The Curious Case of the Robolawyer (No, it's not a Perry Mason Novel!)

With the advent of technology, there is a drastic increase in the use of AI (Artificial Intelligence) which has significantly altered the way technology is perceived and will have a far-reaching impact in the future. Hence, it becomes necessary to try to minimize its shortcomings and make prudent use of the technology.

I do not know how many of you have heard of Joshua Browder, the 26-year-old founder of DoNotPay, a US-based venture that has developed a “robolawyer”- essentially an AI-powered bot that helps users in use cases such as appealing vehicle parking tickets, negotiating airline ticket refunds, and contesting service provider bills. Although the app was first released in 2015, to be honest, until recently, I too had not heard of him or the app!

My curiosity was piqued when I recently read the news that his company is willing to pay a million US dollars to any person or lawyer willing to repeat verbatim in front of the Supreme Court judge all that their robolawyer asks them to. It remains to be seen whether someone will take Josh up on that offer, whether the US Supreme Court will grant permission and what the outcome will be. However, it is being reported in the media that the DoNotPay app will help two defendants argue speeding tickets in US courts next month. The company has promised to pay the fines on behalf of the users if the robolawyer loses their appeals.

The app runs on the AI model known as “Generative Pre-trained Transformer” or GPT. This is the same technology that runs ChatGPT, which reportedly hit a million users in less than a week of its launch. AI technologies are constantly improving, and there is now greater emphasis on “ethics” and “explainability.” Essentially, the software must be able to explain how it arrived at a certain conclusion or output. This is important to minimize, if not altogether eliminate, the risk of biases and prejudices that creep into AI software simply because it is trained using hundreds of millions of content elements on the web (articles, images, reports, videos, etc.) that were all created by humans, and as such, carry the individual beliefs, prejudices, convictions, etc. of their original creators.

Over the coming decades, AI will shake up many fields including legal practice, healthcare, finance, etc. Not all fields will be impacted at the same pace or to the same extent but change they will. Already, AI is being used by healthcare professionals in improving the efficacy of diagnosis and confirmation of lines of treatment. Law firms too are beginning to use AI to simplify the tedium of the process of trawling through case laws and legal judgments to identify precedents and the reasoning of the benches involved. Soon, lawyers will simply be able to type in questions into ChatGPT, which will provide well-reasoned answers in a matter of minutes. Of course, the real skill will be to ask the right questions and figure out how sensible the answers are, and decide on further courses of action. Think of it as an advocate briefing a senior lawyer before the latter argues in court.

Half-baked knowledge is dangerous. For many years, patients (and/or caregivers) have used search engines to find information about symptoms, diagnostic tests, and lines of treatment and then argue with qualified medical professionals about their choices, at times forcing doctors to explain their hypotheses and reasoning. It is quite likely that in the foreseeable future, clients of lawyers and law firms too will be tempted to adopt a similar approach, which means lawyers too will end up spending time and effort on educating clients on matters of law and jurisprudence. Maybe it is worth coming up with new pricing models to dissuade frivolous “brainstorming” and “legal strategy” sessions!

Note to myself: Try out ChatGPT to explore the kind of responses it provides and start preparing for a future that will undoubtedly be more closely linked with AI tools.

References:

[1] Design Application Numbers 274917, 274918, 284680, 276736, 260403

[2] 24 U.S.P.Q.2d (BNA) 1614 (BPAI Apr. 2, 1992)

[3] Apple, Inc. v. Samsung Elecs. Co., 926 F. Supp. 2d 1100 (N.D. Cal. 2013) (partially affirming jury damages award).

[4] US6763497B1

[5] US10915243B2

Image Credits:

Photo by cottonbro studio: https://www.pexels.com/photo/person-using-macbook-3584994/

Over the coming decades, AI will shake up many fields including legal practice, healthcare, finance, etc. Not all fields will be impacted at the same pace or to the same extent but change they will. Already, AI is being used by healthcare professionals in improving the efficacy of diagnosis and confirmation of lines of treatment. Law firms too are beginning to use AI to simplify the tedium of the process of trawling through case laws and legal judgments to identify precedents and the reasoning of the benches involved.

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Regulating Online Gaming Intermediaries - The Rules and their Implications

The Ministry of Electronics and Information Technology (MeitY) has released the draft Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Amendment Rules to bring online gaming intermediaries within the ambit of the IT Rules, 2021.

Background

Online gaming is one of the fastest-growing industries in India with the number of gamers expected to increase by 30 million from 2022 to 2023[1]. Following the increase in the number of users, it has become imperative that appropriate laws are introduced to regularize the online gaming industry. On January 02, 2023, the Ministry of Electronics and Information Technology (“MeitY”) proposed an amendment to the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021 (“IT Rules”). The IT Rules, in its current structure, provide regulation for social media intermediaries and significant social media intermediaries. The Draft[2] “Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Amendment Rules” (the “Draft”), which is open for consultation from the public, proposes to extend its ambit to ‘online gaming intermediaries’ forming a part of Part II (that relates to other intermediaries).

The Draft defines “online gaming intermediaries” and “online games” but lacks to provide a clear distinction between “games of chance” and “games of skill”, which has been a sticky issue over the years. The Draft further proposes (inter alia) the following changes –

  • All online games would be required to be registered with a ministry-approved self-regulated body by creating a self-regulatory framework, to be registered with MeitY. The self-regulatory body will be responsible for reviewing and registering the online games offered by its members, subject to certain prescribed factors. Games approved by the self-regulatory body may be offered with a visible mark signifying their registration.
  • The proposed rules also mention certain compliances that need to be made by the social media firms such as checking the registration of the online gaming intermediary and consulting the self-regulatory officer before allowing any advertisement on their platform.
  • The online gaming intermediary shall comply with the requirement of due diligence and shall additionally ensure they do not host any online game that does not conform with Indian laws and shall make additional disclosures to the users including the refund and withdrawal policy, financial risks, and other risks associated with gaming, measures that are in place to ensure the safeguarding of deposits, etc.
  • In addition to the above, a new set of due diligence requires compliance with mandatory know-your-customer(KYC) norms for user verification as per Reserve Bank of India norms.
  • Similar to the requirement for social media intermediaries, requirements of appointment of a resident ‘compliance officer’ and ‘grievance officer’ have been mandated along with ‘nodal officers’ for round-the-clock coordination with law enforcement agencies and officers.
  • The online gaming intermediaries need to have a physical address in India and the same is required to be published on their website.

Purpose of the Draft

The purpose of the Draft, if it becomes the law, is to protect the interests of different stakeholders, ensure the safety of players and encourage responsible gaming.  The Draft is also put together to bring about uniformity of laws that online gaming intermediaries may be required to follow by reducing the burden of following state-specific gaming measures making it, not just easier for online gaming intermediaries to comply with the law, but also helps the enforcement agencies since it becomes difficult for the governments of different states to ensure geographical checks are in place. According to the ministry, the final amendments to the IT rules would be notified by April 2023.

Discussions & Implications

While the Draft seems to have been aiming at shaping a burgeoning gaming industry, the concerns around the Draft seem to be supplementing the already existing questions on the existing IT Rules.

At the outset, the question of whether ‘online gaming’ should remain a subject of the ‘States’ (as betting and gambling have traditionally been) or the ‘Centre’, remains unresolved. MeitY had earlier, in affidavits before the High Courts, consistently stated that is not within its purview and power to legislate on the subject and that rests solely on the states. Therefore, the introduction of the Draft without consultation and consensus amongst states seems not quite in line.

