With the Internet of Things Comes the Internet of Law
By Ken Grady
The Internet of Things, or IoT, is upon us. For years, we have heard how devices in our lives are becoming interconnected. The coffee maker talks to your car; the refrigerator talks to the microwave oven. This interconnectivity, we are told, makes our lives easier. Run low on milk and the refrigerator will tell the grocery store. If the washing machine is about to malfunction it will call the repair company. All the mundane things we need to do each day to keep our lives running will drift into the world of computers and we will be left free to … well, we’re still working on that piece.
With the IoT comes the Internet of Law, or IoL.
The IoL, like the IoT, is an interconnectedness of laws in self-effecting systems.
In some cases, the laws will embed in the IoT, so that knowledge of the law is not necessary when using the thing. A car can have a Breathalyzer built into the starter system. The car won’t start unless the driver passes the Breathalyzer test. The driver doesn’t have to know the law about driving under the influence, because the law is built right into the thing. The driver can’t operate the vehicle if his or her blood alcohol level exceeds the legal limit.
These simple legal applications are, however, only the beginning. Corporate loans often have many compliance ratios and other requirements set out in the loan documents. Each reporting period, the corporation’s finance department must run calculations and then report to the lender that the corporation is in compliance with the loan covenants. A loan document could instead be built so that it resides in the lender’s and borrower’s computers. Each reporting period, the loan document automatically retrieves the necessary information from the borrower, runs the calculations, and flags any discrepancies.
You could argue that loans aren’t things, but I’d say that even if that distinction is valid, it increasingly will be a distinction without meaning.
When the loan document is over 125 pages and even its creators have difficulty following what it says, people will be motivated to connect that thing to a computer and let the computer sort out the niceties.
The important evolutionary point will be that we expect computers to take off our backs mundane, tedious tasks and do them without bothering us. We only want to know about the exceptions.
Equity Should Have a Role in the Internet of Law
Lawyers get nervous hearing about the IoL. When you live in a world where things are gray, it can be unsettling to hear others talk about the world moving to black or white. Lawyers think in terms of judgment calls, where a person makes the judgment. Was there really a breach of the covenant or was there a timing glitch where something that should have happened on March 31st didn’t get recorded until April 1st. If a human was in the loop, equity would prevail and no breach would be declared. Without a human, the computer thinks in binary terms: no payment on the 31st means a default. Since a default can trigger a cascade of defaults, shouldn’t we build equity into the system? How will the computer determine if the slight delay was okay or not?
The IoT and its companion the IoL are here to stay. Lawyers may fret about whether this is good or bad, but regardless lawyers and clients must deal with them. The scary thing isn’t that the IoT and IoL have arrived it is that lawyers are still unprepared to deal with them. Rather than focusing on the many fascinating issues these developments raise and then preparing clients and corporate compliance systems to address these developments, lawyers are stuck quibbling over the mundane.
Solving Client Problems Includes Efficiency
Lawyers should focus on solving client problems, and not just the problems of yesterday but the problems of tomorrow. As a real estate lawyer, you should learn how to make leases easier and clearer for clients and tenants. Most large retail companies have teams of lease administrators who spend time making sure the retail company doesn’t overpay on leases. Isn’t that something the real estate lawyers should look to resolve through process improvement with a dollop of technology? As a software license lawyer, shouldn’t you help clients turn contracts into data to better administer and predict potential dispute areas? This list expands into every area law—shouldn’t lawyers do more than just get it on paper?
Clients need lawyers and will continue needing them for many years to come, unless lawyers give clients no reason to use them. The IoL provides abundant opportunities for lawyers to improve services to clients, reduce problems clients face, and demonstrate that they are staying on top of developments in the world. Perhaps if lawyers take advantage of these opportunities, clients will buy into an IoT app that sends a payment to the lawyer with the push of a button when the client accepts the service and give it an Emoji smiley face for “job well done.”