By all accounts, “Maple Valley” is thriving.
2017 saw Canada, home to the second largest tech sector outside Silicon Valley,[i] solidify its position as a leader in the field of artificial intelligence (“AI”).
Based on available data to date, it is estimated that funding raised by Canadian AI companies in 2017 will exceed US$250 million, representing an almost two-fold increase from the previous record historical high of US$143 million in 2015.[ii] This healthy injection of private-sector funding has been accompanied by significant public investment. Notably, the 2017 federal budget provided for C$125 million in research and development funds earmarked for AI initiatives and nearly C$1 billion over 5 years to promote innovation superclusters.[iii]
Access to unprecedented levels of capital, a strong network of academic institutions, improving infrastructure and availability of talent facilitated by open immigration rules have fuelled the development of a burgeoning industry north of the border. Joining dozens of growing start-ups in AI cluster cities such as Toronto or Montreal, global tech giants such as Google, Facebook and Samsung have invested in or opened Canadian AI labs in 2017.[iv]
The regulatory landscape impacting AI continues to evolve both domestically and abroad. As we begin the new year, we pause to reflect on some of 2017’s most notable developments in AI and prepare for new trends to watch out for in 2018.
What we saw in 2017:
- New federal support and plan for AI: Budget 2017 signalled the Government of Canada’s clear priority to foster innovation in a number of key industries, including AI. The Pan-Canadian Artificial Intelligence Strategy was launched in March 2017 with a view to increase and support our national research community on AI, connect Canada’s major centres for AI development and lead the global discussion on the economic, ethical, policy and legal implications of advances in AI.[v] More broadly, the federal government announced funding for innovation superclusters, began a review of its business innovation initiatives to better align them with client needs, and established Innovation Canada, a new platform created to coordinate the public programs made available across several departments in support of Canada’s innovative companies, including AI companies.[vi]
- A survey of AI policy, innovation and regulations abroad:
- United States: In May 2017, the US Congress established the Artificial Intelligence Congressional Caucus, tasked with informing policy decisions with respect to AI and ensuring rapid growth and innovation in this industry. This signals American lawmakers’ continued support for developing a national AI policy roadmap despite the change in administration since the publication of the Obama-era White House National Artificial Intelligence Research and Development Strategic Plan.[vii] Additional policy discussions of note have emanated from the United States Government Accountability Office, which released a technology assessment of the Internet of Things respecting the status and implications of an increasingly connected world.[viii]
- United Kingdom: In January 2017, the Science and Technology Committee of the UK House of Commons released its report on robotics and AI with recommendations for supporting AI research. Chief among its recommendations is the creation of a national council on AI with membership drawn from academia, industry and government to produce a government-backed “National Robotics and Autonomous Systems Strategy”.[ix] The Committee is holding ongoing consultations to better understand issues related to the proliferation of advanced AI systems. In fall 2017, the UK government announced it will invest £75m into delivering recommendations from an independent review on AI, and will open a Centre for Data Ethics and Innovation.
- European Union: In February 2017, the European Parliament passed a resolution titled “Civil Law Rules on Robotics”, pursuant to which the European Commission is to propose rules on robotics and AI, in order to fully exploit their economic potential and to guarantee a standard level of safety and security.[x] In October 2017, the European Parliament released its preliminary findings on its public consultation on robotics and AI. Meant to inform the EU’s position on ethical, economic, legal, and social issues, the consultations revealed support for the creation of a central EU regulatory body on AI. The European Commission published a preliminary response to some of the European Parliament’s recommendations and has committed to working on a EU response on AI following its own public consultation and stakeholder dialogue.
- Estonia: The small country of Estonia, with a population of around 1.3 million people, is outlining options for extending legal representative rights to AI.
- China: The Chinese government announced an ambitious goal of becoming a leader in AI innovation and regulation by 2030. In December 2017, the Ministry of Industry and Information Technology published a document outlining its goals to lead in AI.
- South Korea: In February 2017, the Ministry of Science, ICT and Future Planning released a plan to prepare South Korea for advancements in AI-enabled technologies. The plan identifies policy goals relating to workforce preparedness, education and social welfare as well as a number of targeted measures to manage the development of AI in South Korea. These reforms include an overhaul of the country’s Framework Act on National Informatization and the establishment of a Charter of Ethics for AI (by 2018) and protocols to guide developers and users.[xi]
- Privacy continues to be a concern: In his remarks delivered in May 2017 at the IAPP Canada Privacy Symposium, the Privacy Commissioner of Canada emphasized the need to proactively engage with organizations that use AI and other cutting edge-innovations to ensure accountability in this rapidly evolving area.[xii] From an automotive industry-specific perspective, the Privacy Commissioner signed the Resolution on Data Protection in Automated and Connected Vehicles during the 39th International Conference of Data Protection and Privacy Commissioners in September 2017. This non-binding document acknowledges the rapid advancement of vehicle automation and connected vehicle technologies and expresses concern about the possible lack of available information, user choice, data control and valid consent mechanisms for vehicle owners, drivers, passengers, other road users and pedestrians.[xiii]
- Competition law is a hot topic: In September 2017, the Competition Bureau released its consultation paper entitled “Big data and Innovation: Implications for competition policy in Canada”.[xiv] The report canvasses how the acquisition and use of Big Data, which is essential to AI systems, can raise competition issues. Competition and privacy issues affecting Big Data were considered by the Federal Court of Appeal in its decision in Toronto Real Estate Board v. Commissioner of Competition,[xv] released on December 1, 2017. The decision has profound implications as it relates to risks of non-compliance with the civil prohibitions against abuse of dominance under the Competition Act stemming from allegations of data monopoly.
