On Friday, March 3, I attended a conference organized by the Stanford Technology Law Review whose title was “Regulating Disruption.”Foot Note

“Disruption” is intended in the Silicon Valley sense of “innovation.” With only a mild stretch, “regulating disruption” can be parsed two ways:

The disruption of regulation, and
The regulation of disruptive activities.

The two parsings join in at least one place:

Effective regulation of disruptive activities will require disrupting regulation.

Digging into this a bit:

Innovative activities can push boundaries, upset relationships, newly expose or aggregate weaknesses, and otherwise cause mayhem.

Innovative activities can be broadly banned, at least in some places and for some time.  But some innovations are genuinely helpful and desired, and some arrive uninvited.

Ideally, a regulatory system would respond rapidly and narrowly to curb the most deleterious effects, and take fuller shape as knowledge of the advantages and dangers accumulates. Regulation would distinguish among different situations and  would respond to “experience.”

The open source community’s iterative system of text sharing can help.  Let’s start with a look at the structure of regulation.  Regulation has layers, including:

  • Quasi global – treaties and community rules such as the EU
  • National – legislation, regulation and precedents
  • Local – like national, and often multi-layered – e.g., state, county, municipality or region, department, city.
  • Trade group or marketplace – membership in an association or market may impose duties, which may be expressed as rules or contracts.
  • Insurers, brokers and others who expect or require conformance.
  • Peer-to-peer agreements and forms – documents “signed” by pairs (or groups) of persons. These are often intermediated by counsel.  Legal departments and law firms nudge transactions into patterns by their forms and expectations.

CommonAccord is addressed to the bottom layer – P2P documents such as contracts, permits, organizational documents. Modularity and reuse as practiced by software developers permits radical improvements in efficiency, transparency and precision. Sharing those materials via git (and GitHub) allows bottom-up quasi-codification that can rise up the chain to wider adoption.  The dynamic is not novel, there are many forms that currently work as quasi-standards, but the new tools can make it radically more efficient, rapid and flexible.

Handling legal text as “prose objects” allows:  i) very efficient use of standards, ii) full flexibility of customization and iii) organic migration of customizations into standards.

In the 19th Century, the common law courts, overwhelmed by the complexities of contract arrangements caused by the industrial revolution, and influenced by economic thinking, declared themselves incompetent to judge the merits of those arrangements and retreated to formalisms such “offer,” “acceptance,” and “plain meaning.” The assumption was that parties were in the best position to judge the fairness and best structure of relationships.  Through experience and diligence, parties in markets would self-regulate. Reality fell short of the theory, in some respects quite substantially.   The consequences of that abstention and wave of innovation are still being worked out in contract practice.

The collaboration methods of the open source software community provide a way to bring reality closer to the theory of parties wisdom embedded in contracts.

Foot Note:  The subtitle of the conference may resolve the dual meanings of the title. The full title is  “Regulating Disruption: Responding to Emerging Technologies” .