Practice Tip: Intelligent Cars

There is a reason the magazine is titled Car and Driver ' the two have always gone together. But that might be changing. Recent technological advances are allowing the car industry to consider a shift away from the need for a driver because of increasingly intelligent and connected vehicles. Increases in intelligence and connectivity also provide new opportunities for cars to interact with consumers' mobile devices. As many companies evaluating this issue likely will turn to their product liability counsel for help with initial issue spotting, this article briefly surveys the major legal challenges likely to be faced during this evolution in several key areas: 1) product liability and insurance; 2) standardization; and 3) intellectual property. First, however, we consider some highlights of this rapidly evolving technology.

Overview of Intelligent Car Technology

Google's foray into driverless cars has been widely covered by the press ' from Google's successful push for legislation permitting use of autonomous cars (first in Nevada, and now expanding to other states), to its recent announcement of a fleet of 100 prototype driverless cars, to publicity over a patent that envisions services such as ad-supported, autonomous taxis. Additionally, major manufacturers are developing features that reduce a driver's need to control a vehicle directly ' at least in certain conditions. For example, several major manufacturers have released or announced cooperative-adaptive cruise control that uses data from vehicle-to-vehicle communications to maintain a safe, uniform following distance. These systems can also improve fuel efficiency by reducing unnecessary acceleration and deceleration. Another possibility under consideration uses this type of system to convoy vehicles together automatically. Many other automated features like lane tracking aids, blind spot assistance, and automatic parking are becoming increasingly available and, in some cases, aggressively marketed.

Intelligent collision avoidance and safety systems are also expanding. Pioneering systems in this field have for years been able to sense certain types of imminent collisions and take proactive measures like pre-tensioning seat belts and applying braking force more quickly. Newer systems now aim to avoid some collisions altogether. For example, some manufacturers are providing systems that can apply a car's brakes automatically, at least at low speeds, to avoid certain types of potential collisions. Even before these recent developments, systems like antilock braking and electronic stability control have long been augmenting a driver's ability to respond to hazards.

Future systems aim to provide even more collision avoidance at higher speeds, and in more complex situations. Potential solutions may be purely autonomous ' relying on the vehicle's own sensors and processing ' or use vehicle-to-vehicle (V2V) communications to sense other vehicle's locations.

V2V Communications

This potential for improved safety from V2V communications safety has captured the attention of federal officials. In February 2014, the Department of Transportation (DOT) announced its intent to take “steps to enable [V2V] communication technology for light vehicles” in order to improve safety by exchanging “basic safety data, such as speed and position, ten times per second.” This followed on a DOT pilot program in Ann Arbor, MI, involving nearly 3,000 vehicles with V2V technology. The agencies working on analyzing V2V technology include the National Highway Traffic Safety Administration (NHTSA) and the Federal Highway Administration (FHA). In August 2014, NHTSA released another report regarding “Readiness of V2V Technology for Application,” that further elaborates on the strong interest in, and assessment of, V2V technology.

Smartphones

The growing connectivity of vehicles, however, is not limited to V2V communication. More than 60% of Americans are now smartphone owners, and 4G cellular networks can provide high-speed data connections even to phones moving at freeway speeds. As more people rely on smartphones for more services, there is a major opportunity to provide expanded services to vehicle occupants, provided that it is done safely.

There are competing theories of how to deliver better hands-free and console-based services in a car. In a traditional approach, each car manufacturer provides its cars' information and entertainment systems, in their entirety. This is being challenged, however, by those who want cars to offer an open platform to which portable computing devices can connect to run applications. One example is the MirrorLink standard developed by the Car Connectivity Consortium. MirrorLink “mirrors” a mobile device's interface onto a console display, albeit with certain interface restrictions to encourage safe driving, so that its applications may be used through the car's controls.

Another approach involves phone manufacturers and software developers providing their own platform for integrating mobile devices with vehicles. For example, Apple is promoting CarPlay, designed to integrate iOS devices with selected, forthcoming car models. Google, meanwhile, is promoting the Open Automotive Alliance, an industry alliance aimed at bringing the Android platform to cars.

Smart mobile devices and applications, which tend to have faster upgrade and development cycles than cars, can thus increase the range of available services. This requires the car's manufacturer, however, to give up some degree of control over how occupants interact with its systems.

All of these developments are linked by threads of increasing connectivity and intelligence. New vehicle designs are steadily improving the ability to sense, communicate with, and respond to, the world around them. Meanwhile, users want to be ever more connected at all times. These trends will raise many legal issues for businesses.

