Joint Innovate UK and CW Legal SIG Event - Internet of Things Workshop - 17th March Contracting for IoT

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1 Joint Innovate UK and CW Legal SIG Event - Internet of Things Workshop - 17th March 2015 Contracting for IoT Professor Ian Walden Institute of Computer and Communications Law Centre for Commercial Law Studies, Queen Mary, University of London

2 Overview Definitions Supply chain IoT and contract law Case study: Nest Product liability Unfair terms

3 Definitions A global infrastructure for the information society, enabling advanced services by interconnecting (physical and virtual) things based on existing and evolving interoperable information and communication technologies ITU-T 2012 Physical entity or interface of physical entity capable of dynamic connection and interaction according to policy Microsoft Cloud Computing Research Centre, 2015

4 IoT& contract law Contracts ever more difficult to understand Layers of contracts Economic dependence Freedom of contract and asymmetric bargaining power Legal capacity Lock-in Private ordering & public law control

5 Case Study: Nest One product, a thousand contracts! With a smart system, the whole point is that when you use it, it learns about you over time. That learning intrinsically involves some sort of logging James Scott, 2015

6 Nest: Supply Chain & Actors Device owner Device user Nest Nest affiliates Nest subsidiaries Technicians and other Nest employees Manufacturer of the thing (and of its components) Persons who embed things in other things (or combine, join ) The house inhabitants Friends and temporary guests Groundskeeper and other employees Website developer Website webmaster App developer Embedded software developer Software providers Owners/tenants/manufacturers of connected devices Owners/tenants/developers of connected apps Facilitators of communication between things IPRs holders Resellers (Nest Pro) Installers Insurance companies Network operator Payment providers Analytics Advertising

7 Layered legals Terms of Service (sites, web apps, mobile apps) EULA (embedded software) Sales terms (hardware) Privacy statement (for the devices) Website privacy policy (for monitoring data & accessing accounts) Open-source compliance IP and related notices Community Forum Agreement (user sharing) EU Declarations (type approval) Installation ToS Developer ToS

8 Product under the ToS The ToSare stated to apply only to the services and not to the hardware, but it affects the latter: IF YOU DO NOT AGREE WITH ANY OF THE PROVISIONS OF THESE TERMS, YOU SHOULD DISCONNECT YOUR PRODUCTS FROM YOUR ACCOUNT (AS DESCRIBED BELOW) AND CEASE ACCESSING OR USING THE SERVICES. 1. The product is an inseparable mix of hardware and software/services/apps: Liability standard? 2. Standard contracts: little room for customisation

9 Product under the Sales Terms The Sales Termsprofessedly refer to the product as hardware, but: These Terms constitute the entire agreement between you and Nest regarding the use of the Services. Confirmation in the Privacy statement: Nest Products include our mobile and web applications.

10 Product under the EULA IF YOU DO NOT AGREE WITH ANY OF THE PROVISIONS OF THESE TERMS, YOU SHOULD CEASE ACCESSING OR USING THE PRODUCT SOFTWARE. Is it feasible to use the device without using the embedded software? No Modifications may be automatically installed without providing any additional notice or receiving any additional consent.( ) If you do not want such Updates, your remedy is to stop using the Product. YOU ARE CONSENTING TO AUTOMATIC SOFTWARE UPDATE OF THE PRODUCT SOFTWARE. IF YOU DO NOT AGREE, YOU SHOULD NOT USE THE PRODUCT SOFTWARE.

11 Unilateral modification We reserve the right to change these Terms & Conditions at any time (.) We will post notice of modifications to these Terms on this page ( ) Continued use of the Services following notice of such changes shall indicate your acknowledgment of such changes and agreement to be bound by the revised Terms. (Sales Terms)

12 Interoperability and portability You agree not to access (or attempt to access) any of the Services by means other than through the interface that is provided by Nest You may only copy parts of the Services (including this Site) on to your own computer for your own personal use (ToS) Private copy? You agree to not use any portion of the Product Software on any device or computer other than the Product that you own or control (EULA)

13 Security Nest cannot guarantee that unauthorised third parties will never be able to defeat our security measures or use your personal information for improper purposes (ToS). Nest Labs will have no responsibility to provide maintenance or support services with respect to the Product Software. (EULA) But, Automatic software updates We use commercially reasonable physical, administrative, and technological methods (Website Privacy Policy) Nest may process your personal information on servers that are not in your home country( ) All information is encrypted as it is transmitted to Nest and cannot be accessed easily. (Privacy Statement)

14 Data & Personal Data We record the IP address you visit our website from, and if you have a Nest device or other connected device, we record adjustments you make to the product through the website interface. We store this data along with your address, information about your Nest device, data collected directly by the device, a history of your device settings, and any other information we have collected about your use of Nest products and services (Website Privacy Policy) Your Nest Product regularly sends the data ( ) to Nest (Privacy Statement) Technicians (as well as Nest employees) can access certain information about you or your account in line with this work but these technicians are not allowed to use this data for non-nest purposes. (Website Privacy Policy)

