• Digital rights and the notion of boundaries in smart space
For new rights to emerge, they need to be delineated. Barzel (1997) explains that
what causes an imperfect delineation of rights is the choice of owners not to exercise all their rights. [As] describing what the property is and protecting it consume resources [...], the delineation of property rights is in itself subject to individuals’ optimization.
Non-exercised rights move into the public domain. In the case of digital rights, the technology involved in creating new rights adds an important dimension to consider. Digital rights are rights to a hybrid space, partly physical, partly digital. Furthermore, digital rights are the by-product of pervasive computing. Without ubicomp, the question of right delineation in smart space would not be so acute since all human-computer interactions would take place in fixed locations in physical space. However, ubicomp is by definition ubiquitous. It is calm and transparent to its users. It promotes fluidity and seamless continuity of spatial experiences. How can such characteristics be compatible with the emergence of digital rights? To delineate rights, boundaries are necessary.
Pervasive computing researchers have analysed the question of boundaries in pervasive intelligent space and asserted that one fundamental tenet of ubicomp is the “boundary principle”. According to Ma et al. (2005), although “boundaries in smart space are not necessarily related to a boundary in the physical world, spatial features of a smart space must be clearly drawn”. These researchers assess that boundaries are essential as a smart world will consist of many ubiquitous systems rather than one single system. The same is true of a smart building which might have to accommodate multiple tenants with potentially very different requirements with respect to smart space (a situation exemplified by the notion of standard and specific interactions mentioned previously). Therefore, what should define a workable system of boundary and maintenance in smart space? Should boundaries in smart space derive from physical space or digital space, or both?
To emerge, property rights need enclosure. Umbeck (1981) propounds that “all private ownership rights are ultimately founded upon the ability to forcefully exclude potential competitors”. Achieving this martial ideal in smart space will involve delineations not only in physical space (e.g. clearly delineated surface area in a building) but also in digital space (e.g. cyber-physical systems, data analytics, Al).
Defining rights underpinned by use in digital space is not easy. The issue of boundaries in cyberspace has been dividing law scholars since the World Wide Web appeared in the 1990s. Cyberspace is sometimes considered as a place with delineated borders defining property rights (Reeves, 1996), or as a placeless spacewhere commons should prevail (Hunter, 2003). Beyond the debate about the legal nature of cyberspace, the issue at stake here is whether smart space is a legal place whose boundaries can be perfectly defined or a placeless space as far as law making is concerned.12
According to Johnson and Post (1996), “cyberspace challenges the law’s traditional reliance on territorial borders; it is a “space” bounded by screens and passwords rather than physical markers”. For geographic boundaries to apply for law making, four conditions have to be met:
i power (i.e. “control over physical space and the people and things located in that space”),
ii effects (i.e. “the correspondence between physical boundaries and ‘law space’ boundaries [reflecting] a deeply rooted relationship between physical proximity and the effects of any particular behaviour”),
iii legitimacy (i.e. “persons within a geographically defined border are the ultimate source of law-making authority for activities within that border”),
iv notice (i.e. “physical boundaries are appropriate for the delineation of ‘law space’ in the physical world because they can give notice that rules change when the boundaries are crossed. Proper boundaries have signposts that provide warning that will be required after crossing, to abide by different rules [...]”).
In light of these four conditions, are geographic boundaries applicable to rights in smart space? Or is smart space more akin to cyberspace? Noticeably, contrary to cyberspace whose “power to control activities has only the most tenuous connections to physical location” (Johnson and Post, 1996), smart space gives control over physical space, either owned or tenanted. Its effects are deeply rooted in physical space, whether it is about footfall in a shopping mall or hot-desking in an office building. By the same token, digital rights are not property rights in cyberspace. A property owner is legitimate as the ultimate source of authority in dealing with the building’s smart space. And, physical boundaries in a property (e.g. physical separation between a retail outlet and its neighbours) are appropriate for the delineation of smart space regimes (i.e. changes of rules). Hence, smart space can meet the four above-mentioned conditions. As such, territorial boundaries are relevant for ‘law-making’ in smart space and, in turn, for delineating digital rights.
