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But how does it influence the business from the world of IP and legal?

Nicholas Negroponte, the founder and chairman Emeritus of Massachussets institute of Technology’s Media Lab in his quote argued the revolution of our world.  Current technology is rapidly evolving and of the innovative technologies that is already changing our lifestyle is called Internet of Things.

The term was first coined by Kevin Ashton, who back then did not actually know to what extent his use of term will affect our time. He was merely trying to attract attention of a less-than-computer-savvy crowd to represent the development and research of RFID technology. But it was Neil Gershenfeld’s book, When Things Start to Think, also in 1999, not Ashton, who provided a clear vision of where IoT was headed. It was only in a year of 2014 that the term Internet of Things reached mass market awareness when in Google announced to buy Nest for $3.2bn.

“By 2020, it is estimated that there will be over 20.4 billion IoT devices deployed around the world. In an in-depth study by Deloitte, a further estimation predicts that by 2022 a family home in an “affluent market” will utilize up to 500 sensing devices every day.” (Versetti, 2018)

 We are all familiar with smart devices emerging in every corner of our world, Smart watches monitoring your everyday activity, air conditioners that can be controlled by our smartphones, heart monitors monitoring your heart rate. Or the Guardian glucose monitoring device, that detects glucose level in blood, using a tiny electrode called glucose sensor placed under skin, which is a great helping tool for people suffering from diabetes. But these beneficial devices are small in comparison of variety of possible applications and usage of IoT system.  Smart city spans a wide variety of uses, from water distribution, to waste management, urban security, traffic management etc. Connected health, smart farming and so on will have an enormous impact on our reactions, behaviour, function, management of the world.

Internet of things is a system that enables good automation and control, it has strong monitoring features, it saves money, it is fast and efficient, it is integrated with more technical information, so it operates better.

Everything seems so wonderful, but…

In every major technological improvement comes a great challenge, a need for adaptation and possible failures, such as: complexity- can result in failure, reduced safety for users, reduction in employment, over-reliance on technology, legal challenges, a lot of problems!  And you may ask: does it need internet to work? Yes and no, some devices do not need internet or they are connected to remote router allowing to communicate with the systems remote cloud server. But, still in most cases the internet is needed. Also, devices are pretty expensive, which means that many countries and lower income families might not be able to afford the benefits of Internet of things

What challenges does Internet of things represent to intellectual property law?

As mentioned before, there are many disadvantages of IoT, mostly concerning privacy and security. There is a great need to establish measures and procedures ensuring data authentication, access control, system protection. Client privacy needs to be address and reassured. Law will have to provide new regulatory approaches to ensure its privacy and security. System is receptible for hacking attacks, that have to be intercepted and data needs to be authenticated, so different legal framework needs to be established.  It’s also a good idea, to have legal professionals researching the legal challenges of the IoT, systematically, consistently and regularly.

Iot and other technologies will in future pressure intellectual property rights and create continuous fragmation of the intellectual property law system.

The most relevant intellectual property -related question is interoperability. Interoperability is a necessity for developing IoT, because the idea of IoT lies within internet-connected devices communicating with each others and with users. For interoperability it is of utmost importance that interface information for software producers is offered. (Pihlajarinne) IoT interoperability is also an objective for the European Commission, which sees in the IoT ‘the next step towards the digitisation of society and economy, where objects and people are interconnected through communication networks and report about their status and/or the surrounding environment’. In March 2015, the European Commission initiated the creation of the Alliance for Internet of Things Innovation (AIOTI) with the intention of working closely with all relevant stakeholders to create a ‘vibrant European IoT ecosystem’ with the Digital Single Market (DSM) Strategy, adopted in May 2015, which is kick-starting Europe’s progress on the IoT

  • It is possible to claim patent protection for software embedded in the connected devices, when used together within the device. The software must be essential to the functioning of the claimed invention and make an additional technical contribution.
  • Protection of the connected device s appearance: the design of connected devices can benefit from copyright law, because design is protectable due to its creation, and originality

Under the legal protection of designs, company can filL and claim protection with the national intellectual property protection institute, to the extant that the design is new and has individual character. (Lefavre, 2017)

  • Database protection: database is an essential part of Iot, it can be protected with copyright protection for the organisational structure of the database, to the extent that it is original. And also its protection must be ensured in contracts.