- Continued dialogue between non-governmental actors: The 2017 Asilomar Conference, involving some of the leading thinkers in AI, released a list of 23 principles ranging from research strategies to data rights to future issues including potential super-intelligence. These principles, which underscore ethical and societal values for beneficial AI development, were endorsed by a total of 3,814 signatories, including over 1,250 AI/Robotics Researchers and twice as many thought leaders such as Stephen Hawking and Elon Musk.[xvi]
- AI in Fintech is an area of focus: A number of public consultations and reports in 2018 have centered on the opportunities and challenges related to the integration of AI in the delivery of financial services. Of note is the European Commission’s public consultation document on Fintech and the European Banking Authority’s response, published in March and June 2017, respectively.[xvii] Access to information, transparency, cybersecurity risk, market distortions caused by widespread automation and limited data portability are identified as areas of concern. Similar issues were raised by the Basel Committee on Banking Supervision in its August consultative document on Fintech[xviii] and by the Financial Stability Board in its November 2017 report on the implications of AI for financial services.[xix]
What to watch for in 2018:
- The AI industry will continue to experience rapid growth: Building on the success of 2017, the AI industry in Canada and globally is expected to continue to experience rapid growth in 2018 and beyond. By 2020, the worldwide market for AI-related products is predicted to reach US$47 billion, up from US$8.0 billion in 2016.[xx] Industries such as healthcare and financial services, which have traditionally been particularly proactive in integrating AI technologies to improve business models in various capacities, will continue to drive the market. Over the coming years, AI is also likely to progressively make its mark in traditionally more conservative industries – including the legal practice – as parties become more exposed to transformative technologies and weigh the opportunities and challenges associated with the deployment of AI.
- Expect developments in respect of privacy requirements: In late 2017, the Privacy Commissioner invited stakeholders across Canada to comment on draft guidelines in respect of consent and data practices under the Personal Information Protection and Electronic Documents Act (PIPEDA), which is currently under review. The final form of these guidance documents, likely to be released this year, will assist those organizations relying big data analytics and AI that such uses are appropriately disclosed. Canadian businesses should also take note of the forthcoming entry into force of the European Union’s General Data Protection Regulation (“GDPR”) in May 2018. The GDPR will apply to any company offering goods or services to EU residents. Discrepancies between the GDPR and Canadian privacy law requirements may pose new challenges to businesses who come within the purview of both regimes
- Intersection between AI and other transformative technologies: The intersection between AI and other technologies, including blockchain, is gaining attention from theoretical and applied perspectives. We expect to see growth in the areas of AI and blockchain, quantum computing and Internet of Things (IoT), among others.
- Strategic acquisitions and competition for talent: The acquisition of AI start-ups, particularly in our innovation hubs of Toronto, Montreal and Edmonton, is expected to heat up. The most recent announcement of TD Bank’s acquisition of Layer 6, and AI start-up based in Toronto, is the beginning of what we expect to be one of many this year. Not only will such acquisitions fuel innovation but it will also propel the competition for talent in applied AI.
McCarthy Tétrault and AI
In this environment ripe for opportunities and challenges, legal counsel must keep up with AI to marry legislative compliance and the application of industry best practices in various jurisdictions with a practical knowledge of commercial and technical outcomes. McCarthy Tétrault, named Law Firm of the Year at the 3rd Annual Canadian Fintech & AI Awards presented by the Digital Finance Institute in November 2017, is thinking ahead to cross-disciplinary ways in which AI and the law will intersect, to provide comprehensive advice to our clients.
Our 2017 Transformative Technologies and the Law series explored the conceptual and practical legal issues arising from the integration of AI into organizational processes, operations and business models. Consult our first White Paper entitled “From Chatbots to Self-Driving Cars: The Legal Risks of Adopting Artificial Intelligence in Your Business”, published in October 2017. Our series of seminars will continue this Spring 2018 with a focus on Managing Privacy Litigation Risk.
AI will also continue to feature prominently in our 2018 McCarthy Tétrault Advance Continuing Professional Development program, with seminars focusing on Open Banking, Cyber Insurance, Automated Cars as well as in the context of our 7th Annual Technology Summit.
[i] Jack Derricourt, “Understanding the legal risks of deploying AI in businesses – An interview with Carole Piovesan”, DX Journal (2 December 2017), online: <www.digitaljournal.com/digitaltransformation/2017/12/understanding-the-legal-implications-of-deploying-artificial-intelligence-in-a-business/>.