The ambiguity further extends to a lack of clarity on whether the Draft bans ‘gambling’. While IT Minister, Rajeev Chandrasekhar stated that “online games that allow wagering on the outcome are effectively a no-go area” there is no clear prohibition on ‘gambling’. The Rules only state, as a part of due diligence, online gaming intermediaries shall make reasonable efforts to ensure that online gaming platforms do not contravene any gambling or betting laws in India, which again differs from state to state.

An online game has been defined in the Draft as a “game that is offered on the Internet and is accessible by a user through a computer resource if he makes a deposit (in cash or in-kind) with the expectation of earning winnings”- In the absence of a definition of “gambling” and “betting” in the Draft and clarity on which category of games are sought to be regulated if the online game for consideration is sought to be regulated on one hand and gambling or betting content is prohibited on the other hand, remains a question[3]. While it may be assumed that the ‘kind’ component in the definition has been introduced to cover ‘non-monetary token’ or ‘online gaming currencies’, it may lead to the consequence where games that do not require any monetary incentive may also be included within the meaning of online games here. The definition can almost broadly cover all ‘gambling games’ within the purview of ‘makes a deposit (in cash or in-kind) with the expectation of earning winnings’. Would that mean that ‘gambling’ is brought within the purview of these Rules?

The Draft classifies online gaming platforms as ‘intermediaries’. Our understanding of the term ‘intermediary’ includes one that acts on behalf of another entity. However, in the case of online gaming platforms, we notice that most of them publish the gaming content themselves and do not host games on behalf of another. In view of the above, in an earlier debate, a government task force submitted a study stating that gaming platforms should be categorized as ‘publishers’ and not as ‘intermediaries’[4]. The question that remains unanswered is why we now bring online platforms within the purview of intermediaries thereby giving them passage to ‘safe harbour protection’ under Section 79 of the IT Act.

Apart from the few above-mentioned points, the Draft may expect push-back from various industry stakeholders on the Government’s over-arching power on issues of revocation of registration of self-regulatory bodies and exercising regulatory power for KYC. It is to be observed therefore how MeitY resolves the already existing issues on the IT Rules pending before the courts and accordingly brings about an amendment to the current online gaming Draft Rules catering to the purpose it mentioned in its notes[5] accompanying the Draft Rules.

An online game has been defined in the Draft as a “game that is offered on the Internet and is accessible by a user through a computer resource if he makes a deposit (in cash or in-kind) with the expectation of earning winnings”- In the absence of a definition of “gambling” and “betting” in the Draft and clarity on which category of games are sought to be regulated if the online game for consideration is sought to be regulated on one hand and gambling or betting content is prohibited on the other hand, remains a question.

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Generative AI: Generating Legal Headaches?

The year 2022 saw major breakthroughs in the field of generative Artificial Intelligence. This field is different from the more traditional “discriminatory” AI models, whose algorithms rely on the datasets they are fed during “training” to make decisions. By contrast, “generative” AI models are forced to make conclusions and draw inferences from datasets based on a limited number of parameters given to them during training. In other words, generative AI uses “unsupervised” learning algorithms to create synthetic data. The output of generative AI includes digital images and videos, audio, text or even programming code. In recent days, even poetry, stories, blog posts and art work have been created by AI tools 

Generative AI: The Socio-Economic and Legal Problems

Like every technology, generative AI too has pros and cons. While it has made it easy to create various kinds of content at scale and in much shorter timeframes, the same technology has also been used to create “deep fakes” that then go viral on social media.  

OpenAI’s image generator platform “DALL-E 2” and automatic text generator GPT-3 have already been used to create art work and other text-based content. GPT-4, which is expected to be far more powerful and advanced, is expected to be released in 2023. Until recently, Open AI did not allow commercial usage of images created using the platform. But it has now begun to grant “full usage rights”- which includes the rights to sell the images, reprint them and use them on merchandise.  

Generative AI has the potential to open a Pandora’s Box of litigation. A class action suit has already been filed against OpenAI, Microsoft and Github alleging copyright violations by Copilot, Github’s AI-based code generator that uses OpenAI’s Codex model. The argument behind the suit is this: the tool uses hundreds of millions of lines of Open-Source code written, debugged, or improved by tens of thousands of programmers from around the world. While these individuals support the Open- Source concept, code generators like Copilot draw on their code (which was fed to it during its training) to generate code that may well be used for commercial purposes. The original authors of the code remain unrecognized and do not get any compensation.  

A similar situation can easily occur with art work created using AI-based tools because all that such tools need to create a digital image is a text prompt. For example, Polish artist Greg Rutkowski, known for creating fantasy landscapes, has complained about the fact that just typing a simple text like “Wizard with sword and a glowing orb of magic fire fights a fierce dragon Greg Rutkowski” will create an image that looks quite close to his original work. The smarter text recognition and generative AI get, the simpler it will be for even lay people to use. Karla Ortiz, a San Francisco based illustrator is concerned at the potential loss of income that she and her fellow professionals might suffer due to generative AI.[1]

 Sooner than later, this challenge will be faced by playwrights, novelists, poets, photographers and pretty much all creative professionals. Indeed, AI tools could conceivably put writers out of business in the next few years! AI generators are “trained” using millions of poems, images, paintings etc that were created by persons dead or alive. Their creators or their legal heirs do not currently have the option to exclude their works from the training datasets. In fact, they do not even usually know that their works have been included.  

The creative industry itself is taking various steps to protect the rights of various categories of creative professionals. Such measures include the use of digital watermarking for authentication, banning the use of AI-generated images, and building tools that allow artists to check if their works have been used as part of any training datasets and then opt out if they so choose.  

A more pernicious problem could conceivably arise when deliberately or inadvertently, misleading content is created and posted- and consumed by innocent users. Some early examples of such misuse have already emerged, and there is a genuine concern that if these activities are not nipped in the bud and information on the internet is not somehow authenticated, serious, unexpected, and large-scale damage may be caused.  

Overhauling the Laws

In the US, AI tools may, for now, take legal cover under the fair use doctrine. But that applies only to non-commercial usage. Arguably, the current situation where researchers and companies building AI tools freely use massive datasets to “train” their tools violate the spirit of ownership and protection of IPR because these AI generators are also being used for commercial benefit. Also, as various lawsuits are already underway, changes to IPR and related laws will need to be made to explicitly enable AI. Not doing so will only impede the use of AI in various fields where such algorithms can deliver significant benefits by speeding up innovation.  

References:

[1] https://www.technologyreview.com/2022/09/16/1059598/this-artist-is-dominating-ai-generated-art-and-hes-not-happy-about-it/

Image Credits:

Photo by Tara Winstead: https://www.pexels.com/photo/robot-fingers-on-blue-background-8386369/

Like every technology, generative AI too has pros and cons. While it has made it easy to create various kinds of content at scale and in much shorter timeframes, the same technology has also been used to create “deep fakes” that then go viral on social media.  

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Private Sector Fuels India’s Space Economy

The Indian National Space Promotion and Authorization Centre (IN-SPACe) was set up in 2020 as an independent body to oversee regulation of all space related activities in India, including the authorization of private rocket launches. The government’s decision to allow the private sector into India’s space sector was aimed at broad-basing innovation capabilities and speeding up India’s ability to compete in the global market for space technologies- a high-growth market that has historically been dominated by a small number of players from the US and Europe.

