Quantum Leap – heralding a golden age for the tech sector
Quantum computing is a hot topic. Quantum computing startups and university spinouts continue to attract venture capital and private equity investment, whilst countries such as the UK, US, Germany, Japan, and China are engaged in a quantum computing arms race, as they seek to realise its potential and develop capability and expertise which will support the private sector as well as enhancing military and cyber capability.
And, as the technology rapidly develops, some important governance, regulatory and legal issues demand consideration by developers, operators and users of quantum computing. Here Tim Wright, Partner and Co-Leader of the Technology Sector Group, Fladgate LLP discusses.
A quantum decade
At Tech Show London, held at London’s Excel conference centre in mid-March 2023, Nicola Hobson, CEO of IBM UK&I described Automation & AI, and Digitisation, as the two most transformative technologies of our time, however, notably, the phrase used by Nicola to describe where the tech sector is headed was the “quantum decade,” a phrase used to describe what IBM and others see as the next computing revolution, with quantum computing promising exponentially faster speeds for certain classes of simulation, algebraic, and search problems.
Quantum computing is a developing area of computer technology based on the principles of quantum theory. At its current rate of development, quantum computing is likely to have an impact in many areas of our lives in the next few years, with the potential to open up new opportunities in AI, which often involves the combinatoric processing of enormous quantities of data in order to make better predictions and decisions (think facial recognition or fraud detection).
Whilst not all problems are suited to quantum computing, a variety of use cases are emerging, using quantum computing to solve exponentially complex problems across diverse sectors, such as:
- Financial services, e.g., investment portfolio optimisation, algorithmic trading, fraud detection, and pricing of complex derivative products.
- Defence, e.g., war game simulation, supply chains and logistics optimisation, systems and hardware cybersecurity, and intelligence, surveillance, and reconnaissance.
- Life sciences, e.g., drug discovery and development, molecule simulation, and design.
Quantum computing might also be used to solve large optimisation problems such as complex multi-modal logistics routes, distributed energy systems, and engineering simulations, and to enable predictive maintenance of supply chains, buildings, and complex systems.
However, quantum computing is difficult and expensive technology. Quantum computers are very different from the typical desktop computer or even the largest supercomputer based on traditional compute technology – instead they typically resemble a giant chandelier made of copper tubes and wires assembled in a research laboratory.
Looking ahead, buyers of quantum computing power will most likely procure on a quantum as service basis (QaaS), with the service delivered via the cloud, although some users (such as GCHQ and the NSA, as well as some of the biggest investment banks) may want to own and operate the physical machine itself.
The UK plan for quantum
The UK government has set out its mission to become the most innovative economy in the world, with a Science and Technology Superpower agenda which places quantum technology at the heart of its vision alongside 4 other critical technologies – AI, engineering biology, future telecommunications, and semiconductors. This vision is set out in more detail in a recent policy paper, the UK Science and Technology Framework, published on 6 March 2023 by the newly created Department for Science, Innovation, and Technology.
In his recent spring 2023 budget, Chancellor of the Exchequer, Jeremy Hunt, announced that the government will invest £2.5 billion in quantum computing over the next 10 years. This investment, subject to usual business case processes, will start this year and will follow two of the key recommendations of the Future of Compute review, namely building an exascale supercomputer (e.g., a computer capable of 1,000x more speed and power than today's most advanced supercomputers) and establishing a new dedicated AI Research Resource.
The government’s £2.5 billion quantum strategy comprises a new and ambitious quantum research and innovation programme focussed on four main goals:
- Ensuring the UK is home to world-leading quantum science and engineering.
- Supporting businesses through innovation funding opportunities and by providing access to world-leading R&D facilities.
- Driving the use of quantum technologies in the UK.
- Creating a national and international regulatory framework.
Taking over from the current £1 billion National Quantum Technologies Programme, the new 10-year programme aims to create training schemes for scientists, engineers, and technicians while boosting the number of quantum firms based in the UK and attracting others from overseas.
Governance best practice
The World Economic Forum published the first Quantum Computing Governance Principles in January 2022. These principles, which are arranged according to a range of themes, such as privacy, cybersecurity, and sustainability, serve as a global structure for various stakeholders across diverse industries covering a number of areas including transparency, accessibility, non-maleficence, and common good. They also highlight a number of the legal and regulatory issues that will need to be considered when developing and bringing to the market products involving quantum computing.
Legal and regulatory issues
The legal and regulatory framework applicable to, and the type of issues likely to arise in relation to. quantum computing, are only now starting to emerge. Although quantum computers were first proposed in the 1980s, it is only now that we are seeing significant momentum in the field, with some suggesting that full-scale commercialisation is likely by 2027.
