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Legal and regulatory challenges in the enterprise application of virtual and augmented reality: What lies ahead

Virtual and augmented reality technologies are gamechangers that will inspire new opportunities for businesses and individuals alike, today and in the future. As a leader in the enterprise global marketplace, you need to understand, adopt, and implement these cutting-edge technologies or risk losing your competitive advantage. Although consumer use cases have generated considerable attention and investment to date, the enterprise adoption of these technologies is growing exponentially.

A recent study predicts the enterprise market for AR and VR will be worth roughly $56 billion by 2022, while the consumer market could be worth $53 billion1. Virtual reality, which completely transports a user to an artificial environment, is increasingly being adopted in sectors as diverse as medicine, manufacturing, the military, autonomous vehicle training, urban planning, and real estate. Augmented reality, which maintains a viewer’s current environment but “augments” it with virtual elements, is becoming widespread in advertising, architecture, insurance, retail and geolocation applications. But every day new sectors are discovering new ways of presenting goods and services to buyers around the world through the use of these technologies.

Great opportunity often comes with great challenges. One such challenge is that legal and regulatory frameworks often lag behind advancements in technology. Businesses need to be proactive in tackling these issues, often before the laws are clear. As it is early days, there is as yet little guidance from courts and governments on how laws will be applied to VR/AR scenarios, but here are some potential issues:

Intellectual Property

Patents, copyrights, trademarks and trade secrets are rigorously defended by rightsholders because they protect their investment and ingenuity, and form the foundation for their future financial success. Often, technologists are uncertain if or how these rights will apply to new technologies, but courts have consistently found ways to adapt and apply existing IP frameworks to new technological developments. At stake are questions such as who owns the underlying software and platforms that enable these environments, whether brands can be featured in a virtual space without permission of the brand-owner, and whether the development of particular types of hardware designed to enhance the user’s experience might infringe on another company’s rights.

Patent issues are also likely to become increasingly contentious as the major players and start-ups seek to build their portfolios of patents to protect their own areas of innovation from their competitors.

Privacy and Security

Increasingly, consumers are realizing that businesses profit from the exploitation of their personally identifiable information, and they are seeking to remain in control of this information. Business-to-business (B2B) enterprises do not escape liability under new legislation such as Europe’s General Data Protection Regulation (GDPR), so each company has a legal responsibility to examine what type of personally identifiable information it collects, and to ensure that it is only used, shared and protected in accordance with the law. Virtual and augmented reality applications can record eye movements of a user as well as track very specific geographic and behavioral data that could be construed as highly sensitive and subject to strict regulation. Health applications in the VR/AR space may collect an individual’s personal health data and if it is stored and/or manipulated by an enterprise, clear notifications to users and opt-ins would likely be required.

As for security concerns, the more we live our lives online and virtually, the more vulnerable we become to hackers and wrongdoers. From stealing our money to our identities and causing real harm to individuals and businesses, cybersecurity needs to be on everybody’s radar.

Product Liability

Inviting a customer to strap-on glasses that may obscure their vision and start walking around could risk causing an injury. And that could well expose a business to law suits. With high-speed 5G networks still to be rolled-out across markets, some virtual reality applications can experience low latency speeds which may cause nausea and discomfort to a user, potentially provoking litigation. Additionally, VR and AR environments have potential to distract the user from the “real” world, and that in itself could give rise to a risk of liability if this results in an accident.

Cross-jurisdictional Disputes

Just as the Internet crosses borders, so too do these new environments. Designers will be able to collaborate on a new project from different continents and all “meet” in virtual reality without crossing an ocean. New doctors will get their training from a reality training program that will not depend on physical proximity to a real patient. But each participant comes with their own understanding of the laws of their homeland and it may be difficult to determine which laws apply to interactions in a virtual space. Just as in the early days of the automobile and the Internet, harmonization of laws across borders and guidance as to conduct in the virtual arenas will likely develop to provide recourse in the event of a dispute. But in these early days, it’s best to clearly articulate expectations and mechanisms for dispute by way of commercial contracts.

And finally, it is important to note that a crime in the “real” world will likely still be considered as a crime in the worlds of virtual and augmented reality. Fraud is fraud, actionable by law most everywhere, and misleading and deceptive advertising is likely to prompt a regulatory response if not litigation. Businesses will need to think carefully about real-world consequences and understand the potential application of existing laws so as to best leverage the unbridled opportunity that virtual and augmented reality technologies present. Only then can consumers and businesses alike profit from a safe and predictable environment in which to engage and transact -- virtual or otherwise.

References

[1] See https://www.zdnet.com/article/augmented-and-virtual-reality-mean-business-everything-you-need-to-know/, citing IDC report, “Worldwide Semiannual Augmented and Virtual Reality Spending Guide” (2018).

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Jeremy Dalton

Jeremy Dalton

Head of VR/AR, PwC United Kingdom

Tel: +44 (0)7701 295956

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