This decision seems to be paying off, because India’s private sector has already become quite active across the value chain in the space sector. Nearly 300 entities are already registered with IN-SPACe, of which 30% are startups. On 18th November 2022, Vikram-S, a small single-stage rocket developed by Hyderabad-based startup Skyroot Aerospace, was successfully flight tested. This marks the beginning of “Prarambh”, the company’s sub-orbital mission. By year-end, Chennai-based Agnikul Cosmos expects to launch its small rocket too. Pixxel, another space startup, has already launched Shakuntala, India’s first privately built earth imaging satellite and a second satellite Anand. A consortium of L&T and HAL has been awarded a contract to build five PSLVs. This is the first time anyone other than ISRO has been tasked with this key responsibility- an indication of the government’s rising confidence in our private sector. The success is testament to the robust space sector ecosystem being built as a result of close collaboration between ISRO, IN-SPACe, academic institutions, and the private sector (both startups and established companies).

 

Why the Private Sector is Important for India’s Space Economy?

The capability to launch small rockets is critical because smaller rockets can place their payloads in more precise orbits. Also, they can be produced in shorter timelines by using 3D printing technologies. Miniaturization of components means that required functional capabilities can be achieved through smaller satellites. All this means that satellites with specific functional capabilities can be quickly assembled and launched. Smaller rockets can be easily fueled by liquid propellants, which are inherently easier to manage; they are also less prone to vibrations, which can become a challenge for launch vehicles that carry sensitive payloads.

Given rising geopolitical uncertainties, there is now a higher risk of conflicts between countries arising at short notice. Increasingly, wars will be fought using cyberattacks and directed energy weapons to degrade the enemy’s vital assets such as communication satellites and missile defence batteries. Swarms of weaponized drones too will be deployed to target and destroy vital military installations in remote, hard-to-access areas. In such a scenario, it becomes critical that as a country we can launch new satellites and other space assets quickly to replace lost capacities or augment and complement new space-based capabilities that are needed.

ISRO has successfully designed, developed, and launched heavy, multi-stage rockets into space. These technologies/capabilities have helped place many satellites in orbit and in turn, these are playing a key role in India’s development. ISRO has also developed the SSLV (Small Satellite Launch Vehicle), but unfortunately, its technology demonstration mission failed earlier this year. It is this gap that the private sector can help plug at short notice.

 

Public-Private Cooperation is Vital to Power India’s Space Economy

As various countries seek to build/enhance their space-based defence capabilities, countries like India can benefit from commercial contracts to launch satellites/other payloads and conduct defence missions in space. With defence capabilities increasingly relying on assets deployed in space, the evolution of India’s private sector space capabilities will also boost our credibility as a builder of solutions and not just as a provider of reliable, cost-effective space launch services. While ISRO continues to build its reputation as a reliable partner, it needs to scale up its ability to launch satellites for its customers. In October 2022, ISRO successfully launched 36 satellites for UK-based OneWeb (partly owned by the Bharti group), marking the use of the LVM3 rocket; this was also one of ISRO’s largest commercial orders. More such opportunities can come ISRO’s way because satellite-based internet services are rapidly becoming cost-competitive and an easy way to deliver connectivity to far-flung areas where building fibre-based infrastructure is difficult due to terrain and weather conditions.

It is estimated that by 2025, India’s space business will grow to US$12.8 Billion from US$9.6 Billion in 2020 (source: https://timesofindia.indiatimes.com/india/how-indias-space-startups-are-aiming-high/articleshow/95637043.cms). ISRO is a shining example of a public sector entity that has consistently overcome huge odds (including sanctions from time to time) to indigenously develop world-class capabilities in frontier areas like space technologies. Its ability to do much more has arguably been limited by budgetary support. And although launches are the most visible part of a space economy, they are by no means the only facet: design, development, manufacturing, building technology demonstration prototypes etc. are all just as important. Now, with the innovative energies and other resources available to the country’s private sector, significant synergies can be unleashed through public-private partnerships in the space sector.

References: 

Image Credits: Photo by Pixabay: https://www.pexels.com/photo/space-technology-research-science-41006/

With defence capabilities increasingly relying on assets deployed in space, the evolution of India’s private sector space capabilities will also boost our credibility as a builder of solutions and not just as a provider of reliable, cost-effective space launch services. While ISRO continues to build its reputation as a reliable partner, it needs to scale up its ability to launch satellites for its customers.

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AI Adoption: Behooves Heightened Responsibility & Higher Ethics

In July 2022, UK-based Artificial Intelligence (AI) firm Peak commissioned a benchmarking survey to study AI adoption in the USA, UK, and India. The study, jointly conducted by the Centre for Economics and Business Research, included 3000 senior decision-makers from companies with at least 100 employees; the survey was augmented by responses from 3000 middle-level staff as well.

A key finding was the inaugural Decision Intelligence (DI) Maturity Index, an indicator of how prepared businesses in these three jurisdictions were to adopt AI for commercial decision-making. The study found that over the past six years, the percentage of companies that have adopted AI technologies stood at 28%, 20% and 25% in the US, UK, and India respectively. While it was only expected that the US would be the leader, it was surprising that when it comes to leveraging AI in commercial areas, Indian companies ranked highest- they scored 64 (out of 100), while those in the US and UK respectively scored 52 and 44. 

The study also found that 18 % of US workers were unsure whether the companies they work for used AI at all; for India this figure stood at 2%. It was also revealing that Indian enterprises embedded data sciences capabilities within commercial teams, while their western counterparts relied more on central data teams[1]. Of course, it must be acknowledged that China is perhaps much further ahead in terms of deploying AI, although we will likely not get to know the details anytime soon.

 

AI will play a major role in how our world evolves

 

Consumers like you and me already experience the power of AI in the form of reminders from fitness apps or what books to read, shows to watch or music to listen etc. Intelligent parking assistance in some cars is another example of AI in action. AI is also at work when we see “deep fake” videos that look and sound so real. AI is not a new field; it has in fact been around since the late 1950s, which is when the term was coined. But it is only in recent years that AI has become less esoteric and more mainstream. 

This shift is due to rapid advances in computing power and speeds as also evolution of models and capabilities around natural language processing, voice recognition, machine vision and other allied areas. It is this pace and nature of AI evolution that gives experts the confidence that AI will play a key role in economic and social development, delivery of education and healthcare services, forecasting natural disasters and managing them, national security and much more.

Several national flagship infrastructure backbones in India, including the GST and Income Tax systems, Open Network for Digital Commerce (ONDC), Government e-Marketplace (GeM), the Unified Logistics Interface Platform (ULIP) and the Gati Shakti National Master Plan already have elements of AI embedded in them. India’s private sector too, has been actively working on AI-based projects and products that span different use cases and industry sectors.

 

India is taking steps to prevent unbridled use of AI- but “there are miles to go before we sleep”

 

A couple of decades ago, movie franchises such as “The Matrix” and “The Terminator” conjured up a world where machines take over the world. Today, the world is closer to being at a stage where inadvertent or deliberate misuse of AI can unleash unknowable harm to society. It can be argued that human avarice has already damaged our planet beyond redemption, but we have done that without much help from AI!

There have already been instances reported in media where the use of AI in some applications has thrown up evidence of discrimination and bias-negative traits that are patently human. The companies behind these applications have rolled them back but they signal a clear and present danger. There has also been much debate in recent times about whether AI-based programs are truly “sentient” i.e., capable of feelings. Maybe we are still some years away from truly sentient machines- or maybe they are already here. Either way, it is important to ensure that AI is governed by appropriate ethics to make it “responsible.”