[ii] PwC & CB Insights, MoneyTree Canada Report (Q3 2017), online: <www.pwc.com/ca/en/technology-industry/publications/PwC_MoneyTree_Q3_en.pdf>.
[iii] Government of Canada, “Innovation superclusters initiative (ISI): Program guide”, online: <https://www.ic.gc.ca/eic/site/093.nsf/eng/00003.html>.
[iv] Denise Deveau, “Here’s what the AI map in Canada looks like (at least today)”, Financial Post (14 June 2017), online: <http://business.financialpost.com/entrepreneur/heres-what-the-ai-map-in-canada-looks-like-at-least-today>.
[v] Canadian Institute for Advanced Research, “Pan-Canadian Artificial Intelligence Strategy Overview” (30 March 2017), online: <www.cifar.ca/assets/pan-canadian-artificial-intelligence-strategy-overview/>.
[vi] Government of Canada, “Canada’s Innovation And Skills Plan”, online: <www.budget.gc.ca/2017/docs/themes/Innovation_en.pdf>; Government of Canada, “Innovation superclusters initiative (ISI): Program guide”, online: <https://www.ic.gc.ca/eic/site/093.nsf/eng/00003.html>; Treasury Board of Canada Secretariat, News Release, “Government of Canada review will ensure that innovation and clean technology programs deliver results for Canada’s innovators” (6 September 2017), online: <https://www.canada.ca/en/treasury-board-secretariat/news/2017/09/government_of_canadareviewwillensurethatinnovationandcleantechno.html>.
[vii] Congressman John Delaney, “Delaney Launches Bipartisan Artificial Intelligence (AI) Caucus for 115th Congress” (24 May 2017), online: <https://delaney.house.gov/news/press-releases/delaney-launches-bipartisan-artificial-intelligence-ai-caucus-for-115th-congress>.
[viii] United States Government Accountability Office, Technology Assessment: Internet of Things (May 2017), online: <www.gao.gov/assets/690/684590.pdf>.
[ix] United Kingdom, House of Commons Science and Technology Committee, Robotics and artificial intelligence: Government Response to the Committee’s Fifth Report of Session 2016–17 (London: House of Commons, 2017), online: <https://publications.parliament.uk/pa/cm201617/cmselect/cmsctech/896/896.pdf>.
[x] EC, European Parliament resolution of 16 February 2017 with recommendations to the Commission on Civil Law Rules on Robotics (2015/2103(INL)), online: <www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//NONSGML+TA+P8-TA-2017-0051+0+DOC+PDF+V0//EN>.
[xi] South Korea Ministry of Science and ICT, “Long-term Service R&D Strategy Road-map and Investment Plan Announced ” (27 February 2017), online: <http://english.msip.go.kr/english/msipContents/contentsView.do?cateId=msse44&artId=1335476>.
[xii] Office of the Privacy Commissioner of Canada, “Course correction for improved outcomes for Canadians: Remarks at the IAPP Canada Privacy Symposium 2017” (17 May 2017), online: <www.priv.gc.ca/en/opc-news/speeches/2017/sp-d_20170517/?wbdisable=true>.
[xiii] International Data Protection and Privacy Commissioners Conference, “Resolution on Data Protection in Automated and Connected Vehicles” (25-29 September 2017), online: <https://edps.europa.eu/sites/edp/files/publication/resolution-on-data-protection-in-automated-and-connected-vehicles_en_1.pdf>.
[xiv] Competition Bureau, Big data and Innovation: Implications for competition policy in Canada, online: <http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/04304.html>.
[xv] Toronto Real Estate Board v Commissioner of Competition, 2017 FCA 236.
[xvi] Future of Life Institute, “A Principled AI Discussion in Asilomar” (17 January 2017), online: <https://futureoflife.org/2017/01/17/principled-ai-discussion-asilomar/>
[xvii] EC, Consultation Document: Fintech: A More Competitive And Innovative European Financial Sector, online: <https://ec.europa.eu/info/sites/info/files/2017-fintech-consultation-document_en_0.pdf> ; European Banking Authority, EBA Response, online: <www.eba.europa.eu/documents/10180/187341/EBA+response+to+the+European+Commission+Consultation+Document+on+FinTech+-+June+2017.pdf>.
[xviii] Basel Committee on Banking Supervision, Sound Practices: Implications of fintech developments for banks and bank supervisors (August 2017), online: <https://www.bis.org/bcbs/publ/d415.pdf>.
[xix] Financial Stability Board, Artificial intelligence and machine learning in financial services, online: <http://www.fsb.org/wp-content/uploads/P011117.pdf>.
[xx] International Data Corporation, “Worldwide Cognitive Systems and Artificial Intelligence Revenues Forecast to Surge Past $47 Billion in 2020, According to New IDC Spending Guide” (26 October 2016), online: <https://www.idc.com/getdoc.jsp?containerId=prUS41878616>.