Malta: AI, Machine Learning & Big Data 2021

Trends

Artificial intelligence and other forms of innovative technology will continue to shape our ways of life and all sectors of society. Be it health, education, finance, entertainment, or other economic sectors, there is no escaping the disruptive effects of technology. This said, technology is a remarkable enabler which, if implemented appropriately, will reward the efforts made in meeting the various challenges that it poses.

Conscious of the global shift towards a digital economy, Malta has, over the past years, embarked on a number of policies and strategies aimed at placing innovation and emerging technology at the centre of its developmental strategy.

The Malta Digital Innovation Authority (MDIA) was set up in 2018 as the public authority to promote and foster innovative technology by, amongst others, offering a certification system for innovative technology arrangements. This framework, which was originally limited to distributed ledger technology (DLT) and smart contracts, in line with the country's vision of a "Blockchain Island", is being widened to capture other forms of technology, including Artificial Intelligence (AI). Having a public authority that is focused entirely and specifically on infusing trust in technological solutions, through adequate regulation where required, is deemed critical in ensuring that technological solutions and developments will be embraced by what have always been highly regulated sectors, including health and financial services.

It is expected that, over the coming months, a number of schemes and policies aimed at fostering the development of technology and building upon other initiatives and policies that had already been launched, including Malta's AI and Digital strategy, will be launched.

The public policy focus on technology in Malta is supported by a network of other authorities and bodies, each having their own scope and purpose. These include MITA (the public agency tasked with assisting the Government in transforming technology innovations into real business solutions and to provide ICT infrastructure, systems and services to the Government), the Chamber of Commerce and Enterprise (the constituted body that represents businesses in Malta), TechMT (a joint initiative between the Government and the Chamber of Commerce, aimed at providing support to the technology industry and start-ups) and Malta Enterprise (the Government agency that supports businesses through grants and schemes).

Whereas digital policy and strategy seems to be high on Malta's political agenda, the enthusiastic pace has not been matched when it comes to adapting legal principles to the change in realities brought about by technology. Apart from a thorough legislative framework aimed at DLT, which is still to be enacted, there have been few legislative projects that were not egged on by European Union directives or regulations. This said, it is also true that, over the past few years, the EU has legislated rather extensively, and is currently in the process of discussing or adopting laws, on most legal aspects surrounding technological developments; which begs the question whether any Member State will be allowed to legislate on aspects such as ethics and civil liability, any differently from other Member States.

As things currently stand in Malta (and subject to changes at an EU or domestic level over the coming months), there is scope for better and more effective legislation relating to, amongst others, the taking of security over IP assets, in particular computer programs, and liability for actions performed by autonomous machines with no, or limited, supervision. It is a well-known fact that traditional Civil law concepts are not the most adapt to deal with such matters. Similarly, intellectual property laws and data protection principles do not adequately address novel issues coming to the fore through automated generation of inventions or works of art and processing of data, whilst the immense value of big data sets used to train machines is not necessarily sufficiently protected by the trade secrets framework. On the flip side, current competition laws cannot be expected to cater adequately for anti-competitive practices through algorithmic collusion and monopolisation of data sets. Consequently, unless harmonisation of these aspects of law is achieved at EU level, we expect the Maltese legislator to have to provide adequate solutions in the not-so-distant future.

Finally, ethics and the adoption and application of ethical standards in AI development is likely to become more central to policy formation and regulation, in line with the stance taken at EU level.

Ownership/protection

The Intellectual Property law aspects relating to AI-generated works and technical solutions are amongst the most debated in the field of emerging technology.

The Maltese IP office (IPRD) has not issued any guidelines relating to the patentability of AI systems and AI-generated solutions. Neither does Maltese law specifically deal with such matters at this point in time.

The Maltese patent registration system is a registration-based system (as opposed to an examination-based one) and, consequently, it is expected that, if a patent is challenged on the basis of lack of inventive step and excluded subject matter, it would be the Maltese Courts or Patent Tribunal that would have to decide this issue. Guidance will be drawn from the European Patent Office (EPO) and precedents of the UK Courts, except where the two diverge, such as in the instance of "mixed-type inventions" (a term used by the EPO to refer to inventions containing technical and non-technical features).