Clearly, AI has great power; it must therefore also be used with great responsibility. “Responsible AI” has many dimensions, including reliability, safety, privacy, transparency, fairness, and accountability. Just as important is for humans to know how an AI system arrived at a certain conclusion or decision. While most of the above have to do with how AI powered devices and applications are designed and built, it is also critical to ensure that ethics govern how these devices and apps are deployed and what they are used for. 

In the absence of such mechanisms (and punitive actions for violators), think of the myriad privacy incursions that can be easily caused by physical surveillance using drones or digital eavesdropping of phone conversations. Even AI-powered software in place to analyze CVs to identify the “best” candidates can be misused to ensure that only candidates of a certain profile are hired.

AI ethics and governance needs to cover more than just individual companies that develop AI tools and applications. All stakeholders must work together to put in place an overarching framework that includes policies, laws, rules, and SOPs to ensure that AI does not become a Pandora’s Box. A key objective must be to ensure that there is mutual trust.

To support India’s burgeoning AI ecosystem, the Niti Ayog has begun to hold consultative discussions. Its report “AI for All” is grounded in the fundamental rights enshrined in India’s constitution. It suggests setting up of an expert committee comprising specialists in AI, cybersecurity, social scientists, law, various industry domains and representatives of government and civil society to create a regulatory/governance framework. 

Such a framework must necessarily be flexible, to accommodate unexpected changes powered by technological innovations. NASSCOM, India’s software industry association, has launched a Responsible AI hub to ensure that key stakeholders are engaged so that broader societal views are considered and factored into strategies and plans related to not just innovations, development, and deployment but also governance.

A survey by IBM Institute for Business Value has found that the responsibility for leading and upholding ethics has shifted to the CEO. 62% of business leaders agree that AI ethics is important to their organizations. It is a given that the world will never be a utopia. It is time that “leaders” in every field from around the world stand up and take necessary steps to prevent the world from becoming an AI-powered dystopia. AI is too important a domain to be left to the whims and fancies of individual countries, companies, or leaders- whether democratic, despotic, megalomaniac, idealistic or somewhere in between.

AI ethics and governance needs to cover more than just individual companies that develop AI tools and applications. All stakeholders must work together to put in place an overarching framework that includes policies, laws, rules, and SOPs to ensure that AI does not become a Pandora’s Box. The key objective must be to ensure that there is mutual trust.

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Card Tokenisation: Plugging Personal Information Leaks

Plastic money still captures a large portion of the market share despite the growing use of the Unified Payment Interface (UPI).  Recent data released by the Reserve Bank of India (RBI) indicates that there has been an increase of 16.3% year after year in the usage of debit and credit cards by Indian consumers in the last decade.

Nevertheless, this decade marked a shift to digital technology, augmented by governmental decisions and policies such as demonetisation, the introduction of UPI, and Digital India program, etc. that enabled Indian consumers to make a smooth shift to online payment solutions. The pandemic has also played a big role in this revolution. With face-to-face interaction minimized, the focus on digital products and payments skyrocketed.

Digital transactions are now considered the most sought-after payment mechanism in comparison to hard cash or currency for availing services and goods. As the number of transactions made through a mobile application or platform increases, customers usually prefer to save their card information on the merchant’s site or platform. Information saved on these sites and platforms is critical financial data of consumers and is considered sensitive personal data. The risk of misuse of such sensitive financial data by hackers or fraudsters looms over every individual, and cases of such misuse have garnered the attention of the authorities.

The RBI, through its notification dated 17th March 2020 had made it mandatory for payment aggregators to disable the storage of customer card credentials within the database or server of the company. Though a fixed date for implementation of this rule was not decided, RBI later issued notifications directing merchants to comply with this recommendation of not storing card data by 31st December 2021. Since then, the RBI has been extending the timeline for implementing tokenisation and as of today, the RBI has instructed all parties to delete the card information before 1st October 2022.

Card tokenisation is a process by which sensitive data of the cardholder is removed from the sites/platforms and replaced with randomly generated numbers and letters from the company’s internal network called tokens.


History


The groundwork for regulating this space of online payment and ensuring the safety of cardholders has been in line for a couple of years. As India is yet to formulate a dedicated data protection bill, the safety of a cardholder’s sensitive personal data stored on the merchant’s website was one of the major concerns of cardholders as well as the regulators. Moreover, the increase in data theft and leakage of debit and credit card details of cardholders did not really help in containing the concerns of the stakeholders.

In January 2019, the RBI released a notification whereby it permitted card networks to tokenise. This choice of tokenisation was made optional for the customers, and the permission was extended to all use cases like QR code-based payments, NFC, etc. However, such services could only be offered through mobile phones and tablets, and no other devices were permitted to offer such a facility at that time.

RBI later released the guidelines on the Regulation of Payment Aggregators and Payment Gateways, which made it mandatory for a payment gateway to not store customer card credentials within the database or on the server accessed by the merchant, with effect from 30th June 2021. This move reiterated the importance of safeguarding customer card details and the focus once again shifted to the introduction of a tokenisation scheme. Though the guidelines did not mention specifically tokenisation, they did find mention in the subsequent notification released by the RBI on Payment Aggregators and Payment Gateways on March 31, 2021. The guidelines called upon payment system providers to put in place workable solutions such as tokenisation to safeguard the interests of the cardholder.  In order to eliminate any ambiguity in the definition of ‘payment aggregators’ as defined in the Payment Aggregators Guidelines, the RBI explicitly stated that the Payment Aggregators Guidelines applied to e-commerce marketplaces that engaged in direct payment aggregation, and to that extent, e-commerce online markets that used the services of a payment aggregator were to be regarded as merchants.

The RBI further released a notification in August 2021 amending the 2019 notification by extending the scope of permitted devices that could use tokenisation. The present framework for tokenisation was extended to include consumer devices such as laptops, IOT devices, wearable devices, etc. A subsequent notification issued in September 2021 further allowed card-on files tokenisation. This notification permitted card issuers to offer the services of tokenisation as Token Service Providers (TSPs). The TSPs were permitted to tokenise only those cards that were affiliated with or issued by them. The notification also emphasised that no entity in the card transaction/payment chain, other than the card issuers and/or card networks, shall store the actual card data from 1st January 2022. Entities were only allowed to store limited data, like the last four digits of the actual card number and the card issuer’s name, for compliance and tracking purposes.

The earlier notification of removing all card details of customers with effect from 30th June 2021 was again extended to 31st December 2021 in view of the huge compliance hassle. This was again extended until 30th June 2022 and finally, the government set the latest deadline on 1st October 2022.


Functioning of Tokens


An e-commerce website, mobile application, or any merchant site for that matter, offers different payment methods to its consumers, which may range from cash to debit/credit card payment to UPI. When it comes to the authentication of the debit or credit card used by the consumer, the entire responsibility for authenticating the same vests is with the Payment Gateway service provider. The e-commerce platform or websites merely act as an intermediary to facilitate the trade and it is the responsibility of the Payment Gateway service provider to provide the technology to these platforms and websites that authenticates the card details. This process of authentication done by the Payment Gateway service provider is known as 2FA i.e., two-factor authentication. The process of authentication involves the registered bank of the customer sending a Time Password (OTP) to the registered phone number of the consumer to close the transaction. The OTP is the key that helps authenticate that the customer is the rightful owner of the card. Upon entering the correct OTP, the Payment Gateway service provider authenticates it and completes the transaction.

