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Clifford Chance

Clifford Chance

Real estate

Talking Tech

Digital Twins: Legal Considerations

Proptech Internet of Things 23 February 2023

Demand for precise virtual modelling of real-world assets is gaining momentum, especially in the construction industry. What legal risks and challenges should companies expect to face? 

A digital twin is an exact virtual model of a real-world asset which enables interaction with that asset, be it a physical object (such as a building or jet engine), a system (such as a piece of computer networking architecture) or a process. Digital twins can operate at several levels of digital transformation, with more sophisticated twin models integrating both historical and live data collected from sensors and can be updated in real time.

Digital twins in business

Digital twins have traditionally been used in the manufacturing and automotive sectors (such as refining Formula 1 car racing). Recently, improvements in Artificial Intelligence and the Internet of Things have led to the uptake of digital twins in other sectors.

A recent large-scale example occurred in Singapore, which, just last year, completed the world's first digital replica of its entire country; intended to generate terrain and obstacle maps, model solar energy rollouts, and aid future 5G deployment.

The market for digital twins was estimated at US $6.9 billion in 2022 and is expected to jump to US $73.5 billion by 2027 as prominent tech giants such Microsoft, Siemens, Amazon Web Services and Oracle showcase the benefits of this technology across a range of sectors.

In the construction industry, where Building Information Modelling (BIM) is often used to visualise the design and construction of an asset, digital twins are primed to step in as a next-stage asset management tool that could automatically track and represent changes to a build over time. This has the potential to drive the construction software market, currently estimated at upwards of $10 billion, even higher.

Tech company Get-Tech Innovative Solutions has estimated US$280 billion in cost benefits by 2030 from using digital twins technology for more efficient urban planning, as well as a 35% cut in maintenance and operating costs. In an industry with an estimated $1.6 trillion in inefficiencies, the financial benefits of digital twins to construction cannot be overlooked. Governments are already responding – Infrastructure Australia is targeting 100% of federal government-funded projects incorporating a digital twin within the next 10-15 years.

A recent private enterprise example is Los Angeles' Sofi Stadium, for which a digital twin of both the stadium and the surrounding 300-acre mixed-use developments was created. The digital twin has been used for a variety of purposes, such as quickly checking the 3D dimensions of a particular space to coordinating general management and operations of the precinct.

What are the benefits of digital twins?

Digital twins offer numerous benefits including:

  • Efficiency: setting up data input processes for a digital twin model can reduce, optimise or streamline existing processes. Being able to remotely view and analyse an asset's performance also reduces the need to devote time to other time-consuming modelling methods (such as photogrammetry) and reduces the need for in-person site visits and the associated expenditure of resources.
  • Accuracy: the option to monitor an asset through its digital twin in real-time means that users can pinpoint areas for attention in a short period of time. Risk assessments and future planning can be made using the most up-to-date information possible. Historical data regarding the state of an asset as a chosen point in time can also be retrieved.
  • Optionality: Digital twins can be set up to perform different functions. For example, while some may only passively reflect the state of the physical asset, others can be programmed to make changes to the asset to keep it in line with agreed parameters (for example, influencing a cooling system to keep a building at a set temperature). This means digital twins can offer bespoke solutions for specific end-use industries.

In the construction industry, these benefits translate to efficient monitoring and management of a building or complex.

Digital twins and legal considerations

As digital twins grow in popularity and the regulatory framework around their use develops, businesses should be conscious of the risks involved in establishing and maintaining a digital twin. In particular, businesses should consider:

  • Cybersecurity: as dense collections of sensitive data, both the digital twin and its storage (as well as the transmission function between the two) should be kept highly secure using secure networks and encryption to ensure compliance with applicable laws and regulations.
  • Modelling Risk: clear protocols regarding checking the accuracy of data collection for the digital twin are critical, as inaccuracies could lead to incorrect modelling and wrong decisions being made in reliance on this incorrect model, with potentially serious (and costly) legal consequences. There should also be careful consideration of who will be able to access various branches of the data and for what purpose, be it for data integration, monitoring, quality control or otherwise, and the duration of same, including any good faith exclusions.
  • Intellectual Property: it is important for businesses to consider and clearly establish at the outset who will own what parts of a digital twin through intellectual property rights or otherwise. In addition, businesses should consider whether the digital twin will contain copyrighted information that needs to be licensed with a sufficient life for the project or build.
  • Allocation of Risk: ownership and licensing have knock-on effects for liability in relation to the digital twin, including for companies and individuals contributing to data input and for those responsible for ensuring accurate flow of data, or representing the data is accurate. Businesses should consider these points at the outset and consider how they will account for possible issues such as software or sensor.
  • External obligations: as the regulatory framework around digital twins evolves, businesses may be subject to expectations regarding the setup and use of their twin. For example, the Gemini Principles used for the UK's digital framework task group set out principles such as the need for clarity of purpose, quality and effective function when setting up digital twins.

Closing remarks

As digital twins continue to grow in popularity across a variety of industries, including the construction industry, businesses should be conscious of and mitigate the legal risks associated with their use.