The Internet is creating a new class of web-based, geographically-dispersed entrepreneurs. Digital communication allows work, capital, and knowledge to come together in a virtual world that can let go of the old necessities of handshakes and paperwork. Until recently, however, the legal frameworks available for structuring these businesses haven’t kept pace. With the advent of Vermont virtual business laws, and particularly the digital LLC, there are now forms that allow the legal formalities of setting up and running a business to be migrated entirely into cyberspace.

The Law Lab at Harvard’s Berkman Center for Internet and Society has been active in developing software applications that can make full use of this flexibility, while preserving the protections and stability of a recognized organizational form. We are now releasing ademonstration version of a digital LLC platform aimed at entrepreneurial start-ups with a relatively small core group of owners who want to use the ease and flexibility of digital interactions to form and manage their business. Starting a company may never be the same again.

These developments are, in a sense, overdue. In the commercial world, many kinds of transactions are safely and routinely handled via the web, from buying books to energy trading to selling the contents of our garage. Internet banking allows digital controls over transactions with a high need for security – and it all works remarkably well. Given this environment, it seems absurd to still be using the same paper-based means of documenting meetings and recording the decisions of companies that were developed in an age of steam and telegrams. But that is the basic orientation of most business organization laws. Even a web-based service like Legal Zoom sends you a physical minute book as the end-result of setting up a new corporation online.

Why are the traditional options for business organizations ill-suited to the needs of such web-based businesses? Some of the limitations have nothing to do with the potential of the digital world. For instance, under U.S. law, traditional partnerships may not survive past the death or departure of one of their members and do not afford their members limited liability. Traditional corporations provide greater permanence and are generally better in terms of the ability to raise capital but also impose cumbersome internal governance processes that are appropriate for companies with thousands of shareholders but that ill-suit the needs of a small, entrepreneurial ownership group. The limited liability company (LLC) form offers entrepreneurs much greater flexibility, streamlined governance, and pass-through taxation. However even with these structural advantages, an LLC in its traditional form is still tied to paper for its formalities, and so cannot fully meet the needs of a web-based, geographically dispersed team of entrepreneurs.

In 2009, Vermont led the way by passing groundbreaking legislation that for the first time offered a legal framework for virtual companies. These changes allow three critical aspects to take place. The first is digital interaction with the State, a step authorized in other states as well. Moving beyond this, however, Vermont has made two key additions, allowing digital originals of bylaws, operating agreements, and other primary documents, and by permitting the full use of any “sequentially structured” digital communication in its formal decision making. These steps permit the formal interactions to move entirely into the digital sphere. The availability of software to carry out these functions will lower the barrier to entry for entrepreneurs worldwide who might not have or be able to afford legal counsel when starting a corporation or LLC, and will open up the possibility for a “Cambrian Explosion” of new digital firms and start-ups.

In order to catalyze this new business environment, the Law Lab has developed Digital LLC, a web-based software platform that allows entrepreneurs to form and manage an LLC completely online. Where existing on-line “set up a company” sites typically just have a user fill in the initial filings with the state, Digital LLC aims to be an interactive forum for the entire length of a digital LLC’s existence. The software provides tools for negotiating the LLC structure and building the two main components that govern the management of an LLC – the Operating Agreement and the Articles of Organization. Once the business is set up, the software provides a framework for making and recording decisions and identifying and resolving disputes as they occur. (Please see the videos here.)Through Digital LLC, businesses can be established and run entirely through internet communication.

As the digital business sector grows and matures, the Law Lab will expand its work to focus on new ways to reduce barriers to entry, provide governance safeguards and efficiency, reduce formalities, and augment paper-free and nearly lawyer-free administration. Our aim is to help the ideas-based entrepreneurs of the 21st century. Digital companies’ flexible, non-terrestrially based nature will help make them a natural governance form around which geographically dispersed innovators can coalesce, unlocking a whole new wave of firm creation and entrepreneurial activity.