Product Liability and Insurance

One counterintuitive concern about driverless cars is that, as great as the technical challenges may seem, the legal and financial challenges may prove to be at least as serious. Replacing a driver with a more reliable, automated system might seem at first to be a clear benefit for all involved. Studies often place the rate of driver error in causing accidents above 90%. For example, a 2001 NHTSA study concluded that driver error caused or contributed to 99% of accidents. So, if car manufacturers can replace a driver with something safer, would it make sense for them to do so? The answer may not be so simple.

Even if technology can do better than a human, there may be serious financial and legal obstacles to its adoption. Currently, liability in most auto accidents rests with at least one of the drivers. That liability is, in turn, borne largely by a highly regulated system of insurance with mandatory coverage requirements controlled at the state level. As manufacturers take on greater degrees of control from the driver, they could also take on greater risk of sharing liability. This potential shift from drivers to manufacturers (and suppliers who indemnify the manufacturers), poses a risk of discouraging the adoption of technology that may otherwise provide safety benefits. This leads to a host of complex legal, regulatory, and business questions, such as:

• To what extent will an individual's insurance policy cover an accident caused by a failure of an automated driving system? What about a crash caused by combined action of the driver and the system?
• How do we assess the relative responsibility between the driver and automated systems? Are such questions too complex to warrant the cost of most litigation? Should any presumptions or default rules be put into place to streamline assessment of liability in typical cases? Are existing rules of contributory/comparative negligence sufficient to analyze these situations?
• Should manufacturers/suppliers be responsible to insure automated driving systems? If so, how will that be regulated ' e.g. , at the state or federal level? Could such insurance replace existing forms of mandatory auto insurance or merely supplement them?
• How should autonomous driving systems be approved and monitored? Do they need some new kind of “driver's license” or other regulatory approval? Will they require some type of regulated inspection/maintenance regime?
• Can alternative forms of insurance regulation/liability rules spur adoption of safer technology? For example, might some form of expanded no-fault coverage simplify challenges in dealing with insurance for increasingly automated vehicles?

Beyond these questions of managing liability and risk, any legislative or regulatory framework intended to manage increasingly intelligent and connected vehicles may need to consider related questions, such as:

• To what extent should a manufacturer allow third parties access to display apps/services on its in-car systems? Should this be open/standardized or proprietary? For example, too much openness may create liability risk, while leaving a car's systems inaccessible to mobile devices may cause the car to lose appeal and fall behind in the marketplace.
• Should V2V communication capability be mandatory? If so, should it be regulated by the government, determined by industry standardization, or perhaps some hybrid model of government/private collaboration?
• Should vehicle systems be required to keep data to assist with accident assessment? Will this run afoul of privacy concerns ' whether legal or cultural? To what extent should insurance companies be able to use additional data available to monitor drivers and adjust rates?
• What about the risk of malicious interference with automatic driving systems? Does a manufacturer have any responsibility to protect its systems from hacking/intrusion?

These are not just abstract legal considerations. One possible disruption, if new technology delivers on the promise of increased safety, could be a change in the need for automotive liability insurance. Insurance companies may need to innovate and adapt quickly to maintain revenues and market share.

Businesses should also be arming themselves to protect against litigation challenges that may arise against new technologies. Even the best innovations carry a risk that someone will accuse the innovation of causing harm. At some point, large businesses will likely attract litigation alleging product defects, whether justified or not. Some of this risk can be avoided by managing public perceptions. Fear of a technology and its consequences can result in litigation that is very costly to defend, even if there is no underlying fault. But litigation risk cannot be eliminated altogether, and both vehicle manufacturers and their technology suppliers must prepare for lawsuits challenging any designs that take control over the driving process.

Standardization

As cars become increasingly intelligent and connected, the need for standardized interfaces between products is likely to grow ' such as the DOT's promotion of V2V communications or standards like MirrorLink, CarPlay, and the Open Automotive Alliance. Participation in standardization work should be undertaken only with a thorough understanding of its legal implications.

A common question faced by standard setting bodies is how to deal with intellectual property rights implicated by the standard. Creating a standard can increase the risk that the holder of a patent covering part of the standard will demand excessive royalties or otherwise frustrate adoption of the standard. Thus, many standard setting bodies require licensing commitments from participants, and their implications should be considered carefully before becoming involved. One approach is to require member companies to make licenses available to practice the standard for no more than a “fair, reasonable, and non-discriminatory royalty” (a so-called “FRAND” commitment). Some groups even require a royalty-free licensing commitment from their members. Standard setting bodies may also require members to provide certain disclosures about the nature of their intellectual property related to the standard and related licensing commitments. Businesses often agree to these terms because the benefits of the standard and the reciprocal rights received outweigh the value of the rights surrendered. But these commitments should not be undertaken lightly.