In general, a merchant website or an online portal is only allowed to store details like the cardholder’s name, the 16-digit number on the front of the card, the expiration date of the card and the service code, which is located within the magnetic stripe of the card. On the other hand, these portals and sites are strictly prohibited from storing information such as full magnetic stripe information, PIN, PIN Block and CVV/CVC number of the card.

After the guidelines kicked in on October 1, all the card details of individuals stored on the merchant’s website were automatically erased. All information concerning the cardholder, like the expiry date, PAN, etc., is replaced by the token. This token is a one-time alphanumeric number that has no connection with the cardholder’s account. Unlike the previous system, these tokens so generated do not contain any sensitive personal data of the cardholder.

An individual can tokenise his/her card in the following ways:

  1. The individual will have to visit the preferred merchant’s website for the purchase of any goods or services.
  2. The website will then direct the individual to the preferred payment option, and the individual will be able to enter his/her card details and initiate the transaction.
  3. The website will also contain another option called “secure your card as per RBI guidelines,” which basically generates tokens for the card.
  4. As soon as the individual opts for that option, a One-time Password (OTP) will be generated and sent via SMS or email to the individual.
  5. With the OTP being entered, card details are sent to the bank for tokenisation, which is then sent back to the merchant for storing the same for the purpose of customer identification.

The token so generated from one merchant website will not be applicable to every other merchant website. The cardholder will have to create separate tokens for each merchant website, and the use of the same token will not help in initiating the transaction.


Benefits of Tokenisation


Many customers today prefer digital payment over the traditional mode, mainly due to the convenience of not carrying hard cash.  Since the frequency of transactions across such an online medium among customers rose significantly, they preferred to save the card details on the online portal for convenience’s sake. As the sensitive personal data of customers is stored in such portals, there is always a risk of leakage, theft, or merchant access to such information. Hence, tokenisation provides much-needed safety and assurance, which helps in not exposing the customer’s card details.

Tokenisation helps reduce data theft and leaks, as the tokens are in no way connected to an individual’s personal information. Moreover, the process of replacing sensitive personal information with tokens helps build trust and confidence among consumers.


Effects of these Regulations on the Industry


The RBI is striving to organize payment aggregators by bringing non-banking payment aggregators under its regulation. The RBI’s main goal in introducing these guidelines is to reduce fraud and protect customers’ interests. Placing the burden on payment aggregators to ensure that merchants are genuine and have no malicious intent will go a long way towards removing dishonest merchants from the market and safeguarding customers’ interests.

Payment Aggregators are instructed to credit reimbursements to the primary payment source rather than the e-wallet account. Previously, refunds were credited to an e-wallet, posing a challenge for consumers to utilize the monies somewhere else.

Although the RBI has reduced the required net worth from INR 100 crores to INR 25 crores, it will not be sufficient for small-sized entities (including start-ups) seeking to enter the industry. Many existing players will be forced to exit the market if they fail to meet the net worth requirements. Moreover, small businesses operating as payment aggregators would find it difficult to implement the required baseline technology suggestions owing to the high implementation costs. This will result in the removal of market competition, leading to an oligopoly, which would harm merchants’ interests in the long term.

It can be stated that these guidelines represent an important advancement in the Indian fintech industry and assure that customers’ overall interests are secured.

Conclusion

With the current atmosphere where there is intense scrutiny over an individual’s personal information, the scheme of tokenisation is a breath of relief for a lot of privacy enthusiasts and the public in general.

Image Credits: Photo by energepic.com

Many customers today prefer digital payment over the traditional mode, mainly due to the convenience of not carrying hard cash.  Since the frequency of transactions across such an online medium among customers rose significantly, they preferred to save the card details on the online portal for convenience’s sake. As the sensitive personal data of customers is stored in such portals, there is always a risk of leakage, theft, or merchant access to such information. Hence, tokenisation provides much-needed safety and assurance, which helps in not exposing the customer’s card details.

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The Indian Telecommunication Bill, 2022: An Au Courant Approach

Telegraph was first introduced in India in the year 1851 and telephone exchanges were set up in the early 1880s. The Indian Telegraph Act, 1885; the Indian Wireless Telegraphy Act, 1933; the Telegraph Wires (Unlawful Possession) Act, 1950, were enacted to suit the needs of the day. The usage of the telegraph as a telecommunication mode became obsolete in 2013, and today technologies such as 4G and 5G, the Internet of Things, Industry 4.0, M2M communications, Mobile Edge Computing, etc. are revolutionising the sector.

While these technologies create new opportunities for social and economic growth, issues relating to dispute resolution and penalties, data privacy, the infrastructural needs of the industry, etc. become more complex.

With the objective of reforming the telecommunication law and making it more sensitive towards the concerns of this ever-evolving sector, a consultation paper on the “Need for a new legal framework governing Telecommunication in India[1] was issued by the Department of Telecommunication on July 23, 2022, inviting comments.

The Consultation Paper proposed a new legal framework to address the following:

  1. Simplification of the regulatory framework while ensuring regulatory certainty, minimising policy disruption, promoting investment, and preventing retrospective application.
  2. Spectrum assignment should be to best serve the common good and widespread access, with utilisation of spectrum liberally and neutrally allowed, as should the deployment of new technologies, the repurposing and rearrangement of frequency range, and the authorisation of the central government to share, trade, lease, and surrender spectrum.
  3. Provide a robust regulatory framework to obtain Right of Way and resolve disputes thereby ensuring the deployment of new technologies and ensuring continuous connectivity.
  4. Simplify the framework for mergers, acquisitions, or other restructuring.
  5. Ensure the license is not suspended or terminated during Insolvency while services are being provided, and ensure there is no default on license or spectrum dues.
  6. Expanding the scope of the Universal Service Obligation Fund to address delivery of telecommunications service to underserved rural and urban areas.
  7. Proportionate penalty for offences.
  8. Address situations of public emergency, public safety, or national security.

The draft Telecommunication Bill 2022 was created in response to public feedback on the consultation paper [2].  Further comments on the draft have been invited till 20th October 2022. It intends to replace the Indian Telegraph Act, 1885; the Indian Wireless Telegraphy Act, 1933; and the Telegraph Wires (Unlawful Possession) Act, 1950.

 

Key Takeaways of the Draft Telecommunication Bill, 2022

 

Over-the-top (OTT)

 

There was an interpretational discord as to whether OTT is regulated under the current legal system. The government is of the opinion that OTT is adequately covered under the definition of “Telegraph” in the Telegraph Act. However, there is no explicit legal backing. The proposed bill explicitly clarifies that OTT communication services are a telecommunication service. The bill’s definition of telecommunication service incorporates current technological trends in the industry and includes voice and video communication services, machine-to-machine services, and broadcasting services. Any transmission and receipt of a message through a wire, radio, optical, or electromagnetic system would be telecommunication. Such telecommunication, when intended to be received by the general public, becomes a broadcasting service. Therefore, an OTT service provider, be it broadcasting/streaming services or data/video call services, falls explicitly within the ambit of the Telecommunications Bill, 2022.

