United States: The Coming Of The Drones

Amazon isn't the Only Business That Would Love to Get its Hands on "Octocopter"

Don't look now—hobbyists may already be flying drones in the skies near you, and commercial uses are emerging. The New York Times reported in June that drones have already been put to work gathering news, checking crops for farmers, taking dramatic house photos for real estate agents, even delivering drinks to poolside hotel patrons. Last December, Amazon.com's Jeff Bezos appeared on 60 Minutes to show off drones that could deliver packages to most Americans in just 30 minutes. He said "octocopters" the size of today's model aircraft could be delivering packages to your doorstep in four to five years. "I know this looks like science fiction, but it's not," he told CBS's Charlie Rose.

But all of this is just the tip of the iceberg. Cheaper, greener, nimbler, and potentially safer than aircraft or automobiles, tomorrow's go-anywhere, see-everything drones may soon busy themselves conducting market research, working on security patrols, supervising workers, inspecting damaged infrastructure, monitoring wildfires and tornadoes, carrying relief supplies to disaster areas, or any other job that is "dirty, dangerous, dull, or difficult," according to Michael Toscano, president of the Association for Unmanned Vehicle Systems International, a trade group.

Toscano estimates that drones could become an $82 billion, 100,000-job industry by 2025. The Federal Aviation Administration, for its part, estimates that as many as 7,500 small commercial drones could take to the air by 2018. But there's a hitch: The FAA has declared all commercial drone applications illegal without a special permit. At present, the agency has approved only a handful of these permits.

In the U.S., drones have flown straight into a wall of worry about safety and privacy. Many Americans still know them only as vehicles that spy on (and bomb) terrorists in the Middle East. It's not too early for any business to investigate how to put them to use. But that investigation must be tempered by a realistic assessment of what will be legal, safe, and acceptable to the public.

Better, Faster, Stronger

Search for "drones" online, and you'll find a variety of slick, camera-equipped quadricopters selling for as little as $300. Ankur Mathur of the technology and consulting services firm Accenture says interest in commercial uses has been fueled by three trends:

  •  The rapidly declining cost of the drones and their sensors
  • Their increasing capacity to fly autonomously
  • Their potential to improve on the human eye

Using special cameras, a drone could measure the topology of a farmer's land or sense distressed vegetation, says Mathur, who is a managing director in Accenture's mobility services practice. Or it can visually inspect an aircraft much faster than a human— and then store every detail of the inspection for later review.

But the excitement has been tempered by some scary incidents, like one last March, when a drone nearly collided with a passenger jet over Tallahassee, Florida. The incident highlights a problem, notes Morrison & Foerster partner Bill O'Connor: There are no regulations designed to prevent close calls like this one. In a 2007 policy statement, the FAA prohibited drones from flying in the national airspace without permission from the FAA. But the lack of specific regulations hinders the FAA's ability to enforce the prohibition. The agency's first attempt to fine an individual for commercial drone use was reversed in March by an administrative law judge, who said the FAA lacked the regulatory authority to issue the $10,000 penalty. The FAA has appealed the decision.

Recognizing the economic potential for safe commercial drone use, Congress, in its 2012 FAA Modernization and Reform Act, ordered the FAA to publish regulations for small drones (under 55 pounds) by this past August and for all drones by September 2015. But the agency is behind schedule. As MoFo Tech went to press, the FAA had not proposed a rule for any so-called Unmanned Aerial System—and the proposal itself would merely kick off a public review process that could take 18 months.

The delay increases the risk that the U.S. will lose businesses that design, manufacture, or utilize drones to countries or regions—like Japan or the European Union—with a better developed regulatory environment, says O'Connor, who heads the firm's UAS/Drones Working Group. At the same time, the lack of clarity around regulations and enforcement emboldens drone users to take foolish risks.

Not Over My Backyard

But even if the FAA approved commercial drone use tomorrow, drone operators would confront public fears of being stalked, harassed, or spied on by drones. Nearly every state has considered some form of legislation restricting drone use, says Nathan Taylor, of counsel at Morrison & Foerster, and 16 states have approved laws. Most of the state laws focus on law enforcement—a typical law prevents law enforcement use of a drone to collect information about an individual without a warrant—but seven have broader privacy-related restrictions. Idaho, for example, forbids using a drone to intentionally conduct surveillance on a person or piece of private property.

The fears are not entirely unwarranted. Drones could surreptitiously watch (and listen to) individuals late distances. They could also collect, store, and transmit massive amounts of data. "It's important to keep in mind not only the new drone-specific laws, but more general principles of tort and criminal law that could be extended to drones," says Taylor, of Morrison & Foerster's Privacy and Data Security Group. "Courts could apply principles such as trespass, nuisance, 'intrusion upon seclusion,' and 'public disclosure of private facts' to limit the use of drones."

In late July, news reports said the White House is planning to order the development of privacy guidelines for commercial drones. The National Telecommunications and Information

Administration would develop a set of voluntary best practices in consultation with companies and consumer groups. The guidelines, however, would not supersede state law, Taylor says.

Meanwhile, federal regulators will also have to grapple with data security issues around drones. Last November, two aerospace engineers warned in the pages of Scientific American that "drones' security flaws allow them to be readily hijacked with simple technologies."

Look for Low-Risk Uses

It may be late 2015—or later—before the FAA approves regulations on drone use in the domestic airspace. The FAA's first set of regulations "will allow for commercial operations in low risk, controlled environments," the agency says. In the meantime, several companies have filed for regulatory exemptions. They include film production companies, which see drones as a cheaper, safer alternative to filming with helicopters; farmers, who use them to survey or spray crops; and Amazon. Six of the film companies' exemption requests were granted on September 25. Companies involved in pipeline and power-line inspection and oil-and-gas flue stack inspection are also reported to be considering filing for exemptions.

Now that the FAA has granted the exemptions for film, it is likely that other companies will follow suit. The FAA is also likely to issue exemptions for drone operations in areas that are sparsely populated or owned by the drone operator, O'Connor adds. It may also prefer that drones stay within the pilot's line of sight, Toscano says.

The bottom line? Amazon's dream of self-navigating drones delivering books to New York City penthouses may be years away. But a wide variety of other commercial uses may be just around the corner.

Keywords: drones, FAA, privacy

Mofo Tech Blog - A blog dedicated to information, trend-spotting & analysis for science & tech-based companies

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Morrison & Foerster LLP. All rights reserved

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