Digital rights are fundamentally bounded by physical space. The boundary “made up of screens and passwords” mentioned in Johnson and Post (1996) no longer exists with ubicomp. In smart real estate, space users mesh with buildings’ infrastructure in what smart building researchers call bi-directional consciousness (e.g. Warwick, 2013), which paradoxically roots digital rights in smart space’s physical component.
An interesting framework for analysing digital rights in smart properties with multiple owners and/or tenants is that of containers in cyberspace introduced by a joint group of Harvard Law School and MIT students as part of the MIT Internet
Policy Initiative (Adida et al., 1998). A container is a metaphor for ownership in cyberspace. They write:
Each container has an owner [...] who has control over the contents and the permissions of the container. Each container consists of a barrier or set of barriers between its contents and the outside world [...] Ownership of containers includes the entitlement to exclude third parties, the right to possess and control access to a container, and the right to determine what actions or behaviors are allowed with a container.
Smart space can be called a container whose access is permitted unless technical barriers attempt to prevent it. Besides, despite the existence of privately owned and managed containers, users have a right to public digital space. For instance, a shopping mall manager should not be allowed to prevent space users in a mall from visiting public cyberspace (legit websites) while they are in the property. By the same token, a brand represented in a mall should not prevent shoppers from looking at a competing brand’s website while they are in its retail outlet, but it can prevent shoppers from receiving promotional messages from a competing brand while they are physically located in its retail outlet’s smart space (which would be equivalent to a form of‘digital trespass’). Containers in smart space which are anchored in physical space embody the fact that boundaries in smart space should be based on territorial boundaries in a building (e.g. a building owner has control over smart space in his/her building, but not in neighbouring buildings).
In sum, the principle of territorial delineation for digital rights in smart buildings is consistent with ubicomp’s boundary principle and smart space’s hybrid nature as both physical and digital spaces. Beyond the legal argument presented here, boundaries in smart space will ultimately have to be consistent with the way smart space is produced and consumed by real estate players and space users, respectively. Delineation is also important in defining trespass in smart space. In that respect, boundaries will need to be easy to identify and enforce, lest costly and unclear delineation results in negative externalities for all.
• Divided ownership of digital rights in smart buildings
According to Graaskamp (1970), there are two basic issues to consider with real estate space’s legal dimension: access and claims. Access refers to “decisionmaking prerogatives arising out of the right to occupy the land or to control its use”, and claims to “the benefits or income arising out of ownership”.
Similarly, smart space encompasses two distinct sets of rights:
- - Rights to access and control smart space: for instance by implementing smart technologies in the built environment and/or by setting up interactions between space users and the building. These rights are called Digital Access Rights;
- - Rights to use smart space, for instance to generate revenues. These rights are called Digital Usage Rights.
Should these two sets of rights be owned by a unique stakeholder in a smart building? Or should these new rights’ ownership be divided among different stakeholders in a smart building (e.g. owners, tenants, technology providers)? If so, on which grounds should the attribution take place?
Whoever owns Digital Access Rights can decide on which technologies and interactions to implement in a building, where to position them and how to use them. Whoever owns Digital Usage Rights is entitled to employ smart space to create value in space. Barzel (1997) explains that
the structure of rights is expected to be designed so as to allocate ownership of individual attributes such that the parties who have a comparative advantage in affecting the income flow over the attributes that are susceptible to common-property problem will obtain rights over them.