In her beautifully insightful book, The Nature of Economies, Jane Jacobs suggests that we must broaden our understanding of economics in the context of the flow processes of the natural world. Near the end of the book one of her characters asks the question, “What are economies for?” One of the other characters answers:

“… To enable us to partake, in our own fashion, in a great universal flow”

Another character answers with “Economies have a lot in common with language… like language, economic life permits us to develop cultures and multitudes of purposes… that’s its function which is most meaningful for us.”

What do we mean by economy when we say “the economy is strong/weak/growing/shrinking/healthy/in crisis.” We mean something social, an aggregate of many people interacting. But it’s not just individuals, it’s groups of people in the form of businesses, governments, unions, non-profits, etc. also interacting with each other and with individual people. We know, however, that we aren’t necessarily talking about the entire social organism for when the economy falters, other aspects of the social organism, i.e. its arts-culture may thrive. Or, the economy may flourish while we experience a marked drop in “civility” or an increase in other so called “social problems”. “Economy”, it seems, specifically refers to the body of the social organism — its “corporeal” aspect. This includes moving stuff around, building houses, growing food, transforming nature to its bodily needs, etc. Using this analogy, we might say that the mind of the social organism is everything else — its cultures, religions, arts, politics, and so on.

However, it would be a mistake to project this mind/body dualism onto our nascent understanding of the social organism, thereby forming a dis-integrative framework from the start. So it’s not just that the economy is disintegrating around us, it’s that the very word and concept of economy is disintegrative! Here, the two answers given by Jacob’s characters are so powerful. First, they help us shift our imaginations toward thinking from the point of view of the social organism; toward seeing that the “us” that partakes in the great universal flow, and the “us” that develops cultures and multitudes of purposes is not the individuals of the social organism, but rather the social organism itself. Second, they suggest a perspective from which to perceive the organism as a unity: as a participant in the “great universal flow.” Third, they suggest to how this participation is achieved: through language and expressive capacity.

Here are the two answers restated:

1) What we think of as economic life is actually the ability of the social organism as a whole to perceive and interact with the flows in which it is embedded.

2) This ability of the social organism depends on a coordinative expressive capacity

So what is this “coordinative expressive capacity?” We are very familiar with its current form: money. Without money and its context in currencies, most of what we call the economy would collapse. However, with money in its current form, the economy also seems to be collapsing! Money, as a medium of exchange, a unit of measure, and a store of value is the primary information system that coordinates the flows of goods and services through the economy. If it cannot also properly coordinate the participation of the social organism in the greater flows of nature in which it is embedded, then the organism will not survive. Currently humanity is failing to coordinate the basic flows of inputs (fresh water, food, etc) it needs and outputs it produces (CO2, waste, etc) in a way that will ensure its survival. But perhaps more importantly, seen from the perspective of coordinating flows, the social organism is failing miserably to allocate resources and human effort within itself in a way that yields a healthy harmonious entity. Money as an information carrying “life-blood” does not rise to the challenges posed by the social organism that humanity has become.

So where do we go from here? What is needed is the development of a new expressive capacity, what could be called a meta-currency language that allows the social organism to organically develop and express formal information systems tailored to enabling and interacting with all the different types of flows that comprise it. We can still call these information systems currencies because they are about shaping flows, or currents. However, these currencies will take on a huge variety of new forms tailored to the kind of value that they are helping to build. Note that this is not a call to “monetize” social well-being. Quite the opposite, it’s a call to understanding that money as currently practiced, inherently destroys many forms of social well being. But formal information systems can, in fact, build social well being, and we are actually quite familiar with them: reputation tokens, formal achievement markers like grades/credits & degrees, certification markers like USDA Organic, and many more. But as things stand, we haven’t recognized that all of these formal information systems are related families in a larger coherent pattern. We don’t see this, because we don’t yet have the necessary expressive infrastructure, the language, and grammars that unify the structure and forms these information systems take.