Database sui generis right, protects investments of traditional forms of collection of information that are accessible and organised in a fixed base. However, in many cases of IoT, the value lies with the mass of information, which is not necessarily in a fixed base as it might be analysed immediately after it has been produced. It is, in some cases, possible that the data collected by IoT-devices is a database in the meaning of the directive. (Pihlajarinne). The problem is that this data is very valuable even when separated from the device, also they are usually large investment required to obtaining the contents of database, which means that it might not be clear, who is the creator of the database.  ‘’The most valuable information might be a combination of data from different sources. Due to these uncertainties, contractual mechanisms might become very important. It might be necessary in the future for the CJEU to develop its practice on database protection in particular when IoT is concerned, even though this might lead to fragmentation of protection.’’ (Pihlajarinne) For filing the sui generis protection, the database maker will have to provide evidence that there has been substantial investment in verification, obtaining or presentation of content.


IoT offers enormous opportunities for gathering data, automatization of process, it saves your money and time, makes you more efficient and importantly, it enables variety of new products and services.

Can a product become platform service?

The product connected to IoT offers new business opportunities even after it is already at the costumer. In addition to traditional use, the product serves as a platform for various services that increase the user experience. It is possible to create personalized offerings according to different markets and perhaps an individualized offer for individuals. Unlike traditional services, the related product provides digital services that are delivered to customers with low costs. An extended offer that combines products and services provides an in-depth relationship with customers. The product is evaluated according to the actual costumer use. Connected product allows the company to show the long-term bid value compared to other options on the market. Does your product promise to serve as a basis for a subscription to which you can add additional services?

Automatization or informing?

It is important that you know what you want to achieve with IoT technology. The aim of the IoT are automatization and informing. Automatization means that manual work is exchanged for hardware. Labour costs are decreasing and workers can perform other tasks. When automatization is not possible, information technology provides faster access to the correct information to provide workers with the best possible conditions for solving tasks. The difference between automatization and informing is enormous due to the continued production of data by connected products.

Automated systems classify new data and filters irregularities. Human judgement in irregularities has proved to be inappropriate better than the assessment of machinery, particularly where appropriate measures are taken. The company that invests in IoT must combine automatization and information in such a way that the combination between machine efficiency and human assessment is optimally exploited.

How should you manage huge amounts of data?

The world of connected devices creates enormous amounts of data. The value of data is generated by experts through data analysis and by finding critical indicators and key values. Experts must be able to combine, classify, analyse and link data with a large number of users. If the latter were easy, we would have dozens of Google. To find experts and develop the ability to analyse and secure data is crucial, to prevent the accumulation of data that would start generating costs instead of value.

How should you use the collected data?

The business model of the company determines the use of the collected data. The key is a long-term vision of how IoT will be included in an existing business model. A company that wants to increase sales volumes, on the basis of added value, strengthens the brand. Valuable insights into data can be sold by the company as a service and create new business areas. The company can completely terminate the old business model and sell its product as a customer service instead. To a customer who buys a truck or washing machine and does not change the latter for the next 15 years, you can sell services based on the sold product during that period.

Who owns the data?

Ownership of the data generated by connected product is a complex issue. As the data is obtained by the use of the product, it could be considered the property of the user. At the same time, data is collected and analysed because of the extensive technical infrastructure normally owned by the product manufacturer. It could be argued that the manufacturer is the owner of the data derived from the product. The IoT is used for different purposes in different industries, so it is impossible to expect a universal solution regarding ownership of the data. The more likely scenario is that in future contracts it will be necessary to incorporate clauses relating to the ownership of the data. With IoT design, it is necessary to consider what ownership of the data is, what type of data is relevant to the enterprise, and what type of data is relevant to customers.

Regardless of the ownership of the data, a user in accordance with the GDPR can see who uses its data, and in what way and requires data to stop processing. GDPR compliance is particularly challenging in IoT as it is difficult to obtain the consent needed to process personal data in IoT networks. The company’s additional diligence in data protection will be reflected in greater customer confidence, which can lead to a better business. The e-privacy regulation, which is expected to be adopted in the second half of year 2020, will regulated certain areas in detail, like IoT, that GDPR only generally touched. The e-privacy regulation will affect digital privacy even more than the GDPR regulation.

