Working with many leading brands, platforms and retailers in 2021 has left me in no doubt that 2022 will continue to be a year of advanced technological change for the fashion and retail industry. The need to be more socially inclusive, business responsible and environmentally sound are at the top of all board agendas as is taking advantage of new route to market opportunities and exploring new digital worlds.

In this article, I take a whistle-stop look at AI, NFTs and wearables/new materials, and associated legal considerations in 2022. As you’ll see, in each example given, common threads prevail: intellectual property, data and certainty of contract. (Perhaps predictable considerations in an industry that thrives on innovation and creativity.)

It would of course be remiss of me not to mention the Metaverse. Diving headfirst into these multi-dimensional worlds is a must for any fashion brand wanting to engage with new tech-savvy (often Gen-Z) consumers, build new communities and unlock valuable revenue streams.

Gucci’s Executive Vice President of brand and customer engagement, Robert Triefus, neatly put it when he said, “There are more and more ‘second worlds’ where you can express yourself [but] there is probably an underestimation of the value being attached to individuals who want to express themselves in a virtual world with a virtual product, [through] a virtual persona”.

Cliff Fluet has summed up where we are at – and why the Metaverse is the future. Take a look when you can.

AI

While not ‘new’, chatbots, facial recognition, biometrics and a host of other Artificial Intelligence technologies are being utilised by the fashion and retail sector at an increasingly progressive rate. That’s because AI is literally being applied to all aspects of the fashion supply chain – from the sourcing of materials that meet the right standards through to the marketing and sale customer experience.

Of particular interest to the fashion industry is the use of AI for visual recognition / product discovery purposes and the implementation of machine learning. Other examples include:

• Real-time inventory tracking
• Automated wardrobe planning
• Product match technology
• Virtual try-ons and mirrors
• JIT manufacturing

Day to day, when scrolling through Instagram or on a retail platform, it’s easy to forget what is really going on in the background. And that is what is at the heart of AI in fashion: to enhance a customer’s shopping experience on the one hand (the ‘let’s make it easy to buy’ requirement) and to get meaningful data, a boost in sales, accurate forecasting and real-time inventory management, on the other.

But the growing (and important) question is ‘at what cost’?

Apple’s decision in 2021 to require app developers to ask users’ permission to track their activities was certainly a blow (the move has also meant that customer acquisition costs are only going to increase – delivering return on digital marketing spend is, for some, already at an unsustainable level) and it’s unlikely to be the last as privacy regulation continues to dominate concerns with AI.

Data is the powerhouse behind AI. While the technology can be very progressive, there are alarm bells being raised about the amount of data that needs to be processed for the most effective deployment of AI.

There are also concerns more generally about how this exciting use of technology can be effectively regulated. Key issues for legislatures around the world:

• Transparency: how to explain what is happening, and how people react to AI, particularly where individuals are already generally nervous about decisions made by computers.
• Complexity: the challenge around accountability, especially where it is difficult to understand what is going on.
• Unfairness or Bias: how to make sure new technology doesn’t repeat the mistakes we have previously made in society generally.

My colleague Bryony Long has written more on data privacy considerations here.

Now that’s data out the way, what about intellectual property?

The UK Intellectual Property Office in its Open Consultation published in October 2021 said: “Intellectual property (IP) gives researchers, inventors, creators, and businesses the confidence to invest their time, energy and money in doing something new. It underpins economic growth by incentivising investment, safe-guarding assets and enabling the sharing of know-how in technologies like AI.”

You should ask yourself who is the owner of AI creations and what is in fact protectable? And I’m not talking here about who is the owner of the underlying technology (that we know is protectable in most jurisdictions by copyright – in some jurisdictions by patents) but rather the output that the AI technology produces.

The IPO is consulting on three specifics as part of its Consultation (which we hope to have further insight on later in 2022):

1. Copyright protection for computer-generated works without a human author. These are currently protected in the UK for 50 years. But should they be protected at all and if so, how should they be protected?
2. Licensing or exceptions to copyright for text and data mining, which is often significant in AI use and development.
3. Patent protection for AI-devised inventions. Should we protect them, and if so, how should they be protected?