The word economy comes from the Greek roots oikos (home) and nomy (management) = home management. Since what we really need is flow management, we can use the Greek root for flow “rheo” to declare that when we gain this new expressive capacity of a meta-currency language, then perhaps we can start talking about the Rheonomy instead of the Economy.

Eric Harris-Braun is a co-founder of the meta-currency project which will provide a smart-edged network for distributed currency creation and deployment. He has been a core participant in the open money project, he sits on the board of the E. F. Schumacher Society, and lives in rural New York. Eric Harris-Braun believes we need new systems of wealth acknowledgement that account not only for tradable wealth, but also for wealth in realms that are only measurable and only acknowledgeable.

As technology augments and mediates our daily lives what does it mean to be human if functioning and surviving in a digital dependent society necessitates or mandates technology use? What are the human values that emerge from this melding of co-dependent activity? What new power structures emerge from increased dependency on Cloud technology when individuals have limited control over balance and distribution of processes? How do we assess the Human Experience under these new terms and how does this experience change the value systems that Cloud Laws are based on? What new human rights might emerge from the evolving inter-dependency between the personal technologies (embedded) with its interaction on the Cloud? These are questions at core of our legal systems that challenge the notions and foundations under which laws are based. We are reaching an age in the 21st Century where it may be not so easy to separate Humans from the technology they depend on when that technology my have its own agency.

Cloud Law will need to address the changes in how people interface with the Cloud Computing services. The emergence of smart phones and net books with Internet access via the Cellular network provides possible innovations where location and presence are factors in how people will interact on-line. These developments are only a few of the advances that may challenge what Cloud Law needs to address in the future. For example, privacy controls get escalated from misuse of personal information to physical vulnerabilities if the individual is easily tracked in real-time. What legal safeguards will be required to prevent threats that have serious consequences while providing for privacy rights that facilitate further innovation? Innovation is not without consequences of responsibility, in our short history of information technology one can easily see how uses and abuses have emerged that the inventors and designer never intended. For every advance its uses are many and the global reach and network effect generates a system dynamics with amazing benefits but equally threatening capabilities. Gaining a deeper understanding of the foundation and phenomenon to help anticipate what legal frameworks are needed for Cloud Law requires research and considerate thought that can be put into pragmatic action to reset the policies and systems on a course of great promise for the 21st century.

A review of trends and transformation in how people may interface and interact on the Cloud might help to illustrate the legal considerations that may accompany each innovation and the questions they raise.

• End of Legal Stability – if the interfaces to the Cloud are embedded then the laws that are based on explicit interfaces between known or expected outcomes gets challenged in ways that are difficult to anticipate. Mobile devices become wearable computing, implanted medical devices are embedded in the objects we interact with, ambient intelligence within the spaces we exist in; this pervasive and ubiquitous mediated and augmenting technology blurs the experiences that people have and the judgments they apply to situations. How do new laws build on older frameworks and how will people understand the new legal framework and use them effectively?

• Growth of dependency on technology and hyper- connectivity – communications is consuming our lives instead of freeing up time, the constant digital presence of mobile devices will extend to smart mobs acting as a collective. What can be demanded of device reliability and expectations of safety when the processes use services on the Cloud? When the Cloud gets attacked or an individual’s life is disrupted by Cloud failure or unexpected outcomes what laws will be needed to remedy or ascribe liability and responsibility. How to create the laws to address infrastructure breakdown and malfunctions. If laws are implicit and taken for granted as part of the usage of the Cloud, then how might that impact precedent and legal judgment? If the Cloud has autonomous processes how does that impact the legal framework?

• Digital Footprint and Life Logging – as the Cloud gets used to capture, manage, share, and archive personal traces of information in databases controlled by corporations and governments this reflects a loss of control of one’s personal digital assets. Do we need laws to manage vast amounts of personal data and the ownership and analysis of the digital footprint? What are the implications for the law and how do these needs to evolve to address balance the rights of the individual, the public good, the corporations, and the government to services their public?

