LEGAL TESTBED in detail

One research project, many facets

In order to analyze and understand automated business processes in detail, the research and development of the interdisciplinary experimental field incorporates the complementary competencies of all contributors. Learn about LEGAL TESTBED from different points of view:

General project information

Automated contracting between machines is an important prerequisite for securing and increasing the degree of automation in the economy and thus the competitiveness of a company within the framework of Industry 4.0. At the technical level, communication and contract negotiation between machines are already possible. However, the conclusion and execution of contracts by machines raise complex legal and IT security issues that represent an obstacle for companies. As long as these issues remain unresolved, SMEs in particular are uncertain about investing in the new intelligent systems.

For this reason, the German Federal Ministry for Economic Affairs and Energy is funding the application-oriented research project “Industry 4.0 Legal Testbed”, whose goals are to develop a digital test environment for autonomous business processes in Industry 4.0 value networks and to draft recommendations for action on new legal standards for policymakers and companies. Therefore, the project makes a significant contribution to the research, development and innovation of digital technologies in Germany. Based on the results of LEGAL TESTBED, a publication on recommendations for action on new legal standards is planned for 2022. In addition, it is planned to implement an industrial pilot application.

The pilot project “Industry 4.0 Legal Testbed” pursues the task of solving the described problems with the help of the current state of research and progress, so that business processes and contract negotiations between machines are placed on a legally and IT secure foundation and SMEs also increasingly implement Industry 4.0 components in their logistics systems. In this context, the consortium of the research project consists of four consortium partners who contribute to the solution of the challenges with their respective expertise and areas of responsibility. The consortium consists of the following four partners: the Fraunhofer Institute for Material Flow and Logistics IML, the Fraunhofer Institute for Software and Systems Engineering ISST, Saarland University with the Institute for Legal Informatics (IfR), and Ruhr-Universität Bochum with the Horst Görtz Institute for IT Security (HGI). The common goal is the systematic use of the digitalization potential in Germany as a business location with the help of software agents, blockchain technologies, and other Industry 4.0 components to place automated business processes and contract negotiations on a legally secure foundation.

For further information about the consortium of LEGAL TESTBED and about responsibilities of individual consortium partners in the project, please click here.

Properties and features of LEGAL TESTBED

The pilot project “Industry 4.0 Legal Testbed” represents a digital experimental field whose research focus is on the investigation of autonomous and automated business processes and negotiations. In the process, it contains various properties and features that serve to explore the different complexes of topics. As an interdisciplinary research and development project, it ensures a safe environment for and during the testing of autonomous business models.

Logistical scenarios

In order to test LEGAL TESTBED on tangible use cases and to achieve realistic results, two different logistical use cases are designed. These are concrete examples of relevant business transactions that can be used as a starting point for research. The transportation use case deals with the transportation of goods within the EU and examines, analyzes, and evaluates the digital and automated negotiation and execution of a freight contract. In the production use case, automated contract negotiations take place between a customer and supplier, with all parties being represented on the software side by autonomously acting software agents.

Technologies

In the experimental field of LEGAL TESTBED, various technologies are used that enable the realization of automated business processes and that must be managed as well as understood by the company. The focus is on software agents that autonomously negotiate contract parameters among themselves on behalf of the companies, various blockchain technologies because they provide secure data storage for contracts, and smart contracts that ensure automated contract fulfillment and execute the agreed steps.

Approach

The intended approach in the experiments of LEGAL TESTBED is subject to the following procedure: First, the scenario is configured, whereby the use case, the negotiation strategy, goals of the negotiating partners as well as the necessary prerequisites (e.g. budget, available resources, etc.) are determined. Subsequently, a simulation is carried out in which the negotiation, conclusion as well as execution of the contract are simulated and run through. In order to document the results achieved, reports are prepared in which the outcome of the negotiations is recorded and the case-specific details concerning legal security and IT security are being discussed.

Legal security

Legal certainty is an essential principle of our legal system. It is part of the constitutionally guaranteed rule of law in Germany and its theoretical foundations can be traced back to antiquity. The principle of legal certainty essentially encompasses the protection of confidence in the stability of the legal system and the rights and legally protected interests founded in it. In civil legal and economic transactions, every legal subject should be protected in its expectation of the continuity of rights and legitimate interests and, on the basis of this confidence, be able to plan and shape its conduct and establish and manage its legal relations. For contract law, this results in the principle that what has been agreed must be complied with and fulfilled. The principle “Pacta sunt servanda,” which originated in Roman law, cumulates the obligation of contractually bound parties to be faithful to the contract.

The functioning of our economic system presupposes the legal interaction of the parties involved, which is based on trust. Trust is based on the certainty of expectation that contractually based obligations of the parties will be complied with and fulfilled and, in the event of their non-fulfillment, can be asserted and enforced in court.

In a globally networked world economy, new technological developments such as the Internet of Things and blockchain technologies continue to emerge. Thus, the Industry 4.0 megatrends they have triggered are leading to an enormous pressure for transformation to exploit the potentials arising from technological development. The aim is to maintain and expand competitiveness through automation and the associated standardization, speed and increased efficiency.