Wearables/New Fabrics

Like AI, wearable tech is not new, but it continues to shift the #fashtech landscape. That’s because big brands continue to invest a lot in tangible technology as they know, despite the rise (and importance of) the Metaverse, we continue to (and always will) need to wear physical products and garments (a human necessity I’m afraid).

Future manufacturing with new age materials has never been more important as the world wakes up to the issues fashion has contributed to the climate crisis. The big challenge is drastically reducing the large-scale use of poor materials and the emissions emitted from the manufacturing process. It’s all very good for a brand to say that they want to reduce emissions but ensuring that their suppliers and manufacturers use renewable energy sources is a real problem (let’s not forget that China and India – global manufacturing players – have only committed to ‘phase down’ rather than ‘phase out’ their use of coal at the recent COP26). That said, any brand looking to invest in and use new (smart) sustainable materials (which have been made with carbon cutting manufacturing processes) will certainly be well-positioned to stand behind their green claims, goals and commitments.

Learn more about greenwashing in fashion here.

To anyone operating in the retail sector or looking to build a digital platform / community, wearable technology (although, at times, gimmicky) continues to play an important part in product discovery and customer engagement. For the fitness market (rich with fashion brands), wearables (fitness trackers, smart watches and heart rate monitors) will be the top trend this year.

The legal challenges arising in respect to wearables and new age materials unsurprisingly centre around data (see earlier thoughts in the AI section). But also:

• Because we are talking about physical products and new materials, in respect of IP, patent protection is a key consideration for any brand looking to protect its technology and put in place a potential licensing structure (look at how successful Gortex has been). Searches of patent registers in 2021 suggest a huge increase in patent applications in respect of wearables and modern materials. Learn more about patent protection considerations in fashion and retail here.
• Another important consideration is the ownership of rights given that wearable technology is often the result of design collaborations and brand tie ups. This needs to be clearly defined at the very start of the relationship to avoid issues at a later date. Think contract contract contract.

NFTs

Morgan Stanley analysts predicted the currently negligible market for luxury NFTs could grow to more than €20 billion by 2030. Who doesn’t want a slice of that pie?

Video games developers are of course early adopters and the collaboration opportunities between developers and fashion houses have proved fruitful (Louis Vuitton and Burberry to name but a few). Nike’s acquisition of RTFKT in 2021 signals their desire (not only to challenge rival Adidas) but to capitalise on the world of virtual fashion. RTFKT is of course experienced in the NFT market - its record-breaking NFT release of virtual sneakers with digital artist Fewocious sold over $3.1 million worth of product in seven minutes.

But don’t be fooled, IP in a digital work or asset context can be complicated – from the rights of the original designer, to the coder, to musicians featuring in the NFT. Think of it as different layers. They all need to be considered and in order to make the NFT available (i.e. to Mint it), you need the rights of all IP rights holders to do so.

Contract and sale terms are also really important lookouts and the big platforms (like OpenSea and Crypto) are driving change with regards to how NFTs are listed and sold. Most are via an auction and the terms are often not negotiable. But key distinctions can be around whether or not the IP is transferred as part of the sale

What you need to really understand is how the NFT is sold and what rights you may have to it afterwards. This is often a key consideration for brand clients wanting to retain a right to use the asset.

A benefit from the way in which many NFTs are sold is that they are effectively ‘smart contracts’ – creating a blockchain record every time the NFT is resold (which allows the original rights holder to benefit in a resale royalty – this is because they often still retain the copyright in the work). But often buyers and sellers are in different jurisdictions around the world and different governing laws may apply – consumer rights around the world vary and this is currently quite unchartered territory. Watch this space. You can learn more regulatory pointers re. cryptoassets here.

2022 will see the convergence of digital tech and digital responsibility – and the law will play a very important part in helping to shape the future of fashion.

By Alan Hunt, Co-founder of The Collective by Lewis Silkin

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