It’s a shock to see gasoline routinely priced at over $4 a gallon, the consequence, many think, of ignoring impending scarcity of a limited resource over a long period of time. The same may be true of Internet Protocol addresses (IP addresses), the number strings that identify specific locations on the Internet. How many unique addresses are there in the current 32-bit “address space” in the IPv4 protocol? 4,294,967,296.

That may sounds like a lot, but according to some experts, we may run out of IP addresses fairly soon. A report issued in June by the international Organization for Co-Operation and Economic Development (OECD) urging government action on the subject says we may run out of IP addresses as early as 2010 or 2011, although those early dates are controversial.

Why is this important? Because a shortage of IP addresses may be a drag on bringing new networked services on line.

Each unique location on the external Internet (set aside for the moment the issue of internal networks) requires a unique IP address, so that network traffic can be routed reliably (like each household having a unique telephone number). The explosion in networked services has increased the demand for the allocation of IP addresses, just as the industrialization of China and India has increased the demand for oil. A supply shortage may cause delays and increase costs for emerging technologies.

One solution to the problem is to create more numbers, and there is a way to do that. It involves the adoption of a new Internet protocol, IPv6. This new network communications protocol increases the IP address space to 128 bits, allowing for an increase in unique IP addresses to, say, a mere 340 billion, billion, billion, billion. That should keep us going for a while. And IPv6 is touted as providing a potentially much more secure network environment.

What’s the catch? Implementation of IPv6 imposes costs on network operators, from ISPs to corporations, in the form of new hardware and implementation expenses. While most new networking equipment supports the IPv6 protocol, legacy equipment must be upgraded. And human operators must be upgraded as well. A report presented by academics last month at the Dartmouth Workshop on the Economics of Information Security analyzes the barriers to IPv6 adoption, and points to the steep learning curve as one important barrier to the process.

You may be surprised to learn that at the U.S. Government has actually thought ahead on this issue. In June 2003, the Department of Defense announced a policy requiring purchases of network equipment by the DoD to be IPv6 capable. In 2005 the federal Office of Management and Budget issued a mandate requiring all federal agencies to transition their network backbones to IPv6 by this June. But this means only that IPv6 must be “enabled,” not necessarily actually running on federal agency networks. The Government Accountability Office, which been urging action on IPv6 implementation for some years, reported in June 2006 that overall federal response to the challenges of implementation were seriously lagging. Whether federal agencies are lagging in implementation of the OMB mandate is the subject of debate.

In contrast to U.S. efforts, the China has been on the forefront of IPv6 implementation. “High-Tech” is one of the themes of the upcoming Summer Olympic Games in Beijing, and IPv6 technology is being utilized particularly in the management of the event’s security infrastructure.

So what should you be doing? If you are an attorney involved in technology transactions, at a minimum, become IPv6 aware. You might want to query your clients on the need for representations and warranties on IPv6 capability in technology transactions. And keep your eye on the horizon for legal developments related to IPv6. If the alarmists are right and scarcity of addresses is truly looming, we may see legal disputes over issues such as hoarding of IP addresses, and efforts to create a market for IP addresses, the allocation of which is currently controlled by non-profit corporations.