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The Legal Realities of AR Technology
 Article 
Author
Simon Leaf
Source
World Sports Advocate
Date
11 August 2017

The Legal Realities of AR Technology

A nation of shopkeepers and sports fans

In the late 18th Century, Napoleon reportedly described Britain as “a nation of shopkeepers".  Fast forward three centuries and after a recent survey revealed that only 25% of the British population that watch sport on TV play actually participate in physical activity, the Huffington Post described the country as a “nation of couch potato sports fans”. Retail and sport are undoubtedly two of the most important UK industries; the total value of retail sales in the UK in 2016 was over £350 billion, while over 1 million people are employed in the UK's sports sector.

Yet despite this, when it comes to the Premier League, a significant contributor to the UK's sports economy, average Premier League viewing figures on Sky dropped by 14% last season. The number of people attending Premier League matches also fell. On the retail side, forecasters have estimated there will be 30,000 retail job losses in 2017, and that just under 15% of all retail units are vacant.

So how can the major clubs (and their associated bricks-and-mortar retail operations) use technology to reverse the decline, and attract more people back into their stadia and retail concessions? One answer lies in the development of Augmented Reality (AR) solutions. This article assesses some of the legal risks that may arise.

AR – What’s the opportunity?

AR is essentially a technology that integrates digital or computer-generated content onto an individual’s actual view of the world – be it through sound, video, images or data – changing how the individual sees the physical space around them. Perhaps the most high-profile recent example of the technology in action is Nintendo’s very successful Pokemon Go App, which contributed to increasing the company’s value by £15bn in a week.

In a 2016 report, Goldman Sachs predicted that, by 2025, the combined value of the AR/Virtual Reality industries will be approximately $80bn. It is therefore no surprise that some of the biggest names in technology, such as Google, Microsoft and Apple, have all made significant investments in this space.

From a sports perspective, there are undoubtedly opportunities for collaboration between interested parties to offer fans and shoppers a new and unique AR experience. Recent examples in a retail context include Blippar's development of an interactive family-friendly AR reindeer hunt around CapCo's Covent Garden Market and the surrounding area in the run up to Christmas, and the launch  of a number of AR apps by McDonald's, ranging from those that help customers visualise the food production process to a 'create your own burger' kiosk. On a purely sporting front, the focus has been on engaging fans by making stadia increasingly interactive, such as using on-field graphics in the NFL, while the Denver Broncos encouraged fans to scan their beverage cups during matches in order to access exclusive content. The potential is clear.

Getting the contract right

A successful deployment of AR in this space will depend on a number of different organisations working together. Initially there needs to be collaboration between hardware, software and platform providers to agree on joint standards and distribution for the technology itself. But there's also the need then to agree the specifics of the look, feel and content of the relevant AR software application itself with the chosen "developer". Sports clubs and stadium operators – for our purposes the "customer" – will need to have a clear view of what they are looking to achieve by rolling out an AR solution to their own "end-users".

Getting it wrong can be costly – providing end-users with a poor experience will not only mean the customer has wasted time and money, but it may also damage a business's goodwill. It is important that issues are spotted in advance and dealt with in a written agreement so that all involved know what they are responsible for doing, and when they need to do this by.

In particular, given that these types of software development and maintenance agreements are likely to include 'agile' development aspects, where the end-product will be an iterative process between the customer and the developer, the customer must be satisfied with what is being produced along the way. The contract should include an appropriate service level and service credit mechanism to ensure that the solution is produced on time and then, going forward, is appropriately maintained.

Depending on the type of solution being provided by the developer, the customer may also be keen to ensure that the developer does not promote its product with competitors. Any exclusivity provisions will need to be properly drafted and considered from a competition law perspective to ensure they are enforceable.

AR output: who owns the IP?

With any innovative technology, it is important to think through the intellectual property (IP) issues properly. In the U.S, in particular, patent and trade secrets disputes are a fact of life for several technology companies. Earlier this year, a jury awarded Zenimax $500m in total from Facebook following a claim relating to the violation of an NDA, copyright infringement and false designation in respect of the Oculus VR headset. As a result, it is important that the customer and end-users have adequate protection from any claims that the developer has infringed a third party's IP rights.

Licensing of IP is another issue to keep in mind as valuable IP, such as trade marks and content, will almost certainly need to be used by the developers and end-users. A related aspect to consider is whether the AR product allows end-users themselves to develop or publish content, such as an App that lets the end-user compile its own stats at a sports match, or create and then publish a new design for sports apparel. In such scenarios, it is important that appropriate terms are included in the development contract to deal with who owns the rights to such creations and publications, and to try to protect the customer from liability if the end-user uses a third party's IP.

Data: the devil will be in the detail

One of the most exciting opportunities for retailers, sports organisations is the ability to understand end-users better – be it from how they interact with the physical space around them to profiling that allows them to see what promotions and marketing materials are most effective. 

There are a number of legal issues to consider when undertaking data collection and subsequent analysis – especially in light of the new General Data Protection Regulation (GDPR), which comes into force in May 2018.

In short, on top of the current requirements under existing privacy legislation, organisations collecting personal data will need to ensure that end-users have been adequately informed and the data is lawfully processed. If replying on end user consent to the specific use of their data the end-user must be given the right to withdraw such consent at any time. Burying the detail in a privacy policy or making use of the service conditional on accepting the privacy policy will not be good enough. The potential cost of getting it wrong could be significant – with fines of up to the greater of €20m or 4% of global annual turnover.

Alongside this, the relevant organisation will want to ensure that all data collected – irrespective of whether it is personal data or not – is adequately protected and secure, especially if that data is being collected by the developer. In particular, it is important that any agreement with a developer that is also facilitating the roll-out of the AR product is clear on who owns the data collected and how this can be used by the developer. At the very least, customers will want to ensure that any commercially sensitive data remains confidential and is not used with competitors.

Liability

Inevitably with any complex technology ecosystem, it is important that all involved consider where the risk should sit if things go wrong. For example, who should be responsible if an end-user suffers loss, such as an injury, as a result of using the AR product on offer? Should the customer be responsible for content errors, such as incorrect promotional information? Should the developer be responsible for damage to the customer's brand from a poorly executed product?

Under English law, liability for certain losses – such as death or injury caused by negligence and fraudulent acts – cannot be excluded. However, where the liability sits for all other matters and who takes the risk of liability, is generally up for negotiation and should certainly be considered before embarking on any AR project.

Conclusion

As we've seen, it's important that organisations are aware of the legal issues and challenges that they face when dealing with technology vendors and engaging with end users in this way. AR is undoubtedly an opportunity to re-connect with customers and make physical spaces, such as sports stadia and associated retail concessions an altogether more vibrant, exciting and attractive location – and at the same time, allow them to develop a better understanding of their customers' needs. 

Simon Leaf, is a Managing Associate at Mishcon de Reya specialising in Sports and Technology Contracts.