Developers and operators of, and investors in, quantum computing (and adjacent disciplines such as quantum sensing) need to navigate across a wide range of existing laws and regulations many of which were designed/developed before current efforts to commercialise quantum computing hence they may not be well suited. In addition, the pace at which legislators and regulators are bringing in new laws and regulations with potential to impact quantum computing is increasing.
Areas of interest (or concern, depending on your point of view) include:
Data protection and privacy
Quantum computing technology has the potential to process vast amounts of data quickly, which could make it a valuable tool for companies handling sensitive or personal data. As such, companies must ensure that they are complying with relevant data protection laws and regulations, such as the General Data Protection Regulation (GDPR) in the European Union and the UK or the California Consumer Privacy Act in the United States and are taking steps to safeguard any personal data that they process.
The technology throws up a wide range of IP issues, including patent protection and infringement, copyright, and trade secrets, licensing and use of open source software.
Quantum computing technology can perform certain types of calculations exponentially faster than classical computers which could enable them to crack encryption keys that are currently considered unbreakable. In addition, the technology itself, which remains in the early stages of development, might be vulnerable to cybersecurity threats such as hacking and data breaches. As with any advanced computing technology, quantum computing systems will require robust security measures to protect against cyberattacks, data breaches, and other forms of unauthorised access or interference.
Under the National Security and Investment Act 2021 the government can scrutinise and intervene in certain acquisitions made by anyone, including businesses and investors, that could harm the UK’s national security. Acquisitions in all sectors are within scope of the Act, meaning they can be called in for scrutiny and, if necessary and proportionate, intervention. Certain acquisitions of entities operating in 17 sensitive areas of the economy (which includes quantum technologies) must be notified and receive approval from the government before they can be completed – known as the ‘mandatory notification regime’. Internal group reorganisations can also be caught by the 2021 Act.
Most countries have legislation in place which controls the export of military-use goods, software, and technology, as well as dual-use items (i.e., items which have a civilian as well as a military use). In the UK, the Export Control Joint Unit is responsible for export control and licensing of both physical items and electronic information, including some quantum technologies, and maintains the UK’s Strategic Export Control Lists made pursuant to various Export Control Orders. Export licences may be required by university teaching and research environments as well as private sector businesses. Similar rules apply in the US, where the Commerce Department is said to be developing new trade restrictions on quantum computing technology, and the US Commerce Department has already blocked exports to China, adding major Chinese tech companies to its investment blacklist in order to protect national security.
Sanctions can be imposed on individuals, companies, or countries, and can target specific goods, services, or technologies, including quantum technologies. In 2018, the US government added several Chinese companies involved in quantum research and development to its Entity List, which restricts US companies from doing business with those entities, on the grounds of national security concerns as the companies were accused of using their quantum research for military purposes. More recently, in response to Russia’s invasion of Ukraine, a number of countries including the US, the EU and the UK have banned the export to Russia and Belarus of various technologies including military, internal repression, dual-use and advanced technologies including quantum computers, high-end electronics, software, sensitive machinery and transportation.
Providers of quantum computing, including where it is delivered on a QaaS basis, will need to carefully consider their terms of subscription and use, taking into account a number of legal and ethical considerations. For example, they should ensure that their customers are not using their service for illegal activities such as hacking, cybercrime, or espionage, as well as ensuring compliance with applicable regulations such as data privacy, sanctions, and export controls.
Liability for results
Finally, companies must consider the potential liability implications of bringing quantum computing products to market. This includes assessing the potential risks associated with their products and taking steps to mitigate those risks, as well as securing appropriate insurance coverage to protect against any legal claims that may arise. One consideration is that because of the way that quantum bits (qubits) work, they are more susceptible to errors than classical bits, since qubits are much more sensitive to their environment and can be easily disturbed by external factors such as noise, temperature, and electromagnetic radiation.
The potential of quantum computing is immense and offers exciting opportunities for businesses across a range of industries, with a burgeoning startup community developing in the UK and mainland Europe. According to Sifted, European quantum startups raised $257 million from venture capital last year, whilst the UK has by far the most startups working on quantum technologies, with around 40 so far, including Oxford Quantum Circuits, Peptone and Oxford Ionics.
As with any new and rapidly evolving technology, regulators look to be playing catch-up as they try to keep pace and to ensure that the risks associated with the technology are effectively managed and the potential benefits realised. Ultimately, as quantum computing’s potential becomes clearer, it is likely that legal and regulatory frameworks will need to be adapted to ensure that the technology is effectively managed and regulated, while still enabling innovation and growth in the industry.