1. What next for AI?
Last year, we predicted that we’d see major AI investments, including in tools such as ChatGPT and image generation software – the scale of that investment (such as Microsoft’s partnership with OpenAI) was beyond what most predicted. Most of our clients are looking to make even greater use of AI tools in 2024 to help drive efficiency and offer new/better products. Without a doubt, we shall continue to see AI hitting the headlines with new advances and new uses. Elon Musk, a star guest at Rishi Sunak’s AI Safety Summit in Bletchley Park in November 2023, however, has left us in 2023 with some stark words:
“…AI can do everything. I don't know if that makes people comfortable or uncomfortable. It’s both good and bad.”
This warning, feared by many, which hints at AI and even humanoid robots taking over our jobs, has definitely been spurred on by the explosion of ChatGPT and its widespread use. But while these advances may displace jobs, they also promise to create new ones, and so we see some positive change ahead.
2. Film, TV and music
As businesses in television and film also look to use AI tools, expect to see an increased focus on ensuring that existing contractual frameworks remain fit for purpose. The SAG-AFTRA strike, which dominated headlines last year included AI as one of the final negotiation hurdles – shortly before an agreement was reached, the Alliance of Motion Picture and Television Producers had been seeking the right to create digital replicas of deceased actors without requiring consent from a deceased’s estate or from SAG-AFTRA.
In the music industry, AI has the potential in 2024 to solve a number of challenges, including real-time music detection, metadata, and personalised discovery. It creates an opportunity to monitor piracy and unauthorised commercial use in real time, optimise production costs (particularly for film or ad music) and ensure transparent payments for rightsholders, and we expect to see increasingly innovative licensing and remuneration models emerging. Of course, the current downside is that there are risks that performers may have their voice or likeness used (without permission), such as when Drake and The Weeknd were reported to have a new song, “Heart on My Sleeve”, which was actually created by a Tiktok user that trained AI on the artist's voices.
3. Tech Regulation goes large?
As AI technology develops, so too do the rules that regulate it. The big news of 2023 was the provisional agreement reached between the European Parliament and European Council on the Artificial Intelligence Act. We expect the Act to be finalised imminently and for it to apply one to two years after adoption, during which time businesses will need to get their compliance processes deployed. On UK shores, it seems unlikely that any (equivalent) formal AI laws will be proposed in 2024, but AI safety is still high on the agenda. Rishi Sunak can celebrate some success following the AI Safety Summit, as besides interviewing Elon Musk, the Summit resulted in the 28 countries in attendance signing the Bletchley Declaration – a commitment to joining a global effort to ensure AI is developed and deployed in a safe and responsible way. In 2024, we expect to see further discussions and consultations on how future AI guidance and legislation might operate.
It seems inevitable that there will always be regulatory hurdles in respect of IP rights, data protection, cyber security, consumer protection and employment law around AI but, with the right guardrails in place, that should (we hope) not prevent sandbox development.
Copyright infringement regarding the datasets used to train AI will remain a key issue. We expect 2024 to deliver an initial outcome (if not a solution that pleases all) to the Getty Images case (reported on here) and point to how future copyright challenges will play out. Some comfort can be taken from the fact that Google and Microsoft now offer copyright indemnities for paying subscribers who are sued for copyright infringement, and we expect to see other platforms also standing behind their AI products.
4. Yearning for Sustainable Tech?
The ongoing computer chip shortage continues, partly due to the tech war between the US and China which is set to escalate in 2024, after the US banned the export of certain AI chips to China in late 2023. While the UK is set to become the world’s biggest e-waste contributor by 2024 according to Uswitch, the EU is looking to ramp up its tech recycling efforts. It’s estimated that some 700 million old mobile phones are sitting unused in EU households; to address this, the EU has recently adopted a set of policy recommendations to incentivise us to return old devices. Hopefully the UK might follow suit. So, how about a voucher or discount code for that old mobile? Don't mind if we do!
We expect to see a continued strive for more sustainable, circular and efficient technology, alongside growth and expansion in the realms of ClimateTech (which works towards net-zero carbon policies and strategies) and EnergyTech (which can improve the battery life of our phones and cars, and reduce our dependence on lithium). MIT’s 15 ‘2023 Climate Tech Companies to Watch’ are leading the way, and the University has shone a light on various start-ups using AI to (for example) help convert CO2 into sustainable jet fuel and make plant-based food taste more like its non-vegan equivalents.
Not far behind the buzz of AI’s expansion, there are increasing environmental concerns about AI energy consumption (alongside that of digital currency mining). Various reports have tried to quantify the amount of water and energy used by datacentres to train AI, and it’s safe to say – it’s probably more than you realise. In 2024, expect to see responsible green AI deployment through environmental initiatives, such as AI that helps to create Smart Cities whether through waste management and sustainable urban development, or optimised energy consumption in carbon-intensive environments.
