Contracting for the Internet of Things: Looking into the NEST

Abstract

The world of the ‘Internet of Things’ (‘IoT’) is just one manifestation of recent developments in information and communication technologies (‘ICTs’), closely tied to others, including ‘cloud computing’ and ‘big data’. For our purposes, the ‘Thing’ in the IoT is any physical entity capable of connectivity that directly interfaces the physical world, such as embedded devices, sensors and actuators. To examine IoT contracts, this paper adopts the approach to focus on a case study, examining the complexity of IoT through the lens of a specific product. The case study is the Nest connected thermostat, part of the Nest Labs business, which was purchased by Google in February 2014 for $3.2bn. We focus on the ‘legals’ of Nest (contractual documents, licences, etc.) to provide a case study of IoT complexity. After touching on some general contract law issues in relation to the IoT supply chain, we examine the rights and obligations represented in these legals and discuss the extent to which, collectively, they present a coherent and comprehensible private law framework. We then consider the extent to which certain statutory regimes may treat IoT contracts in terms of addressing two characteristic contractual concerns: liability attribution and unfair terms. Our main conclusion is that the world of IoT demonstrates a need to consider recasting the concept of product to reflect the frequent inextricable mixture of hardware, software, data and service.