Innovation and Regulation : Static Law in Dynamic Markets – How to Regulate the Unpredictable
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The article illustratively shows the tension between law and innovation, which has reached a new dimension with the advent and digitalization of information and communication technologies. As a main problem of this tension, the author recognizes the law’s weakness of not being able to keep up with the disruptive character of innovations – especially with the speed of upcoming innovations in the ICT-sector. In the article, this deficiency is called the “regulatory time lag”. Subsequently, the author distinguishes between three categories of clashes of law and innovation – the law as a mean to protect old business models against innovations, regulatory free-riding by new business models and the question how the law should handle innovations, when dangers and potential harms that come along with it are highly speculative. For each of these categories, the article provides at least one example and a critical analysis of recent German cases, in which the law had or has to deal with innovations in the ICT-sector. Finally, the author concludes that the answer on how to resolve the clash between law and innovation in the ICT-sector – especially in the third category of clashes, where a completely new technology leads to a great uncertainty concerning its consequences – cannot be based on the precautionary principle in its current, very restrictive form. If the current precautionary principle applies, many innovations in the ICT-sector, which could be the main source of economic growth in the future, would very likely to be prohibited. As long as potential damages caused by an innovation are reversible, the law therefore should rather deal with it more liberally. Thus, especially in the ICT-sector “reversibility” should be used as a connecting factor to find balanced regulation rules. One possible legal solution could be the creation of differentiated liability rules like they already can be found in some areas of the existing law.
Abstract
The article illustratively shows the tension between law and innovation, which has reached a new dimension with the advent and digitalization of information and communication technologies. As a main problem of this tension, the author recognizes the law’s weakness of not being able to keep up with the disruptive character of innovations – especially with the speed of upcoming innovations in the ICT-sector. In the article, this deficiency is called the “regulatory time lag”. Subsequently, the author distinguishes between three categories of clashes of law and innovation – the law as a mean to protect old business models against innovations, regulatory free-riding by new business models and the question how the law should handle innovations, when dangers and potential harms that come along with it are highly speculative. For each of these categories, the article provides at least one example and a critical analysis of recent German cases, in which the law had or has to deal with innovations in the ICT-sector. Finally, the author concludes that the answer on how to resolve the clash between law and innovation in the ICT-sector – especially in the third category of clashes, where a completely new technology leads to a great uncertainty concerning its consequences – cannot be based on the precautionary principle in its current, very restrictive form. If the current precautionary principle applies, many innovations in the ICT-sector, which could be the main source of economic growth in the future, would very likely to be prohibited. As long as potential damages caused by an innovation are reversible, the law therefore should rather deal with it more liberally. Thus, especially in the ICT-sector “reversibility” should be used as a connecting factor to find balanced regulation rules. One possible legal solution could be the creation of differentiated liability rules like they already can be found in some areas of the existing law.
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