By Michael Swinson, King & Wood Mallesons

Hollywood has predicted many times that the world will one day be taken over by intelligent machines. Well, our generation may be the one that sees this fiction become fact, as our lives are increasingly automated through the replacement of "dumb" devices with "smart" alternatives.

The smart phone, of course, is already ubiquitous and the smart watch may soon be the same if Apple has its way. But that is only the tip of the iceberg. Moves are afoot to reconfigure every device imaginable so that it can collect and communicate data over the internet. Soon we may all be driving cars that can share information about traffic conditions on the go, or own refrigerators that monitor what you eat and automatically reorder milk and eggs from the supermarket when you are running low, or use wearable devices that can track health indicators and automatically administer medicines or alert your doctor if they detect a worrying change of condition.

The "Internet of Things" (or IoT) made up of these connected smart devices has the potential to radically change the way we interact with the world around us. According to research firm Gartner, approximately 3.9 billion connected "things" were in use in 2014 and by 2020 this figure is expected to be 25 billion (an average growth rate of 35% per year).1 The rapid growth of the IoT reflects the strong commercial impetus for companies to build smart features into their products in order that they can learn more about their customers and provide a more tailored user experience.

These days a consumer is no longer satisfied for their TV set to simply broadcast programs -- it also needs to remind them when their favourite series is on and recommend new shows that they may want to watch. For lawyers, it is important to understand this new technology trend in order to anticipate the new issues it may present, and to assess whether our current legal framework is geared up to cope. Two reports published earlier this year by the United States Federal Trade Commission (FTC) and Ofcom, the UK telco regulator, respectively both identified privacy and cybersecurity as key risks associated with the IoT. This was echoed in a survey conducted by Gartner in February 2015, which found that privacy and cybersecurity were the top concerns for enterprises that expect the IoT to impact their business. This paper will discuss these risks, along with some of the other legal and regulatory challenges that the IoT is likely to present.

It is hard to forecast what future applications and innovations will be made possible by the IoT, and it is equally difficult to predict what legal and regulatory risks may arise. Only time will tell whether our existing legal frameworks are sufficiently adaptable to cope with these risks. The view from overseas, at least as far as the FTC and Ofcom are concerned, is that no drastic changes are required at this stage. In fact, the FTC suggested in its recent report that any specific regulation of the IoT would be premature at this stage and would risk stifling innovation in the area. Even if this is true, regulators will clearly need to keep a watching brief on this area, so that they can move swiftly to address any issues that may surface. As the rise of the machines gathers pace, the real question is whether we as human beings will be able to keep up!

This is an extract from Australian Media, Technology and Communications Law Bulletin, July 2015, Volume 2 No 4