5. You’re (always) under attack!
The potential of data is endless, especially when AI is introduced into the equation. Data has been described as one of the most coveted resources in the world, and it’s easy to see why. Datafication, whether used to improve an organisation’s internal processes and productivity, or to drive revenue through helping consumers decide which movie to stream next, engage with social media advertising or to offer a product or service, is big business.
The increased reliance on data, coupled with the fact that cyber threats and attacks are becoming more sophisticated means that cyber resilience will remain a key boardroom agenda item for 2024. The ‘threat’ landscape continues to become more complex, and AI is adding fuel to the fire, allowing for the rapid acceleration of more sophisticated attacks. For example, the first look at Marvel’s Wolverine, a video game currently in development by Sony’s Insomniac Games, has come from a recent cyberattack. While AI can also be used to combat threats, more protections are needed. We expect to see more robust supply chain diligence and increased penetration and cyber resilience testing, not least due to the increasing risk of fines (never mind adverse PR), with large/high end brands having to spend significant sums on second and third levels of protection.
6. An NFT bounce back?
It’s fair to say that the hype around NFTs took a ‘dip’ last year. October 2023 was dubbed ‘Floptober’ as the market reached its lowest level of transaction activity, with NFT trading volumes having fallen some 89% compared to the dizzying heights of early 2022.
The spectre of increasing regulation for NFTs seems inevitable. A recent report from the Digital, Culture, Media and Sport Committee called for tighter regulation to tackle the risks that NFTs (and similar blockchain-backed assets such as “fan tokens”) pose to sports and culture in the UK, while the US Congress granted the SEC the mandate to regulate certain NFTs as ‘securities’ in the US. Cristiano Ronaldo is facing a high-profile $1 billion class-action lawsuit in the US following his endorsement of his “CR7” NFT collection on Binance, which plummeted in value.
Recent spikes in activity suggest there is still life in the NFT market. Over the past few months, there has been a surge in trading volume on Opensea and Blur, with prices rising across a number of major NFT collections. The Musee D’Orsay in Paris started offering souvenir NFTs to visitors in October 2023 and even Trump announced a new NFT collection of his mugshot (eek). Time will tell what happens but expect to see NFT offerings more streamlined, with more targeted utility for users.
Away from NFTs, the advertisement and promotion of “cryptoassets” will be more tightly regulated in the UK in 2024 (this doesn’t apply to NFTs, but does catch cryptocurrencies and fan tokens). The FCA has taken over the regulation of all technical claims in advertising cryptoassets in non-broadcast media - adverts for cryptoassets need to include risk warnings and a ban on incentives to invest. If an advert constitutes a financial promotion, new restrictions exist on who can communicate it and the circumstances in which it can be communicated. This is complex stuff, but the new rules will have a major impact on how crypto firms carry out sponsorship deals, and those involved in the promotion of cryptoassets should naturally take advice on their ads.
7. Gaming: regulatory burden to force change?
Look out for AI-generated dynamic storylines and game worlds that are almost impossible to explore in full. These developments are the likely causes of the projected growth of the AI market in gaming, en route to an estimated market size of $4.5 billion by 2028.
The AI explosion carries privacy implications with new laws being rolled out. In 2024, expect to see greater focus on protecting children, whether through the ICO’s Age Appropriate Design Code (Children's Code) or the Online Safety Act. There’s also the Data Protection and Digital Information Bill (DPDI Bill) on the horizon, designed to balance innovation with data protection. The upcoming general election puts that at risk, although the Government believes that it is on track for implementation in the Spring.
There will be more hype around cloud gaming in 2024. Cloud gaming allows the playing of video games using remote servers rather than users having to download or install games on a console. Today, the industry is worth $3.5 billion, and some research sources predict this number rising to $24-85 billion by the end of the decade. The widespread adoption of 5G and ultra-fast, low-latency internet will accelerate this boom.
What’s more, the Digital Markets, Competition and Consumer Bill, likely to come into force in 2024, will impact subscriptions – a common business model in the industry. The changes are likely to require publishers to adjust their practices, which in turn are set to put greater emphasis on other revenue streams, such as advertising and in-game purchases (aagh, no more ‘parent-funded’ skins in this household please!).
8. Drone deliveries (really will) take off!
Expect to see more commercial drone deliveries in 2024 with many businesses starting to use drones for ultra-fast shipping of products to consumers in 2024, such as time-critical medical supplies. Drone delivery is already in use in some states in the US, as seen with Chick-fil-A in Florida. Amazon has announced that it will start using drones to deliver parcels in the UK & Italy in under an hour in 2024 via Amazon Prime Air. It is also launching drone delivery for prescription medication orders via Amazon Pharmacy. With the constant demand for faster delivery, more sustainable logistic options, cost advantages and regulations moving forward, drone deliveries seem well positioned to fly high in 2024.