• Growth of digital creative’s – Cloud computing facilitates the consumption, production, and publication of professional and personal works that remain as artifacts distributed by the entities the control the Cloud. The division of ownership and span of control has much to be desired in terms of legal protections for all modes of participation.
The above trends are only focused on the Information Technology aspects of innovation and omit the advances in Life Sciences. The new area of research in Computational Biology may bring together Biology and Information Technology in ways that will merge and blur the boundaries such that our conception of physical aspects of being human may change as well. As technology gets further infused into our daily lives such that human experience is indistinguishable from the mediating technology, when it becomes invisible and always present, how we think of human values is likely to change and the human rights that are at the foundation of a legal system may be challenged.

Reference:
Sellen A., Rogers Y., Harper R. Rodden T., Reflecting Human Values in the Digital Age, Commun, ACM 52, 3 (March 2009).

Cloud Law – What is it?

Cloud law may be defined as the application of ethical principles using verifiable semantics to achieve the formation and execution of fair and economical processes to govern technology mediated social communications where those processes may act on behalf of the participants on systems for which they may not own or have full control of. Cloud law extends Internet or Cyber Law beyond questions of Intellectual Property concerns, Privacy, Identity or Data Ownership, and includes the challenges to jurisdiction and sovereignty, legal precedents (common and civil laws) from the physical world that have no analog in the virtual space, legal interpretation of statues, access to evidence and chain of custody, forensics, implied digital contracts, fluidity of language and its ambiguity as used on the Net, and the very notion of why and how laws are formed and who they serve.

Lawyers on the Cloud

Given the integrated communications that the Cloud enables it may be necessary for lawyers to use the Cloud and craft the legal structures before establishing the laws that govern the use of the Cloud. This would be closers to how the Cloud is evolving, as a self-organizing distributed complex adaptive system. The Cloud is adopting technology quickly to gain capability in support of the massive network and computational scale it requires. The legal system has thus far lagged the developments of the Cloud and when engaged have resorted to applying existing laws to new circumstances which may not of been appropriate or effective. The Music Industry’s reluctant transformation, due to file sharing taking hold on the Cloud, is a well known example. This example may not have the worst consequences relative to what may occur once large segments of the population are easily tracked on the Cloud without representation or legal recourse. The US legislative and judicial systems may lack adequate experience with this rapid adoption of technology that is quickly pervading every segment of society and commerce. If the legal profession were the early adopters of Cloud Computing would the laws be crafted prior to the mass participation of its appeal and utility?

Accessibility of the Law for all

Lawyers have increasingly become dependent on technology and the Cloud. Graduating lawyers are required to know as much about legal research using Lexis/Nexus and WestLaw as they are to know about using a law library. Not using one of the commercially controlled sources for legal research can disadvantage a litigation case and subject it to negligence claims. Yet much of the information provided by the two major legal information providers are in the public domain but not readily available on the Cloud. Accessibility of the law for all that maintains it credibility and is economical may be one of the challenges for Cloud Law. If Google is attempting to make freely available all information and books regardless of quality, credibility, or authority, what implications does that have for the practice of law? Do citizens have the right to have free access to all the laws that govern them and the publically available cases that set the precedents for which the laws are judged? When will lawyers start a wikiLaw for lawyers by lawyers in support of Cloud Law? What new learning and research processes are required of Lawyer’s in support of crafting Cloud Law and how would these laws be tested and made valid in practice?

