By Roger Royse
The Future of Autonomous Vehicles (AV) may be thought of as a capability that requires a large combination of technologies, which can be broken down generally by function into perception (imaging, LIDAR, RADAR, acoustical), navigation (GPS, guidance, beacons), vehicle specific (engine functions, fuel monitoring), communications (remote access, beacons, traffic and location, internet), and vehicle control (steering, acceleration, functions). That combination of technologies requires a variety of legal protections, such as patents, trade secrets and design patents. In addition, AV technology will generate and use vast amounts of data, raising interesting legal issues around data ownership, privacy and security.
The data issues implicate novel legal and policy issues that depend on the data gathered and how it is used. Federal privacy law includes the Drivers Privacy Protection Act, which limits disclosure of motor vehicle records. 18 U.S.C. § 2721. The Electronic Communications Privacy Act may protect against interception of a vehicle’s stored electronic communications. 18 U.S.C. § 2701. And the Federal Communications Act requires telecommunications carriers to protect the confidentiality of proprietary information of customers. 47 U.S.C. § 222. Because there is no pre-emptive federal law of data, each manufacturer must consider the laws of all 50 states and the local laws of each political subdivision. Some states, such as California, have been very willing to regulate the privacy space. California Consumer Privacy Act of 2018, Cal. Civ. Code §§ 1798.100-1798.199 (West).
AV tech implicates US export control laws, which are designed to protect national security, promote US industry and permit international trade. Export controls regulate the provision of US goods to foreign countries through Export Administration Regulations (EAR) and International Traffic in Arms Regulations (ITAR). 15 C.F.R. § 736.2; 22 C.F.R. §126.1. Export controls are enforced through an item based classification system and end user controls. For example, the US strictly controls the export of geospatial imagery technology, obviously an important part of AV. The controls vary not only based on the tech, but also based on the destination countries. The export control rules apply to intangible technology and physical products, so an entrepreneur might be subject to export control by sending an email containing technical information.
The United States is a leader in funding AV development, but China has greatly increased its funding of AV in 2020. Because the United States and China are the leaders in developing artificial intelligence and investment in AI, AV companies must be aware of the Foreign Risk Review Modernization Act of 2018 (FIRRMA), which expanded the scope of inbound foreign investments subject to review by CFIUS, the Committee on Foreign Investment in the US. FIRRMA, Pub. L. No. 115-232, § 1703(a)(4), 132 Stat. 2173, 2177-78 (2018). FIRRMA also gave the President (through the Department of Commerce) additional ability to restrict the outbound transfer of technology.
One of the most obvious challenges to implementing AV technology is manufacturers liability laws. Two people were recently killed in a Tesla driverless car incident, for example. How will traditional liability laws apply to AV? US manufacturers may be subject to liability for faulty design. In addition, because of the high tech aspect of AV, there is the possibility of hacks and malware. Imagine a ransomware demand to let you out of your car.
Some legal scholars have speculated on whether the artificial intelligence that controls AV cars can be held criminally liable, since they are programmed to make moral decisions in traffic. In one sense, AI might make better decisions, not being subject to road rage (we hope) or emotional decisions. In another sense, can a machine replicate human judgement in the infinite scenarios that will require judgement calls? If an AI program gets it wrong, the law may attempt to impose liability on the individual programmers, which may be difficult given that programmers tend to act as teams. There is precedent for individual and corporate responsibility (recall the exploding Ford Pinto cases) especially if an actor knew that an act was the natural and probable consequence of using a system. See McKinney v. Revlon, Inc., 2 Cal. App. 4th 602, 3 Cal. Raptor. 2d 72 (1992) (manufacturer strictly liable for consumer’s injuries caused by its product due to manufacturer’s inadequate warning of the product’s known dangers).
Despite the potential size and impact of the industry, the federal regulatory agencies have not caught up with the technology. In 2020, the US Department of Transportation (DOT) laid out The Autonomous Vehicles Comprehensive Plan (the “Plan”). U.S. Department of Transportation, Automated Vehicles Comprehensive Plan, Transportation.gov (Jan. 11, 2021), www.transportation.gov/av/avcp. The Plan defined three goals to achieve the DOT’s vision for automated driving systems: (1) promote collaboration and transparency, (2) modernize the regulatory environment and (3) prepare the transportation system. Major industry players, however, are at work self-policing the industry by creating pre-regulatory standards. See Safety, Waymo, http://www.waymo.com/safety (Waymo’s pre-regulatory safety standard set in its Safety Report and Safety Whitepapers); Lora Kolodny, Tesla Starts Using Cabin Cameras to Make Sure Drivers are Paying Attention, CNBC.com (May 28, 2021), https://www.cnbc.com/2021/05/28/tesla-starts-using-cabin-cameras-for-driver-monitoring.html (Tesla switched on driver-facing cameras to make sure drivers are paying attention when using Autopilot). There is still significant work to be done in that sphere.
Increasing amounts of money have been going into AV technology, mostly at later stages and at higher median amounts, suggesting that valuations are high, driven by autonomous driving, connected cars, electric vehicles and smart mobility. Overall, the AV industry has been in flux but still growing. VCs view AV as a high cash-burning business that will not generate revenue soon. In 2020, many AV companies laid off of employees or shut down completely. But AV companies are actively raising large rounds and, after a drop in 2019, and funding has picked up and is expected to grow. Funded companies have also consolidated as the market matures.
Despite the business and legal challenges, AV is on the rebound and promises to be a growth sector and a developing capability.
Roger is a distinguished attorney, author, speaker and partner at haynesboone.com.
See also, an interview of Sebastian Thrun, Co-Founder of Google X and AV pioneer on the American Dreams Show, with host, Alan Olsen.
We hope you enjoyed this article about Autonomous Vehicles. If you have questions or need expert tax or family office advice that’s refreshingly objective (we never sell investments), please contact us, GROCO, or visit our home page at www.GROCO.com. For GROCO Family Office Services or GROCO Family Office Wealth visit our Family office page. For GROCO tax, GROCO Advisory Services, GROCO Consulting Services, or GROCO Consulting/Advisory Services, please contact us here. For GROCO Technology and for GROCO Relationship Services contact us here.
And for our free newsletter, contact us here. Unfortunately, we no longer give advice to other tax professionals gratis.
The post The Future of Autonomous Vehicles first appeared on Advisors to the Ultra-Affluent – Groco.