UAVs: A brave new world for businesses

Within a decade, the unmanned aerial vehicle (UAV) industry is expected to employ 15,000 people in Nevada, one of only six states selected by the FAA to serve as UAV testing sites. The creation of this new industry is estimated to have an economic impact of up to $2.5 billion while providing state and local governments with an additional $125 million in tax revenue.

Given the anticipated explosion in UAV activity, the legal implications for businesses looking to enter the market, looking for a piece of the pie, and even uninterested competitors, will be significant. Issues involving intellectual property, insurance coverage, FAA compliance, state and local law compliance, and licensing will dominate this space.

Nevada is on the cusp of a UAV boom and the cusp of new legal implications

The FAA’s absolute restriction on flying UAVs for commercial use is tentatively scheduled to be moderated in the fall 2015 when the FAA plans to release its regulations governing the use of UAVs in the national airspace.

While Nevada’s selection as a leading state in UAV testing places our businesses at the leading edge of the industry, it also creates new legal concerns for our business community. The FAA and Department of Homeland Security are currently working to create UAV regulations focused on aviation safety, which leaves others to legislate on the stickiest of UAV issues—privacy and trade secret concerns. Consequently, Nevada businesses must look to existing tort and intellectual property law to prepare for the use of UAVs in commerce unless, or until, new legislation is enacted.

For commercial businesses, privacy issues involving UAVs have both an offensive and defensive component. Businesses may use UAVs offensively to achieve some business objective. At the same time, businesses exposed to UAVs may need a defensive strategy to protect themselves from UAVs used by competitors. Both approaches require a thorough understanding of the tort and intellectual property laws currently in place and the laws that may be enacted by federal, state, and local governments.

Privacy concerns for businesses utilizing UAV technology

UAV technology inherently relies on data collection and storage to execute tasks. To execute those tasks, UAVs must collect, and sometimes store, data. A basic example is the video transmitted to the flight operator of a drone that delivers packages to a customer’s doorstep. In order for the flight operator to pilot the drone, it must record and relay, in real time, video of the airspace in which the drone is flying. If this airspace includes video of a private citizen’s backyard, is the business operating the UAV violating that citizen’s right to privacy? This scenario is not a plot from a science fiction movie. In fact, it could be a reality in just a few short years. One highly publicized example is the multi-billion dollar company Amazon, which is actively developing a UAV delivery system titled Prime Air. Prime Air’s goal is simple — get a package into the customer’s hands in 30 minutes or less by using UAVs to deliver the packages. Amazon must be prepared to analyze and address these types of legal issues if it intends to implement this program.

Nevada has long recognized the right to privacy both in common law and through the state Legislature’s enacting of privacy statutes. One type of privacy right, germane to the Amazon example above, is an individual’s right to be free of intrusion from others. The individual above could prevail in a lawsuit against the UAV company if the individual could prove that (1) he or she had an actual expectation of seclusion or solitude that was objectively reasonable, (2) the UAV company intentionally intruded upon that seclusion, and (3) the intrusion would be highly offensive to a reasonable person.

Like Amazon, businesses using UAV technology must carefully analyze the legal restrictions placed upon them by torts such as invasion of an individual’s right of privacy. Millions of dollars could be lost in research and development if a Nevada court were to hold that civil law outright bans this type of delivery service because it unreasonably intrudes upon an individual’s right to privacy.

Trade secret concerns for businesses exposed to UAV technology

Businesses that want to use UAVs are not the only entities that must prepare for UAV technology. Even if a business has no plans to use a UAV, it must still understand the legal implications of its competitors’ use of the technology.

For example, Nevada has a thriving mining industry. These companies may soon use UAVs to survey vast uninhabited areas of the state for their next mining operation. Company A uses a UAV to survey a potential mining site in eastern Nevada. During the flight, Company A inadvertently flies the UAV over Company B’s property and records video of Company B testing a secret mining technology. What legal implications arise for Company B from this scenario?

Company B’s mining technology is most likely intended to be a trade secret under Nevada’s Uniform Trade Secrets Act. In order to maintain the trade secret status and protections, Company B must take steps that, under the circumstances, are reasonable to maintain its secrecy. Under normal circumstances, hiding this technology in eastern Nevada and surrounding it with fencing and security would probably be considered reasonable. However, in the age of UAVs, Company B might not have taken sufficient steps to maintain the secrecy from aerial view. If a Nevada court were to agree, then Company A would have broken no laws and Company B’s technology would not receive trade secret protection. In short, UAVs could drastically change the landscape in civil claims for misappropriation of trade secrets and businesses must be prepared to alter the way they maintain their secrecy of their most valuable assets.

A business can never prepare too early

Commercial UAV use could arrive as early as late 2015. While federal, state, and local governments are working diligently to create regulations that will guide businesses on the use of UAV technology, it is anticipated that existing Nevada state law will govern most privacy and trade secret issues in the near term. Changes to business operations may be critical to ensuring the proper use of, or protection against, UAV technology.

Matt Digesti is an attorney with Fennemore Craig Jones Vargas, where he works with business matters including formation, operations and dispute resolution. Reach him at mdigesti@fclaw.com.