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The Internet of Things Will Change Property Rights Forever

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Property law is one of the most ancient and fundamental legal theories in our justice system. Indeed, the cultural origins of property rights based on John Locke’s theory can be traced back to the biblical story of Adam and Eve, where God gave the earth to the two initial inhabitants and their children.

Fascinatingly, apart from some cultural shifts and changing geographic norms, property rights have remained somewhat stagnant throughout history. However, all of this is about to change dramatically as we cruise into the age of “Machine to Machine Communications,” or what is increasingly known as “The Internet of Things.”

Goldman Sachs provides an excellent explanation of the Internet of Things:

“The Internet of Things (IoT) is emerging as the third wave in the development of the Internet. The 1990s’ fixed Internet wave connected 1 billion users while the 2000s’ mobile wave connected another 2 billion. The IoT has the potential to connect 10X as many (28 billion) “things” to the Internet by 2020, ranging from bracelets to cars.”

So how does the IoT have the potential to materially change our property rights? Well, allow me to take you back to law school days where we painfully attempted to memorize the four tenants of property: Time, Title, Interest, and Possession. We spent many weeks delving into the physical property aspects of custody and possession and how the two – while inextricably linked – were materially different in nature. Nevertheless, property rights always boiled down to who had the use and enjoyment of a particular object and how these rights could be infringed upon.

Behold, I bring you a third dimension to property rights (Control) pervading our legal infrastructure based on the Internet of Things. Let me explain.

You did not purchase your mobile device so that you could own a small thin box of metal, plastic, and glass. You purchased the ability to communicate, connect to the Internet, and be more productive. Hence, you could conclude that you own your mobile device outright. Nothing could be further from the truth however, because your device that gives you the ability to communicate, connect to the Internet, and do things like check email only provides you with custody rights. The reality is your mobile provider has possession of your communication abilities and operating system, and your apps are all “controlled” by someone or something else.

Some will argue that what I’m describing is really a licensing issue and that this three-sided model to property rights is consistent with standard property rights as they exist today. However, licensing rights (no matter how broad) do not give the licensor control over the licensee’s property outside of what is being licensed. A mobile device, its communications capabilities, and all of its applications bleed into one another in a way that I argue vitiates many of the licensing rights and powers given to licensor.

The Nest thermostat device is an even better example of IoT materially affecting property rights. Installing a Nest thermostat in your home gives your thermostat the ability to talk with your mobile device – and he ability to talk with the servers at the Nest company itself. Your thermostat can tell it servers when you’re home, the temperature you keep in your house, and could potentially be controlled outside of your wishes or expectations. Therefore, while you may have custody over this thermostat, the possession and (more importantly) the control belongs to someone else.

In an even more nefarious example, the New York Times recently ran a story about cars having “Machine to Machine” boxes installed in them which would allow a lender to shut off the car’s engine at any time if the borrower failed to make payments on their loans.

All of these examples will require the property rights of custody, possession, and most importantly, control to be tested in our court system. Someday soon, this test may even be taken to the Supreme Court.

When you stop and think about it, it’s astounding how delicately our society is held together by property rights. The Internet of Things has the potential to change everything from how we buy things to how we use things and everything inbetween.

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