The opportunities and legal risks of quantum computing

Published Date
May 12, 2023
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Real progress has been made in making quantum computing a reality. How does it work, what are its potential applications, and how might quantum inventions be protected?

How do quantum computers work?

Quantum operates in a completely different way to classical computers, harnessing the properties of quantum mechanics (the interaction between matter and energy at a subatomic level, including via particles such as protons, neutrons, and electrons) to generate vastly superior processing power.

Traditional computers use binary “bits” of data that exist in one of two states (represented by “0” and “1”), and process them using logical operations (e.g. “and”, “not” or “or”) to perform calculations and execute programs. By contrast, quantum computers harness “qubits”, which can simultaneously exist as 0s, 1s, or both 0 and 1. This third state is known as “superposition”, and a quantum computer with several qubits in superposition can process a huge number of calculations at the same time. Qubits can also become “entangled”, meaning the state of one qubit is intrinsically linked to another, no matter how far apart they are (Einstein famously called this “spooky action at a distance”).

The power of a conventional computer has a linear relationship to the number of bits it can process – increase the number of bits and the computer’s capacity will rise in proportion. Quantum entanglement generates exponentially greater processing power through the addition of qubits. As an example, in 2019 a 72-qubit quantum computer performed a calculation in 200 seconds that would reportedly have taken the world’s fastest supercomputer 10,000 years to complete.

What are quantum computers used for?

Quantum computers are exceptionally good at a range of complex operations. These include simulations of particle behavior, optimization problems involving multiple variables, accelerating the training of AI algorithms, and factoring prime numbers (a critical component of encryption).

These capabilities mean quantum computers have colossal potential in areas as diverse as drug discovery, logistics, finance and cybersecurity. Quantum machines can optimize the most complex global supply chains, or analyze huge quantities of agricultural data about the use of water, fertilizers and other inputs to enable farmers to make more efficient and sustainable decisions. In life sciences, quantum computers can simulate how molecules interact with one another with unprecedented accuracy, offering the prospect of dramatically accelerating the time it takes to bring new drugs to market.

They can crunch so-called “Monte Carlo simulations”, calculations that can predict the behavior of financial markets in real-time. They will also transform cryptography - quantum computers can crack the public key encryption systems used to protect data today, but also have the power to generate unhackable communications channels via quantum key distribution, whereby parties agree to encryption keys and then use quantum computers to protect them from interference in transit.

Who is developing quantum computers?

Developing top-end quantum hardware is expensive, and as a result, many of the leading players in the field are the biggest tech companies. The cost comes from the fact that quantum computing is a highly specialized field requiring expertise in various areas, from quantum mechanics to computer science and electrical engineering. Typically, the most powerful quantum computers must also be kept extremely cold to run more qubits. However, smaller machines that can operate at room temperature have emerged in recent years. The qubits have to be isolated from their environment to preserve their quantum properties, which is a major engineering feat. Whether quantum computers will ever be available for mass ownership is, therefore, doubtful – quantum-computing services are more likely to be accessed via the cloud, which is indeed possible today.

What are governments doing in this space?

Governments around the world are investing heavily in quantum computing research and development. The EU for example, has launched several initiatives, including the Quantum Flagship, a 10-year, EUR1 billion research and innovation program, and is developing the European Quantum Communication Infrastructure (EuroQCI), which aims to create a secure quantum communication infrastructure spanning all 27 EU Member States.

The US, too, has enacted several laws and policies to support and regulate quantum technologies, including the National Quantum Initiative Act (launched by President Trump in 2018), which established a federal program to accelerate quantum research and development. Likewise, the Quantum Network Infrastructure and Workforce Development Act of 2021 authorized funding and guidance for quantum internet projects, while a plethora of agencies and bodies have been formed to oversee and coordinate quantum activities, from the National Quantum Coordination Office to the National Quantum Information Science Research Centers and the Subcommittee on Quantum Information Science under the National Science and Technology Council. China, too, is investing heavily in quantum computing research intending to become a global leader in the field.

Quantum technology as a national security concern

Just as with technologies such as AI, quantum computers are “dual-use” systems, meaning they have applications in both commercial and military settings. The U.S. has identified quantum computing as an area of national security concern, with national security advisor Jake Sullivan listing quantum computing as one of the technologies (alongside biotech, clean energy and other systems) the U.S. government is keen to protect over the coming decade.