9. Shop ‘till you drop
“Find me a pair of lime green Crocs in a size 11 for under £25.” In 2024, expect voice search to become more popular with consumers searching for products online due to its convenience, particularly when browsing using mobile devices. Rather than searching for items with keywords or phrases (such as “crocs”) and toggling through filters to find the optimal footwear, we shall be able to use longer, more conversational, search questions (#prompts). Brands will need to review their SEO strategies to ensure that consumers can still find their products quickly.
In physical retail stores, there is set to be continued use of tech to make shopping easier for consumers (particularly at check outs). Last year, Tesco trialled new “magic tills” in its Fulham branch (after launching similar trials at its “GetGo” stores in High Holborn, Chiswell Street and Aston University) – these tills allow shoppers to pick items from shelves and simply walk up to a checkout which already knows what is being purchased, using cameras and sensors. Despite some supermarket chains (such as Booths) moving away from the use of self-service checkouts (due to theft issues), “magic till” technology is set to grow, such as in Amazon’s Fresh “Just Walk Out” stores, to help reduce labour costs.
Technology is invaluable for luxury item vendors who are increasingly using AI and blockchain to tackle online counterfeits. Historically, experts would manually authenticate luxury items before sale but, given the rise of “super-fakes” (very convincing counterfeits), luxury “houses” are now using complex algorithms that are trained to spot fakes from microscopic images of products. Some high end brands are now using blockchain to enable clients to trace the history and authenticity of their products.
10. Frictionless Payment and a Digital Pound?
A recent UK review identified challenges in the retail space such as clunky consumer-to-consumer bank transfer processes (at least relative to international operators) and the lack of viable alternatives (for merchants and retailers) to card payments. We expect to see innovators better leverage Open Banking to develop new payment solutions. We are starting to see spontaneous transactions becoming embedded, for example automated payment when you exit your Uber. Big Tech will continue to grow its consumer payments services in 2024, delivering frictionless customer experiences, where customers need to interact even less obviously with their bank.
Debate continues as to whether the UK should introduce a central bank digital currency, namely the ‘Digital Pound’. Although it is too early to commit to build the supporting infrastructure, work on the design phase will continue during 2024. While the House of Commons Treasury Committee endorsed this approach, it presently remains unconvinced of the need for a Digital Pound.
In the investment space, expect to see the tokenisation of funds. This is perceived to present a strategic opportunity to improve efficiency, transparency and the international competitiveness of the UK’s investment sector. In future, we expect to see digital money used to settle transactions, such as stablecoins and Central Bank Digital Currencies.
11. Is the Online Safety Act the new GDPR?
The Online Safety Act received Royal Assent in October, and a flurry of activity followed from Ofcom, with two meaty consultations on illegal content and age verification. More consultations will follow, and with large fines and criminal sanctions in prospect, many platforms and online services will be kept busy checking that their systems and processes comply with Ofcom requirements. Ofcom has made clear that it does not plan to act on specific content, rather it’s the bigger picture that is of concern. While the Act comes into full force in 2025, compliance should be high on the boardroom agenda, with platforms set to review their risk management policies, especially in respect of age restrictions.
12. AI patent inventions?
Last year’s predictions touched on whether the UK Supreme Court would decide if ‘AI tools’ could be named as inventors under UK patent law, in the Stephen Thaler litigation and the judgment is now in! At the end of December, the Court unanimously held that an AI machine cannot be named as an inventor within the meaning of the UK Patents Act 1977. The Supreme Court emphasised that the case was not about whether technical advances generated by AI machines should be patentable, but instead was about the correct interpretation and application of the Patents Act. The Court did however note that the rapid advances in AI may make such policy questions even more important, and the case may act as a catalyst for the UK Government to push for an international consensus on extending the availability of patent protection to AI inventions.
In more promising AI patent news, the recent High Court case of Emotional Perception AI Ltd v Comptroller-General of Patents, Designs and Trade Marks concluded that an emulated Artificial Neural Network is not a program for a computer as such, and was not excluded from patentability on that basis. The case is a major development which had led the UK Intellectual Property Office to change its practice when examining patent applications involving artificial neural networks – it means we may see additional patent activity in the UK in 2024 where AI is involved as part of an invention.
The other major patent development this year was the long-delayed launch of the unitary patent (UP) and Unified Patent Court (UPC) on 1 June 2023, which enables users to enforce or challenge patents across Europe in one action, rather than engage in multiple national litigation cases. Since the UPC opened its doors, actions have been filed in many tech areas, including life sciences where many expected there would be hesitation. We expect the trend of increased engagement with the UPC to continue into 2024, when we expect to have additional case law from the first litigation in the Court and a greater sense of whether it will be a desirable forum for litigating patent disputes.
And with that, we wish you a healthy, happy and prosperous 2024 – as ever, may your tech fears be dispelled and your tech dreams come true!
James Gill, Partner, Head of Digital, Commerce & Creative.