Computational Law

In the near future it may be feasible to automate legal reasoning using formal representations of the laws that apply to technology mediated communications on the Cloud. Such computational law processing would use advances in artificial intelligence and machine learning on semantic networks. This would be an evolution of what has previously been attempted with digital contracts using Internet Trading Exchanges. Cloud Law may need to address the legal gaps that remain while leveraging the advances in computation to seize the opportunity to automate legal compliance within the Cloud. A number of challenging research areas in computation need further development in Specification Languages, Ontology, Abstract State Machines, Petri Nets/Workflow Nets, Temporal Logic, Process and Event Algebra of Communicating Systems, Prepositional Logic and Inference. As these research areas emerge as capabilities on the Cloud, lawyers may need to become versed in computational law to craft the laws that function on the Cloud. In the future the laws may be embedded into the Cloud and act as constraints on the activities therefore become integral the systems dynamic.

Engineering Cloud Law

The notion that Cloud Law may require the embedding of encoded computational law subjects it to the challenges of expressing the law within software engineering process. Software has some distinct characteristics that make it unlike other engineering practices and may be more like attempting to apply the law against a structural and process legal system. Cloud Law embedded into the system may require the following engineering principles:

• Predictable Outcomes – application of the law has no unintended negative consequences and can be modeled against the actors. The application of the law produces consistent outcomes given similar circumstances

• Tolerance – applying the law even with varying interpretations produces outcomes within certain acceptable ranges or metrics.

• Risk Management – enforcing the law must be easy, systems should not allow for easily breaking the law without clear intentions to do so. Once broken it should be immediately detected. Risk of breaking the law should not create large scale risk to people on the Cloud.

• Separation of Concerns – laws should be applicable regardless of specifics of the Cloud technology implementation.

• Reconciliation of Conflicts – laws should recognize all actors and motivations and capabilities or lack of and how these interact within constraints and forces to produce and consume Cloud artifacts.

• Adaptation – Law needs to facilitate complex adaptive systems and have mechanisms for appropriate changes in response to obsolescence or the laws may also initiate or facilitate a change in the system dynamic.

• Ease of Judgment – Law should be easy to negotiate and judge and by extension easy to learn and teach to all actors in the system. The laws should be easy to understand, implement, and enforce by those being governed. They should be desirous to adhere to by all and not following the laws should be readily apparent and easily corrected.

Formal verification of software is not a widely adopted practice and therefore software systems tend to be incomplete and error prone. Even when the system performs reliably often this is due to the fault tolerance and redundancies created to overcome the inherent lack of verification. Cloud Law would operate on large scale concurrent systems with autonomous processes that are highly distributed. What happens when systems predict and act on behalf of actors based on machine learning algorithms and make inference that cause it to behave inappropriately or illegally? Amazon’s recommendation engine has on occasion suggested offensive products relative to a search term where no human intervention was present nor could anyone anticipate such occurrence. When autonomous multi-agents are the norm what Cloud Laws and mechanisms will govern this? Given the lack of formal verification in both the software and the law and the inability to predetermine all possible behavior of a Cloud acting under its own agency how will the law be applied? This is not an act of nature but and act of an artificial system.

The development of Cloud Law may have constraints that are closely aligned with the limitations of software engineering and therefore these two professions will need to converge in joint research to overcome those obstacles. Lawyers will need to learn computational thinking and Software Engineers may need to understand the principles of jurisprudence. Until this happens it is likely that Cloud Law will remain a disembodied application of existing legal practices onto a medium that is evolving rapidly and not completely deterministic in its system dynamic. If Cloud Law is to be an enabling endeavors it will need to race ahead and charter the legal grounds to facilitate continuous innovation and novel uses of Cloud Computing by society and commerce. Equally if technology innovation wants to avoid being constraint by future regulation then research is needed to understand how Law and Computation can fuse into solutions that embody the policy into the systems.

References

Riehle, R., An engineering context of software engineering, Ph.D. Thesis 2008.

Denning, P., Riehle, R., Is Software engineering engineering?, Commun. ACM 52, 3 (March 2009), 24 – 28

Links

Computational Law at Stanford Logic Group 
AI and the Law  http://www.aaai.org/AITopics/pmwiki/pmwi…

Conference on Artificial Intelligence and the Law