The technology-driven digital transformation of economic networks and value chains raises a wide range of legal issues. In the absence of practical trials, there is a widespread lack of empirical data. In addition, it has not yet been possible to fall back on specific fundamental decisions by the courts. In order to base the use of computer programs for automated contract negotiations, the use of blockchain technologies for proof of contract conclusion and the automated fulfillment of contractual performance obligations on a secure legal framework, the “Industry 4.0 Legal Testbed” is implementing a legal and technical test environment for Industry 4.0 business transactions in accordance with the strategy and research agenda of the German Federal Ministry for Economic Affairs and Energy (BMWi). The publicly accessible infrastructure developed in LEGAL TESTBED offers legally and technically valid functionalities that enable small and medium-sized enterprises (SMEs) in particular to test business transactions in Industry 4.0 value networks and to address their legally compliant use in their productive business processes.

Based on two use cases “Transport” and “Production”, contract negotiations can be conducted in LEGAL TESTBED using computer programs as so-called software agents. These agents act (partially) autonomously for the users of LEGAL TESTBED and represent the users when concluding contracts. The infrastructure of LEGAL TESTBED enables legally valid negotiations and the legally effective conclusion of the contract. Trust in contract negotiations in classically conducted legal relationships is based, among other things, on personally formed trust in the reliability and lawfulness of the contractual partner and, if necessary, additional safeguards through personal securities or collateral in rem, such as guarantees, land charges or mortgages. In Industry 4.0 business transactions, the parties rely on the holistically designed technical procedures for automated negotiations and conclusion of contracts. Here, LEGAL TESTBED provides the framework for the use of computer programs and helps to conclude fully automated contracts and bring them to execution while minimizing legal risks by means of effective and verifiable machine declarations.

The use of blockchain technology represents an essential element of legally secure documentation of contract conclusions and automated execution of performance obligations. As a decentralized, distributed, cooperatively used data store, a blockchain enables secure data exchange between nodes of peer-to-peer networks. LEGAL TESTBED uses these properties for the tamper-proof storage of the conclusion of the contract and the acts of fulfillment performed within the scope of the contract fulfillment. In order to ensure the binding nature and, in the event of a dispute, the usability in court of the information stored in the blockchain, LEGAL TESTBED defines the functional and cryptographic requirements for the IT-secure use of this technology. Furthermore, LEGAL TESTBED implements the use of computer programs that automatically execute specified acts of performance as so-called smart contracts in a way that offers users as contracting parties an increase in legal certainty. Here, the basis is created for Industry 4.0 actors to establish and expand their legal and economic relationships with elaborated trust profiles, implementing the required automated business processes while minimizing legal risks as well as legal costs. In a public repository, LEGAL TESTBED provides sample contracts and sample clauses, as well as checklists and guides. Through LEGAL TESTBED, all instances of our legal and economic system receive a secure basis for the introduction and use of technologies relevant for value creation in Industry 4.0 cooperation networks, taking into account the legal requirements of compliance with confidentiality, data protection and IT security.

IT security

In the project “Industry 4.0 Legal Testbed”, the Ruhr-Universität Bochum is investigating security aspects in the conclusion and execution of contracts by machines. This is ensured by:

  • Secure application of private and consortial blockchains.
  • Smart Contracts
  • Technical verifiability and technical data protection
  • Secure interfaces for the use of blockchain in Industry 4.0

Secure use of private blockchains

In addition to the well-known and well-studied public (permissionless) blockchains, there are also various implementations of so-called private (permissioned) blockchains, in which only a selected group of users has access to the blockchain. If several participants, companies or organizations participate in these blockchains, it is also referred to as a consortial blockchain. These relatively recent implementations have not yet been adequately studied from a research perspective. Part of this project is therefore to determine how suitable these different implementations are from a security perspective for LEGAL TESTBED.

Smart Contracts

Smart Contracts are used in LEGAL TESTBED for the proof of the conclusion of a contract and the execution of a contract on a private Blockchain, which are to digitally represent and implement parts of legally valid contracts. When executing smart contracts, it must therefore be ensured that only the authorized parties (contracting parties) can execute them, and that the current state of the contract is secured via a consensus procedure. Within the project, currently used procedures for consensus building in private blockchain solutions are investigated.

Technical verifiability and technical data protection

Evidence of the activities of the individual contracting parties and third parties involved is stored in LEGAL TESTBED so that it is available in an unaltered form for judicial and extrajudicial negotiations in the event of a dispute. To this end, the Ruhr-Universität Bochum is investigating which technical measures are necessary to ensure verifiability and data protection. For this purpose, the cryptographic security mechanisms of the blockchain implementations and the individual smart contracts for the conclusion and execution of contracts are analyzed so that the contracts concluded in LEGAL TESTBED are technically incontestable and verifiability can be guaranteed.

Secure interfaces for the use of blockchain in industry 4.0

The test environment of LEGAL TESTBED is an important tool for companies to learn about automatic contract negotiation, contract conclusion and contract execution. For this reason, the Ruhr-Universität Bochum takes care of the safeguarding of the external and internal interfaces already during the development and carries out a risk assessment of the overall architecture. For this purpose, the Ruhr-Universität also develops tools, among other things, to automatically check the interfaces used for blind spots.

Become a part of LEGAL TESTBED

By highlighting legal issues as well as the use of novel technologies, LEGAL TESTBED ensures a reduction of risks in autonomous contract negotiations and thus facilitates the use of Industry 4.0 technologies, especially for small and medium-sized enterprises.

Do you also want your company to benefit from the numerous possibilities and opportunities that arise from participating in the project? Feel free to contact us!

Project Management Office »Industrie 4.0 Recht-Testbed«
rtb-pmo@fraunhofer.de
+49 (0) 231 / 9743- 214

We look forward to cooperating with you!