. While this could take many forms, a contractual indemnity for third party IP infringement claims is one solution that you can seek to mitigate this risk. For example, Microsoft’s Azure IP Advantage for IoT offers its customers an uncapped indemnity for any IP infringement claims relating to their use of Microsoft’s cloud platform technologies, including any open source components incorporated in these, and IoT operating systems.
Digital transformation powered by IoT technologies is fast becoming the norm in South-East Asia. Organisations must therefore be more attuned to the legal and regulatory risks associated with producing such new technologies. Businesses should closely consider the risks associated with IP infringement, although this should not be a barrier to innovation. Approached properly, businesses can move quickly with confidence that they will not face third party IP infringement claims when deploying IoT technologies be it for their own operations or as a product offering. Choosing the right partners and understanding the underlying licences that you hold will be key to ensuring continued success and growth.
With thanks to Jeremy Tan.