 

User-Beneficial Provisions

The bill requires that the identity of the person sending a message be made available to the user receiving the message at all times. Therefore, any call recipient from a landline, cellular, or through OTT platforms like WhatsApp, Facetime, or Zoom calls will have information about the caller. To achieve this end, the KYC of all the users has to be obtained by all service providers, including OTT platforms.  Users are prohibited from providing false information about their identity when obtaining telecommunications services. Any misrepresentation of identity is punishable with imprisonment for one year or a fine of up to 50,000 rupees. An advertisement or promotional message, whether fictitious or real, shall not be sent unless consent is procured from the recipient. Any unsolicited message shall be an offense, and the sender is liable to be penalized. The Bill formulates a mechanism for the preparation and maintenance of the ‘Do Not Disturb’ register. The user-beneficial provisions and the penalty for violation are not substantial enough. When the losses caused to the public because of cyber frauds are more than 1 lakh crore each year, the penalty for such fraud of INR 50,000 is not a deterrent. It is ideal that such offenders are abstained from providing telecommunication services so that repeated cyber frauds or impersonations can be avoided.

 

Spectrum Allocation

 

The Bill provides that spectrum allocation can be done only through auction, directly under circumstances specified in the schedule, such as national security, or in such a manner as mentioned in the rules. The Hon’ble Supreme Court of India, in “Union of India & Ors v. Centre for Public Interest Litigation and other” decided on February 2, 2012, stated that:

“When it comes to the alienation of scarce natural resources like spectrum, etc., it is the burden of the State to ensure that a non-discriminatory method is adopted for distribution and alienation, which would necessarily result in protection of national/public interest. In our view, a duly publicised auction conducted fairly and impartially is perhaps the best method for discharging this burden and the methods like first-come-first-served when used for alienation of natural resources/public property are likely to be misused by unscrupulous people who are only interested in garnering maximum financial benefit and have no respect for the constitutional ethos and values. In other words, while transferring or alienating the natural resources, the State is duty bound to adopt the method of auction by giving wide publicity so that all eligible persons can participate in the process.”

The Hon’ble Supreme court’s order mandates spectrum allocation only via auction. However, allocation of Spectrum under extraordinary circumstances such as national security and defence by the Central Government is understandable. Nevertheless, the entire list of Schedule I activities wherein the government is authorized to allocate spectrum to BSNL/MTNL or can assign it to “any other function or purpose as determined” is far too wide to defeat the very purpose of the order.  Further, it is ideal that such spectrum allotted under Schedule I, shall not be resaleable but only returnable to the government.

The Bill provides the Central Government rights to repurpose the spectrum frequency for a different use (“re-farm”), rearrange the frequency range (harmonization), or assign part of the assigned spectrum to another entity for efficient spectrum utilization, or if the spectrum remains unutilized.

 

Seamless Transition 

There is a new set of terms and conditions that will be formed after the Act and rules come into force. A telecom service provider and telecom infrastructure provider have a choice on whether to migrate to the new set of terms and conditions under this bill or the existing terms as per their existing license. A wireless equipment provider has to procure new authorisation (instead of a license). The existing spectrum licenses shall continue to remain valid for a period of 5 years or until the date of expiry, whichever is earlier. The existing rules under the old Telegraph enactments shall continue until superseded by the new rules. All Telecommunication Bill provisions are prospective in nature. These mechanisms would allow greater acceptance of the new Act and a seamless transition.

 

Penalties and Offences

In casesof breach of the terms and conditions of a license, registration, authorisation, or assignment, the government can revoke, suspend, or curtail such approvals. Further, the government can impose a penalty based on the severity of the breach after considering whether it is severe, major, moderate, minor, or non-severe. A licensee can provide a voluntary undertaking to the authority with respect to any breach or delay. Acceptance of a voluntary undertaking will put the proceedings on hold. An alternative dispute resolution mechanism for resolving certain disputes or classes of disputes is envisaged. The Bill provides a list of offences covered by it, the imprisonment or fine imposed, and whether such offences are bailable or cognizable.

 

Right of Way

The mechanism for Right of way is differentiated on the basis of whether it is public property or private property. In the case of public property, the authority has to provide permission in a time-bound manner.  In the case of private property, parties may mutually negotiate an agreement. To overcome the issues of the sale of property along with the telecom infrastructure, an explicit provision has been enshrined to state telecom infrastructure is different from the property it is installed on. Therefore, the property owner cannot claim ownership of the tower in his/her property, and it remains independent of any sale or lease. It is ideal that the Right of Way arrangements/agreements be standardized. Further, the legal framework should also encompass penalties in case of violation of the Right of Way by either the telecom infrastructure provider or the property owner.

 

Common Ducts & Cable Corridors

An express provision is planned under which the Central Government will require infrastructure projects to have common cable ducts and cable corridors established and such cable made available to facility providers on an open access basis.

 

Restructuring & Insolvency

A licensee entity undergoing restructuring/merger/acquisition has to merely inform the authority and an explicit prior approval is not required. The restructured entity has to thereafter follow the rules therein. In case of insolvency, service continuity is given priority, and the entity retains control over Spectrum. An enabling framework has been made for the Central Government to intervene and revert the control of the Spectrum to the Central Government in case the entity fails to provide telecommunications services, and has promptly paid the spectrum licensing fees/charges.

 

Regulatory Sandbox

A regulatory framework of simplified license terms and conditions to empower the start-up ecosystem is formulated, whereby such entities can live-test their products and services in a controlled environment.

 

The Telecommunication Bill is a framework that intends to create a comprehensive and centralised legal ecosystem for an industry that is rapidly expanding with the addition of new players in the market, investments, and technology. How the Telecommunication Act, Digital Data Protection Act, and Digital India Act finally shape up to create a legal landscape to address the new technological challenges remains to be seen. The proposed Telecommunications Bill has addressed the concerns of the present while keeping an eye on the future in its simple, light-touch approach- a concrete step in the right direction.

The Telecommunication Bill is a framework that intends to create a comprehensive and centralised legal ecosystem for an industry that is rapidly expanding with the addition of new players in the market, investments, and technology. How the Telecommunication Act, Digital Data Protection Act, and Digital India Act finally shape up to create a legal landscape to address the new technological challenges remains to be seen.

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The Dawning of Data Centres in West Bengal

It is rightly said that “Data” is the new oil in today’s digital world. Data consumption and cloud-based services have grown exponentially in the past decade, and they are increasing their efficiency by making use of cloud computing and artificial intelligence. Consequentially, the requirement for storage and management of data has grown as well. This demand, along with the government initiatives for digitising India, has given rise to the growth of data centres in the country.

The data centre industry is expected to grow further in the next few years to provide support for the upcoming 5G technology. Data centres require round-the-clock uninterrupted availability of power to operate effectively. However, such requirements inevitably increase carbon-di-oxide emissions. Therefore, there has also been a significant push towards the establishment of “Green Data Centres” – a sustainable solution that is dependent only on renewable energy.

In view of the increasing significance of data, data centers, and the associated regulatory requirements of data localization, the Legislature has also brought about various reforms such as the Digital India programme in order to regulate the entire data industry. However, a comprehensive framework specifically aimed at regulating the construction and operation of data centers is still needed.

 

Concept of Data Centres

 

A data centre is a physical facility that houses all virtual activities and is used to store applications and data, for edge computing, hosting content, and delivering cloud-based services. Data centres cover the three sectors of property, energy, and technology, and thus, various segments such as real estate and construction, hardware equipment, utilities (power, water, cooling), networking, and software services all come within their ambit.

 

National and Global Context

 

The last few years have seen rapid growth in the digital industries such as gaming, Edtech, OTT platforms, e-commerce, etc., in India. These industries are heavily dependent on data centre support. Further, the fast growth in cross-border transactions and the digitisation of transactions has impelled the Indian government to implement data localization mandates in order to ensure data protection and sovereignty. Consequently, global players are now looking to invest in establishing data centres in India, which makes it important to examine the facilities offered to the data centre industry by leading nations in this sector.