What about security?!

It is so important that we need to explain it again.

IoT can be exposed to hacker attacks, so the system needs to be designed safely, with adequate protection against abuse and intrusion. It is essential to protect data and user privacy, comply with the standards and the ability to remotely maintain and enable the customer to safely use the product or service.  Protection can also be established with the use of blockchain technology. “Blockchain technology proves to be especially applicable to securing data and product designs for 3D printed objects and smart sensors alike. More specifically, blockchain is flexible insofar as it can allow for easy access to product designs while also guaranteeing intellectual ownership and permissioned file access.” (Versetti, 2018)Prevod iz jezika Angleščina. 

Connecting to other companies

Connected products require widespread knowledge compared to normal products. In the future we can expect more integration between companies. Production-oriented businesses are often focused only on one industry. The manufacturer of household appliances cannot start producing trucks without the right knowledge. A quick solution for vertical expansion using the new technology is the collaboration between the different players in the market. Of course, it is necessary to take into account own business strategy, objectives and business interests of potential business partners. It is crucial to question how products and data can be associated with the wide IoT. Companies must be aware of their role in the IoT and be active in cooperation with other companies. IoT has significant impact on the business strategy and it will also fundamentally change the relationship between companies.

Digital enterprises and companies that consider to apply IoT systems as their products and services should identify product opportunities, know competitors and partnerships available, identify market opportunities and distribute protection in IoT, claim,  gain investment and valuation intelligence, and most importantly secure your applications with the help of following suggestions proposed by Accenture:


  1. Adopt a new operational mindset. Monitor the IoT operational and security continuously
  2. Adopt privacy by design principles. Establish access and authorization rights to data sets and co-locate these rights if the relevant data is moved or stored.
  3. Apply ‘’ secure by design’’ principles throughout product’s development from comcept to series manufacturing instead addressing security in the end of the process.
  4. Apply mobile and cyber/ physical system.
  5. Track and use emerging standards, and examine the changes in law.

Patents increase the value of your company, they protect you from copycats and it is an important competitive advantage. The question whether you should patent your IoT devices its not so upforward and it can be challenging.  

The James Billmaier book: The 30 minute Patent MBA for starup CEOs and CTOs proposes that you first acknowledge which form of learning your device has: 1) Edge devices learn independently and share learning through hub. 2) Edge devices send data to hub, then hub does all the learning and analysis or 3) some combination of learning takes place on edge device and hub performs supervised learning across inputs and shares this learning globally. 

The approach you take has a great impact on how you can protect your product. If the learning is centralized in the hub, you can use TRADE SECRET PROTECTION, because it is difficult of a competitive company to adapt your learning algorithms.  If your invention uses learning on more than one edge of device, algorithms can be easily discovert, then patent protection is the best choice to prevent compatetors to use them in their own devices. Trade secret is also available if the primary learning takes place in the hub.

As Gary Hauthier said: ” When you reduce the cost of failure, you see a big eruption of innovation.”

Internet of things is not some sci-fi idea from the past, it is happening here and right now so, think big, think smart and let the magic of IoT work in your favour. But don’t forget the legal part 😊

Weber H.R., 2010. Internet of Things  – New Security and Privacy Challenges. Computer Law & Security Review Volume 26, Issue 1, January 2010, Pages 23-30. ScienceDirect.


Versetti A., 2018. Securing intellectual property and IoT with blockchain. Power Engineering International. https://www.powerengineeringint.com/2018/09/24/securing-intellectual-property-and-iot-with-blockchain/

Upasana, 2019. Real World IoT Applications in Different Domains. Edureka.


Lueth L. K., 2014. Why the Internet of Things is called Internet of Things: Definition, history, disambiguation. IoT analytics.https://iot-analytics.com/internet-of-things-definition/

Rosencrance, et.al., 2016. Internet of things. Techtarget.


Lefavre A., 2017. Internet of things: intellectual property focus for the protection of connected devices – IP & Entertainment Law. International Bar Association.


Pihlajarinne T. Internet of Things and Intellectual Property Rights.



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