In terms of inventions made through the assistance of AI solutions, it is expected that the defining point would be the extent to which the invention was made through an automated AI solution. Where the invention is generated by an AI system without human intervention, the invention would not be patentable until and unless the law would specify that ownership to the patent of the AI-generated invention would lie with the designer(s)/creator(s) of the AI system. Such specific laws regulating the ownership of IP generated entirely by automated systems, in particular AI, have to date not been adopted.

In terms of protection, AI, being in the most part code, is protected through copyright under the Copyright Act,¹ where a "computer program" is identified as falling within the definition of a "literary work". In the context of the Copyright Act, the definition of computer programs extends to such programs irrespective of the mode or form of their expression, including those which are incorporated in hardware, interfaces which provide for the physical interconnection and interaction or the interoperability between elements of software and hardware and preparatory design material leading to the development of a computer program, provided that the nature of the preparatory design material is such that a computer program can result therefrom at a later stage.

In order to be eligible for copyright protection as a literary work, a computer program must have an original character and be written down, recorded, fixed or otherwise reduced to material form by an author. Whilst this would not seem to pose any difficulties to the AI code itself, the definition of "author" would seem to exclude the possibility of a fully automated AI-generated literary or artistic work to be copyrightable. This is due to the fact that an author is defined as "the natural person or group of natural persons (including a body of persons) who created the work eligible for copyright".² Naturally, the argument will focus on whether the automated AI was created specifically to produce the results that it did produce and whether, in such a case, the AI was merely a tool in the hands of the "author" and not the "author" itself.

In terms of copyright ownership, both with respect to the AI application itself, as well as any works generated by the AI which (based on the discussion set forth above) would qualify for copyright protection, it is pertinent to note that the Copyright Act defines the term "owner of copyright" as the "author who is first owner, an assignee or an exclusive licensee, as the case may be of, of a copyright and in the case of a collective work, the first owner of copyright shall be the natural or legal person under whose initiative and direction the work has been created".³ Co-ownership would arise where two or more individuals author the literary or artistic work and, in the case of the AI being created by an employee in the course of his employment, the economic rights conferred by copyright shall be deemed to be transferred to the author's employer, subject to any agreement between the parties excluding or limiting such transfer.

An aspect of IP rights that is often overlooked in the academic debate is the all-important and economic effect of commercialising these rights which are deemed to be assets (albeit intangible) of high value. These assets may be used as a form of collateral to raise finance and allow for the further development of the same or other (complementary) assets. This is of particular relevance to start ups that, generally, would have little other means to finance their projects.

The granting of credit and collateral go hand in hand. Underlying most credit facilities supplied by lenders is some form of collateral or "security".

Malta has, over the past decade, maintained its position as a financial hub in the Mediterranean, and the market is very familiar with the traditional requests of lenders to have the credit secured by a general and/or special hypothec attaching to land or real estate. However, the discussion now is whether real estate security will continue to adequately serve Malta's economy and financial sector in a digital and non-traditional future.

To date, Maltese law has not been very accommodating when creating security over intellectual property. This is expected to change in line with Malta's ambitions for a digital economy.

This shift in the way security is granted is perfectly evidenced by the recently enacted Trademarks Act, 2019⁴ and the Trademark Rules 2021⁵ which finally cater, legislatively, for the granting of a trademark by way of collateral. In simple words, a bank can now lawfully accept a valid pledge over trademarks with much less legal uncertainty than was the case prior to these Trademark Rules 2021.

Footnotes

1 Copyright Act, Chapter 415 of the laws of Malta.

2 Ibid.

3 Ibid. article 2.

4 Trademarks Act, Chapter 597 of the laws of Malta.

5 Trademarks Act, Legal 50 of 2021 Trademark Rules.

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