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24 January 2020

AI and internet of things herald 'regulation by litigation', report claims

Crowell & Moring warns digitalisation is exposing companies to increased tort, privacy, and cybersecurity litigation

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Digitalisation is generating new litigation threats as government enforcers and plaintiffs’ lawyers employ new rights of action to pursue companies for product failures and privacy breaches that arise as new products are brought to market. The prediction is contained in Crowell & Moring’s eighth annual survey on the litigation landscape in the US: Litigation Forecast 2020: What Corporate Counsel Need to Know for the Coming Year.

“Today we are moving into an era of regulation by litigation,” said Crowell & Moring partner Mark Klapow. 

The report’s publication coincides with the prediction by the World Economic Forum that more than 20 billion devices will be connected to the internet of things by the end of this year.

Internet of things

Jeffrey Poston, partner and co-chair of the firm’s privacy and cybersecurity group in Washington DC, said: “The increasing sophistication of digitally enabled, intelligent products will drive new litigation in the coming years as these products are inevitably breached, either because a product fails or a cybersecurity incident occurs.”

He added: “AI is dramatically improving business operations, but it is also opening up new frontiers for litigation exposure.” 

Cheryl Falvey, a partner in the firm’s Washington, DC office and former general counsel of the Consumer Product Safety Commission, added that to date “regulators have not provided much insight into how AI should be used”, and the main guidance available is “basic”, amounting to advising that companies need to make sure that “AI works in a way that doesn’t create an unreasonable risk of injury".

Companies can take four main steps to help themselves, the report states: enhance compliance for evolving product liability, take advantage of security and risk technology, prepare for cybersecurity events, and keep learning by putting themselves ‘in the bad actors’ shoes’.

Antitrust

In other areas, the report notes that antitrust is trending and has ‘emerged from relative obscurity’ into the mainstream of politics and government. “Antitrust is back, it’s evolving, and it’s at the centre of a lot of public discourse,” said Beatrice Nguyen, a partner at Crowell & Moring.

Meanwhile, the line continues to blur between regulators and the courts as employees fight non-competes in court on public policy grounds. Partner Thomas P. Gies said that although the use of non-compete and other post-employment restrictive agreements had increased, courts were  beginning to signal that they are less willing to enforce overly aggressive applications.

Turning to the US Supreme Court, the report notes that it has been increasingly open to putting aside the stare decisis doctrine. Partner and environment and natural resources group vice-chair Thomas A. Lorenzentackles worried how much weight the US Supreme Court, with its new conservative majority, might give to its own precedents going forward.

Pointing to significant developments in class actions in the UK, partner Robert Weekes said: “We’re seeing a significant growth in third-party-funded litigation in the UK - and over the past year, it’s exploded. There’s plenty of liquidity around.” 

However, while class actions are of growing interest to these funders, the report observes that the UK is 'not expected to see to see an abrupt total shift to US-style class action litigation, thanks to some key differences,' noting that losing parties in the UK pay the other side’s legal costs and judges are not able to award treble damages.

Click here to read the full report.

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