15 Data sharing We share your personal information: With you consent External processing Business Transitions Legal reasons if we believe in the good-faith belief that we are required to do so for legal reasons. Remember, things talk to each other! - Thermostat pulls information directly from your heating and cooling (HVAC) system (Privacy Statement) - If you have multiple Nest products interfacing with one another, the products will share certain information with each other. locally among devices, be available on your mobile device or application, or on Nest's servers (Privacy Statement)

16 Advertising and tracking Google: A few years from now, we and other companies could be serving ads and other content on refrigerators, car dashboards, thermostats, glasses and watches, to name just a few possibilities. (January 2014) Nest Nest collects your information ( ) in several ways. This information is used to provide users with Nest products and services, to allow us to understand how visitors navigate our Site, and to provide advertising that is relevant to your interests (Website Privacy Policy) Your selection of the Do Not Track option provided by your browser may not have any effect on our collection of cookie information ( ) We permit third party advertising partners to use cookies and other technology to collect information ( ) we have no control over and cannot confirm whether these third party ad parties honor the Do Not Track browser signal (Website Privacy Policy)

17 Applicable law EULA & ToS: California Law, but The courts in some countries will not apply California law to some types of disputes Sales Terms: Irish Law Limited warranty: The disclaimers, exclusions, and limitations of liability under this Limited Warranty will not apply to the extent prohibited by applicable law. For a full description of your legal rights you should refer to the laws applicable in your jurisdiction ( ) to the maximum extent permitted by applicable law, Nest Labs disclaims all express, implied, and statutory warranties ( ) to the maximum extent permitted by applicable law, Nest Labs also limits the duration of any implied warranties or conditions to the duration of this limited warranty

18 Limited Warranty This Limited Warranty gives you specific legal rights. You may also have other legal rights that vary by state, province or jurisdiction. For example, these rights may include your rights under the EC (Certain Aspects of Sale of Consumer Goods and Associated Guarantees) Regulations 2003 and other enactments governing the sale of goods.( ) This Limited Warranty is in addition to your legal rights in relation to the Products. This Limited Warranty only applies to Products purchased and used in the European Union (Limited-Warranty Thermostat) But If you are the original purchaser of the Product and you are not satisfied with this Product for any reason, you may return it at your cost (Limited-Warranty Thermostat)

19 Warranty disclaimers YOU AGREE NOT TO RELY ON THE SERVICES FOR ANY LIFE SAFETY OR TIME-CRITICAL PURPOSES. (ToS) NO WARRANTY THAT DEFECTS WILL BE CORRECTED OR THAT THE SERVICES:(I) WILL MEET YOUR REQUIREMENTS; (II) WILL BE COMPATIBLE WITH YOUR HOME NETWORK, COMPUTER OR MOBILE DEVICE; (III) WILL BE AVAILABLE ON AN UNINTERRUPTED, TIMELY, SECURE, OR ERROR-FREE BASIS; OR (IV) WILL BE ACCURATE OR RELIABLE. NO ADVICE OR INFORMATION, WHETHER ORAL OR WRITTEN, OBTAINED BY YOU FROM NEST OR THOUGH THE SERVICES SHALL CREATE ANY WARRANTY (ToS). NEST LABS MAKES NO WARRANTY THAT THE PRODUCT SOFTWAREWILL BE UNINTERRUPTED, FREE OF VIRUSES OR OTHER HARMFUL CODE, TIMELY, SECURE, OR ERROR-FREE (EULA).

20 Product Liability The commercial sellers growing information about, access to and control over their products, product users, and product uses could expand their point of sale and post-sale obligationstoward people endangered by these products (Smith 2014) Can the multi-layered nature of IoT market act as a disclaimer? Are the contractual warranty disclaimers/liability limitations enforceable?

21 Directive 85/374/EEC on liability for defective products Product: all movables,.even though incorporated into another movable or into an immovable Encompasses IoT products notwithstanding the fact that they are equipped with software 'Producer : the manufacturer of a finished product, or the manufacturer of a component part The multi-layered structure of the IoT? Strict liability: need to prove causal relationship between defect and damage, not fault may not, in relation to the injured person, be limited or excluded by a provision limiting his liability or exempting him from liability(art. 12) Standard: as persons generally are entitled to expect Defence based on state of scientific and technical knowledge :The case of IoT?

22 Directive 93/13/EEC on unfair terms in consumer contracts significant imbalance in the parties' rights and obligations.to the detriment of the consumer Non-exhaustive list Unfairness of a contractual term shall be assessed, taking into account..all the other terms of the contract or of another contract on which it is dependent Peculiar nature of IoT devices? Multi-layered chain of contracts in so far as these terms are in plain intelligible language Are IoT contracts intelligible? if the contract has a close connection with the territory of the Member States

23 Concluding remarks Impact of legacy business on terms? Product, service.. Transparency in multi-layer IoT products? Understanding the words & the structure of the supply chain Regulatory & judicial interventions? Concerning provision or contractual terms The future of consent? For data protection & private law