Let’s apply this principle to smart buildings, by first defining the scope of the two sets of rights. Digital Access Rights should apply to the whole of smart space within the confines of a smart building (common areas, tenanted space, nontenanted space). By contrast, Digital Usage Rights should only apply to tenanted spaces and be defined as part of contractual agreements between property owners and tenants. If a tenant wants to modify smart space access in his or her tenanted space (e.g. specific interactions), then he/she needs to get the owner’s approval since the latter controls smart space owing to full and undivided ownership of access rights. Maintenance of technologies will also fall under property owners. By the same token, the implementation of standard and specific interactions discussed previously is regulated by Digital Access Rights. As owners hold all Digital Access Rights, implementing specific interactions and maintaining smart technologies underpinning these interactions is under their responsibility. Incidentally, owners should have the right to refuse tenants’ request for specific interactions that they consider as non-appropriate or non-compatible with their strategic vision of their properties.
By controlling access to smart space, property owners make sure of the perfect compatibility of all smart technologies and interactions implemented in their smart buildings. They also bear the full responsibility and liability with respect to smart space’s infrastructure in their properties. Case in point: if it is illegal, say, to install facial recognition cameras inside certain retail outlets in a smart shopping mall, should a tenant decide to go ahead and set up such devices in his rented space without informing the landlord, then the landlord bears the responsibility. Hence, owners will have to actively monitor all devices implemented by tenants in their properties.
Indeed, in the proposed structure for digital rights, it is the owners’ duties to ensure that all technologies and interactions implemented in their properties comply with legal and regulatory requirements. Lest responsibilities are unclear or diluted, ownership of Digital Access Rights should exclusively remain with owners at all times. Conversely, Digital Usage Rights should be divided among owners
Digitalisation of commercial real estate 99 and tenants. Tenants are the most qualified to leverage on smart space attributes so as to generate income. Use of smart space is a smart building’s attribute which the owner does not retain. This attribute is bounded by physical space according to the lease terms agreed upon by landlords and tenants. Owners relinquish this subset of rights to tenants who remain rights holders as long as their leases are ongoing. Once their leases expire, Digital Usage Rights should automatically revert to property owners.
During the life of their leases, tenants bear full responsibility for the way they use smart space (e.g. by using their own proprietary digital tools) and specific interactions they select to implement in their rented spaces. As their Digital Usage Rights are bounded by physical surfaces, they cannot overstep into other tenants’ and owners’ smart space, nor interfere with it. This would be equivalent to trespass. Digital Usage Rights of all common areas in a smart building belong to property owners who might decide to relinquish this subset of rights under special circumstances, e.g. for well-defined areas and/or interactions over limited periods of time. Out of fairness for all tenants, owners’ ability to relinquish their Digital Usage Rights in a smart building’s common areas would have to be strictly codified by contractual agreements between property owners and all tenants as a clause in ad hoc “smart space leases” that could be added to existing leases for physical space.
With digital rights’ implementation comes the issue of data collected in smart buildings. Who should own these data? And, who should have the right to use analytics to leverage on these data?
One might argue that since data are collected in their properties, owners should own all rights related to data. As a matter of fact, if Digital Access Rights’ ownership is the attribution criteria, all data collected in a smart building would belong to property owners. However, this seems sub-optimal inasmuch as tenants do play a role in data collection and would eventually benefit the most from an optimal use of data analytics in smart space. Tenants are the most qualified to create value from data collected in their rental spaces.
In the proposed structure of digital rights, the rule for attributing Digital Usage Rights is simple: data collected in a smart building’s tenanted space belong to tenants while data collected in common areas and non-tenanted space belong to property owners.15 This would provide a balanced and unquestionable yardstick for allocating rights related to data collection and use. As stated by Barzel (1997), “the value of multi-attribute assets is not necessarily maximized if these assets are owned by single individuals; it may be enhanced by allocating ownership over individual attributes according to comparative advantages”. This point highlights another fundamental dimension of any successful smart space strategy for the real estate industry: it needs to be cooperative, possibly even more so than in physical space. Cooperation and value sharing will build trust among all stakeholders in smart space, and make smart buildings profitable assets for both landlords and tenants. As cost bearers for all technologies implemented in their properties, landlords will need to develop strong partnerships with their tenants to create as much value as possible from digital rights.