The Office of Foreign Assets Control (OFAC) has already implemented rules designed to limit the transfer of quantum expertise to strategic adversaries, including Russia, while quantum computers are among the list of emerging and foundational technologies under scrutiny from the Committee on Foreign Investment in the United States. The Biden administration - concerned at China’s advances in the field – has been in discussions with industry leaders about the possibility of imposing broader export controls on quantum hardware and software and providing quantum cloud services to Chinese entities. So-called “deemed exports” are also in the spotlight, whereby the transfer of technology and/or information to Russian or Chinese employees of U.S. businesses could be treated in the same way as a transfer to the countries themselves. Supply chain risk is therefore a genuine concern for business.

The quantum cyber threat

In the U.S., the National Institute of Standards and Technology, or NIST, has launched a process to identify and standardize encryption systems that can withstand attacks from quantum computers. Once this is complete (scheduled to be in 2024), businesses must adapt their cyber protections to these “post-quantum algorithms”, particularly those in industries such as financial services and healthcare that store and process large amounts of sensitive personal information.

From a legal perspective, current privacy and cybersecurity regimes operate on the principle of “reasonable security”; i.e., companies expect to implement appropriate technical and organizational measures to guard their systems from attack based on their understanding of the external threat environment. However, in a world where quantum computers are edging closer to the mainstream, the concept of “reasonable” in the eyes of regulators and the courts may change. Businesses, therefore, need to be aware of developments in quantum technology and understand exactly how their data and that of their supply chain partners is protected. They should ensure they are implementing the most robust measures to depersonalize any data they hold, and potentially update their privacy notices to ensure their “quantum-proofing” actions are visible to the public.

Experts are already concerned about “hack now, decrypt later” attacks.  These are attacks whereby entire systems could be  downloaded and stored in anticipation of a point in the future where quantum processing power is available to break “asymmetric” cryptography that underpins today’s public encryption keys. Failing to quantum-proof cyber protections could expose businesses to legal liability many years into the future.

How can quantum technologies be protected?

Quantum technologies are likely to be protected via a combination of IP rights. Quantum computers consist of qubits, quantum “gates” and “multipliers”, chips, processors, quantum software and a range of other components, including the technology contained within their cooling systems.

Patents – which safeguard novel, useful, inventive and non-obvious creations made by humans – can be deployed to protect technologies developed and embedded into quantum hardware. In contrast, other protections, such as copyright (which requires demonstrating creativity, originality and the presence of a human author), are more suited to protecting software elements on quantum systems.

Quantum algorithms are open source but can also be copyright-protected once converted into source code. It may be possible to patent an algorithm’s technical effect, for example, what it does to the quantum hardware. An output from a quantum computer is intellectual property (i.e. with human intervention either upstream or downstream) similar to source code today. Additionally,, the increasing focus on the national security implications of quantum computers could lead to quantum technologies being classed as state secrets.

There is debate in academic circles about whether existing IP protections extend for too long to foster innovation in such a fast-moving space (copyright for example, extends to the author’s life plus 70 years). In response, the European Commission has proposed a new model for IP protections to “reflect advances in data and AI”, which is currently moving through the legislative development process.

What other risks are possible?

As with any rapidly developing technology, quantum computers can potentially drive a wave of disputes. They promise to turbocharge the evolution of artificial intelligence and machine learning, which could exacerbate existing risks concerning bias and poor outcomes driven by algorithms being used in inappropriate ways, which in turn could generate litigation.

Then there is the ability of quantum computers to break current encryption protocols, potentially exposing health data or commercially sensitive information to cybercriminals. This raises the prospect of a rush of negligence class actions from consumers, commercial disputes between businesses, customers and vendors, and shareholder and securities litigation over the impact of a breach on the business and its stock price. As described above, countries are exploring ways to “quantum proof” security protections, and any company deemed to have not taken reasonable and timely steps to do so could be pursued through the courts by a wide range of stakeholders.

If quantum computers break public encryption keys, it could threaten the viability of entire digital ecosystems. Distributed ledgers are underpinned by the same public encryption keys that secure internet servers, meaning any quantum-driven breach would put billions of dollars of cryptocurrencies at risk and spark a blizzard of litigation. Likewise, digital signatures – which in countries including the U.S. are used to execute contracts in the same way as a handwritten mark – are also protected by these keys, and anything that threatens their security has the potential to generate a vast number of commercial claims.

As more quantum-related patents are filed and technologies emerge as standards, we can expect a rise in patent litigation over potential infringements and licensing terms. We may see an uptick in antitrust suits as parties test whether IP rights have a chilling effect on competition and/or innovation. Privacy issues will not be far behind. As we see with today’s dialogue regarding AI, quantum will be the next hot topic.

Quantum computers have the potential to drive a wave of disputes. They promise to turbocharge the evolution of artificial intelligence and machine learning, which could exacerbate existing risks which in turn could lead to litigation.

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This content was originally published by Allen & Overy before the A&O Shearman merger