 

United States

Different states in the US provide different incentives to investors for setting up data centres. For example, Alabama exempts data centres from sales and property taxes, Hawaii offers job creation incentives, Florida offers industry tax refunds through the Florida Enterprise Zone, and so on.

 

China

China is the world leader in internet consumption; hence, data centres have grown there rapidly. At present, it is placed in the second position in the market capacity of data centres, right after the US. The Chinese Government has incentivised the construction of data centres through the allocation of land for the same and making it available at favourable prices. China’s National Development and Reform Commission has launched a project called “Eastern Data Western Calculation,” which aims to move the data collected from developed regions of the country to less developed ones.  Apart from this, several local governments in the central and western regions of the country offer tax benefits for setting up data centres.

 

Singapore

Singapore has several facilities, such as a country-wide fibre network, a corporate tax exemption for a data centre company under the Pioneer Certificate Incentive, a concessionary tax rate of 5% or 10% for a company under the Development and Expansion Incentive, on-site power plants, dual power feeds, etc. to incentivise the setting up of data centres.

 

Regulatory Framework in India

 

The size of the digital economy in India is estimated to grow from $ 200 billion in 2017-2018 to $ 1 trillion by 2025.

Currently, there is no single legal framework regulating the construction and operation of data centres in India. Several guidelines have been issued from time to time by various government departments relating to the data centre industry. One such draft guideline named “Data Centre Policy 2020” was published by the Ministry of Electronics and Information Technology and proposed to give the status of “infrastructure” to data centres, putting the data centre industry on the same pedestal as roads, railways, and power, which would enable them to avail long-term credit from domestic and international lenders at easier terms. Some of the other salient features proposed by this policy are:

  • Data centres are to be declared an Essential Service under “The Essential Services Maintenance Act, 1968” to enable continued service during calamities or crises.
  • Data centres are to be recognised as a separate category under the National Building Code of India 2016 as they require different norms than other commercial spaces.
  • Four Data Centre Economic Zones (DCEZ) are proposed to be set up by the Government of India, which will host an eco-system of both non-IT and IT infrastructures such as hyper scale data centres, cloud service providers, IT companies, and R&D units.
  • Incentives for setting up data centres will be available to both private sector and public sector Data Centre Parks/Data Centre Developers and Data Centre Operators.

The Telecom Regulatory Authority of India (TRAI) had also published a consultation paper on “Regulatory Framework for Promoting Data Economy Through Establishment of Data Centres, Content Delivery Networks, and Interconnect Exchanges in India,” which provides a list of clearances required to build a data centre, some of which are listed below:

  • Environment Clearance from the Ministry of Environment, Forestry and Climate Change
  • Consent to Establishment from the Metropolitan Development Authority and Central Pollution Control Board
  • Provisional Fire No Objection Certificate (NOC) from the State Fire and Rescue Services/National Fire Protection Association
  • Storm Water Permits and Sewage Discharge Approval from the State Pollution Control Board
  • Tree Cutting NOC from the Central Pollution Control Board: Forest Department
  • Drainage/Garden NOC from the Metro Water Supply and Sewage Board
  • Building Permit/Approvals, and Commencement Certificate from the Metropolitan Development Authority
  • Telecom Permit from the state’s Service Provider/Controller of Communication Accounts
  • Water Supply from Metro Water Supply and Sewage Board
  • Power Connection Feasibility, Design, and Sanction from the State Electricity Board
  • Traffic Approval NOC from the Commissioner of Traffic
  • NOC for High-Rise Structure from Airport Authority of India
  • Registration with DIC from the Director of Industry
  • IEM Registration with the Ministry of Commerce
  • 220kV power connection cable laying from a substation to project premises and 220kV power connection substation testing and charging from the State Electricity Board
  • Form V Approval (Labour) from the Labour Department: State Government
  • Plinth Checking Certificate from the Metropolitan Development Authority
  • Electricity Safety License from the Central Electricity Authority/Chief Electrical Inspector to the Government/Public Works Department Electrical Inspector
  • Elevator Permits and Certification from the Central Electricity Authority/Chief Electrical Inspector to the Government/Public Works Department (PWD) Electrical Inspector
  • Diesel Generator System Approval from the Central Electricity Authority/Chief Electrical Inspector to Government/PWD Electrical Inspector
  • High Speed Diesel (HSD) License from the Petroleum and Explosives Safety Organization/Chief Controller of Explosives Department/PWD: Electrical Inspector
  • Lift Operating Permits from the PWD Lift Inspector
  • Occupancy Certificate from the Metropolitan Development Authority
  • Completion Certificate from the Metropolitan Development Authority
  • Consent to Operate Certification from the Central Pollution Control Board
  • Preliminary Explosive License and Final Explosive License for HSD from Petroleum and Explosives Safety Organization/Chief Controller of Explosives Department

Several states have promulgated their own data centre policies, such as Maharashtra, through its IT/ITES Policy of 2015; Telangana, through its Telangana Data Centre Policy of 2016; Uttar Pradesh, through the Uttar Pradesh Data Centre Policy of 2021; Tamil Nadu, through the Tamil Nadu Data Centre Policy of 2021; Karnataka, through the Karnataka Data Centre Policy, 2022-27 and West Bengal, through the West Bengal Data Centre Policy of 2021.

 

Regulatory Framework in West Bengal

 

On September 6, 2021, the Department of Information Technology and Electronics, Government of West Bengal, introduced the “West Bengal Data Centre Policy 2021,” which will be valid for a period of five years from the date of the notification.

The nodal agency for the proper implementation of this policy is WBEIDC Limited (WEBEL), and they will promote it at both a national and international level.

In 2022, it was announced that the Bengal Silicon Valley Tech Hub being developed at New Town, Rajarhat, is expected to become the main area for the development of the data centre units in the state. The biggest advantage for West Bengal is that the new submarine cable landing station is being developed at Tajpur in West Bengal and ancillary units will be created in the two electronics manufacturing clusters at Kalyani and Falta for supporting the data centres.

Data centre organisations will be classified as “Essential Services,” as has also been proposed in the National Policy.

In order to attract data centre companies to set up data centres in West Bengal, various other incentives have been proposed in the policy. The companies setting up data centres in West Bengal will be entitled to a hundred per cent exemption of stamp duty and registration fees for any transaction relating to the setting up of data centres in the state, and there will also be a waiver of electricity duty from the commencement of commercial activities up to five years.

Among the non-financial incentives, the data centres will also be entitled to:

  • Dual-power grid networks to ensure electricity supply without interruption
  • “Industrial” status is given to electricity supplied to data centres
  • Affordable power backup infrastructure
  • Companies who wish to establish captive firms will get single-window approvals and permits
  • Quality power and internet facilities are to be provided to Edge Data Centres being set up at various IT parks or industrial parks
  • Uninterrupted Power Supply and Internet Connectivity
  • Uninterrupted and high-speed water supply
  • A support system to be provided to set up captive water treatment plants for the Data Centre Parks
  • Extra FAR for data centre buildings.

West Bengal is becoming a lucrative option for setting up new data centres, and various corporate houses such as Reliance Jio, Adani Enterprises, and Hiranandani Group are also in the process of setting up data centres in the state. Several factors need to be taken into account before setting up a Data Centre and real estate is a significant one among them because data centres are one of the most expensive real estate investments. Extensive due diligence should be performed on the project site to ensure that it has a clear title and easy access to transportation and other utilities. In addition to this, all the relevant licenses and permissions should be obtained from the competent authorities to avoid legal issues in the future. Considering the progressive policies implemented by governments at both the central and state levels, it will be interesting to see how the data centre industry develops and how these policies affect it. 

Image Credits: Photo by Akela999 from Pixabay 

West Bengal is becoming a lucrative option for setting up new data centres, and various corporate houses such as Reliance Jio, Adani Enterprises, and Hiranandani Group are also in the process of setting up data centres in the state. Several factors need to be taken into account before setting up a Data Centre and real estate is a significant one among them because data centres are one of the most expensive real estate investments. Extensive due diligence should be performed on the project site to ensure that it has a clear title and easy access to transportation and other utilities.

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The Blockchain Push in the Legal Industry

The transformative power of blockchain technology is visible in many areas. The adoption of decentralised blockchain systems that are arguably more tamper-proof than traditional software systems can greatly benefit the legal services industry too. This process has already begun, with a judge in the UK allowing legal documents to be served using blockchain technologies. Earlier this year, a US court too authorised service of the suit via a “hot wallet” in another cryptoasset case.

Fabrazio D’Aloia, the founder of an online gambling company, sued a cryptocurrency exchange and other cryptobrokerage platforms by claiming that his cryptoassets were fraudulently accessed and cloned. D’Aloia’s suit (in a UK court) claims that the perpetrators used their platform to impersonate another platform and led him to transfer money from his cryptocurrency wallets for what he believed to be legitimate trades. The legal documents were served by transferring a token on a blockchain via wallets that originally belonged to D’Aloia but were stolen or exploited by unknown fraudsters.

Implications of such an allowance by the Courts

Traditionally, suits and notices could only be served via the mechanisms agreed upon by the parties in advance; options included post; in person by a representative; fax; email or other forms of electronic communication. These channels were largely adequate when the identity and contact information of the parties were known or easily traceable. However, in the digital world, many frauds are increasingly being perpetrated by “unknown persons”. Especially in such cases, when the identity of fraudsters/cybercrooks is not known but the suit has to be served, the blockchain route is a useful option because it uses the “digital wallets” compromised by the scamsters to reach them.

The other significant aspect of the UK court’s decision goes beyond communication channels: it recognises that the defendants are “constructive trustees.” This essentially means that cryptoasset exchanges and other intermediaries can be held liable for breach of trust if they do not take the necessary measures to ringfence the underlying cryptoasset. This will be a deterrent and force various players in the crypto industry to be more diligent. Indeed, this may also have implications for digital supply chains in the banking and financial services space as well.

Blockchain can transform many more aspects of the legal industry

Blockchain also has applications in other areas, such as litigation, IPR matters (both applying for patents and resolving disputes by providing evidence of creation, first use, rights management, tracking distribution), etc. Smart contracts can make it easier for artists (singers, painters, writers, etc.) to get paid. Each use case will obviously involve different user personas (roles- e.g., the parties and their lawyers, competent authorities, courts, etc.). Maintaining records of events such as birth, health, marriage, adoption, change in citizenship, death, etc. on the blockchain can make it easier to maintain tamper-proof records. Even property records can be maintained on the blockchain.

Such innovations will save parties and lawyers significant time and effort. This is an important benefit in a country like India, where a lot of time is wasted only because of the inefficiencies in accessing records and verifying their authenticity. The risk of forgery increases the presence of false evidence in various cases, thus leading to protracted legal proceedings. Improving the efficiency of various processes in the justice delivery system can speed up court decisions and reviews of appeals.

It appears that the adoption of blockchain-based paradigms can reduce pendency in various courts across the country- a major challenge for the judiciary that affects not only ordinary citizens but also our country’s reputation in terms of the ease of doing business and speed of delivering justice.

There is a sense of inevitability that the digital revolution will accelerate the evolution of different industry sectors in different ways and at varying times. India, with its large pool of technical talent, is well-positioned to take the lead. Just as our DBT/UPI technology stacks, blockchain solutions too can become attractive to a large chunk of the world. But we have to move fast and in a concerted manner at all levels of our complex judicial system.

The adoption of decentralised blockchain systems that are arguably more tamper-proof than traditional software systems can greatly benefit the legal services industry too.

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Blockchain Technology: Don’t Throw the Baby Out with the Bath Water!

Blockchain technology, which underlies cryptoassets, is revolutionary because it is the opposite of conventional software designs. Data is not recorded and stored in a central database, with identified database administrators responsible for updating it and maintaining security. Think of a blockchain as a shared digital ledger of transactions. Unlike a traditional database that relies on tables, blockchains use “blocks” to store information. Each block has a certain storage capacity. When a block is filled (with transaction data), it is closed and cryptographically linked to the previously-filled block. Thus, information is distributed across a “chain of blocks.”

Whenever a new transaction occurs on the blockchain, a record of that transaction is added to the ledger of every participant in the blockchain. This paradigm is supposed to make blockchain applications much harder to hack or for a small group of individuals to act in cohort with the objective of cheating or committing fraud. Cryptocurrencies and NFTs are built and traded using blockchain technology; in fact, blockchains were first used to create Bitcoin, the world’s first-and probably best-known-cryptocurrency.

Cryptocurrencies have crashed- but is blockchain to blame?

In recent weeks, however, various cryptocurrencies have lost significant value, spurring numerous debates around their relevance, safety and sustainability. It appears that the drop in value of most cryptocurrencies was caused by the spectacular drop in Terra, a supposedly stable “fiat-backed” coin that was pegged to the USD, South Korean Won and Mongolian Tugrik and Luna, its sister cryptocurrency. It is believed that massive withdrawals from Anchor, a Terra-based decentralized finance (DeFi) protocol, led to Terra’s UST stablecoin being “depegged” from the USD.

It is not yet clear is why such massive withdrawals happened, and whether it was the result of some kind of conspiracy (the high correlation with stock market movements does suggest some wrongdoing, although it is not clear by whom and with what intent). It is sad that investors lost billions of dollars in a matter of hours and days, and although a new version of Terra coin has been launched, it is too early to say if it will succeed. Naturally, questions are being raised about the much-vaunted safety of blockchain technologies.

Trust is critical to any innovation- the key is to find better ways of applying blockchain

Whether it is the world of cryptoassets or real assets, a key lesson to be learnt is that: trustworthiness will always trump technology and other tangible traits that underlie any physical or financial asset. One must therefore resist the temptation to throw the baby out with the bathwater. In this case, I am referring to blockchains: we should not, based on the failure of cryptocurrencies, give up on blockchains. Instead, we must work on enhancing its trustworthiness even further, so that even inadvertent loopholes don’t arise.

Blockchain technology is finding application in a number of other areas as well. These include supply chain management, shipping & logistics, e-governance, energy, education and financial services. Food traceability, enforcing music rights, securing payments and even tamper-proof vaccination certificates can all be delivered via blockchain. Many of these use cases are already under implementation in India. Even the emerging metaverse world is expected to make use of blockchain concepts.

Image Credits:

Photo by Ivan Babydov: https://www.pexels.com/photo/gold-bitcoin-coin-on-background-of-growth-chart-7788009/

Blockchain technology is finding application in a number of other areas as well. These include supply chain management, shipping & logistics, e-governance, energy, education and financial services. 

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