Another area to monitor when participating in standards set by these entities is antitrust compliance. Work on standards will not necessarily create any antitrust issues because standardization often provides important, pro-competitive economic benefits. For example, improving vehicle safety through V2V communications might not become possible but for standardization. Nevertheless, businesses should keep a watchful eye on any standards group in which they participate to ensure that the group does not stray into behavior that creates risks of antitrust liability. The antitrust issues surrounding standardization are complex and not quickly summarized here, but some signs of possible concern include: 1) attempts to set prices or other financial terms; 2) activity that seeks to block an entrant to the market or otherwise stifle competition; and 3) other collaboration that is not for purposes of the standard under consideration.

Intellectual Property

Intellectual property should be an important element of the strategy for any emerging technology, whether automotive or otherwise. For cutting-edge developments, patents are likely to be of foremost concern. Whether large or small, patent rights provide innovative companies with important benefits. For large businesses, patents provide opportunities to seek licensing revenues, deter lawsuits from competitors, and exclude others from using patented technology. In addition to these benefits, growing companies often find that investors require a clear intellectual property strategy and commitment to securing patent rights. A solid patent portfolio, and even pending applications, can add significantly to a growing company's valuation. Patents also can give expanding companies an important hedge against the risk that a new product or service will not succeed as expected. For example, even if a company is unable to achieve its goals for direct sales, it might create a licensing revenue stream from other businesses better positioned to provide products or services using its technology.

A business's intellectual property strategy should not, however, be limited to patents. Software is likely to play an increasingly important role in the vehicle technologies discussed here, and copyright and other legal considerations surrounding use, creation, and licensing of software must be carefully managed. For example, businesses may face challenging questions about whether to keep their software entirely proprietary or to make use of open source materials and development models. While open source may not have been common in the automotive industry thus far, the potential for standardized interfaces to play an increasingly important role (e.g., V2V communications or open interfaces to car consoles) may cause the role of open source software to be revisited.

Also, as new technologies lead to new branding and marketing opportunities, businesses should carefully guard the distinctive features of their products and services through mechanisms like trademarks and design patents.

Conclusion

The years and decades ahead will be an exciting time for the automotive industry in which we may see fundamental changes in the nature of what vehicles can do and how people interact with them. Businesses that take a proactive, innovative approach to managing the legal issues discussed here will put themselves in a better position to make the most of these developments.

Josh Becker, a member of this newsletter's Board of Editors, is a partner with Alston & Bird LLP, andfocuses his practice on mass tort and product liability litigation. Byron Holz is a senior associate with the firm.

There is a reason the magazine is titled Car and Driver ' the two have always gone together. But that might be changing. Recent technological advances are allowing the car industry to consider a shift away from the need for a driver because of increasingly intelligent and connected vehicles. Increases in intelligence and connectivity also provide new opportunities for cars to interact with consumers' mobile devices. As many companies evaluating this issue likely will turn to their product liability counsel for help with initial issue spotting, this article briefly surveys the major legal challenges likely to be faced during this evolution in several key areas: 1) product liability and insurance; 2) standardization; and 3) intellectual property. First, however, we consider some highlights of this rapidly evolving technology.

Overview of Intelligent Car Technology

Google's foray into driverless cars has been widely covered by the press ' from Google's successful push for legislation permitting use of autonomous cars (first in Nevada, and now expanding to other states), to its recent announcement of a fleet of 100 prototype driverless cars, to publicity over a patent that envisions services such as ad-supported, autonomous taxis. Additionally, major manufacturers are developing features that reduce a driver's need to control a vehicle directly ' at least in certain conditions. For example, several major manufacturers have released or announced cooperative-adaptive cruise control that uses data from vehicle-to-vehicle communications to maintain a safe, uniform following distance. These systems can also improve fuel efficiency by reducing unnecessary acceleration and deceleration. Another possibility under consideration uses this type of system to convoy vehicles together automatically. Many other automated features like lane tracking aids, blind spot assistance, and automatic parking are becoming increasingly available and, in some cases, aggressively marketed.

Intelligent collision avoidance and safety systems are also expanding. Pioneering systems in this field have for years been able to sense certain types of imminent collisions and take proactive measures like pre-tensioning seat belts and applying braking force more quickly. Newer systems now aim to avoid some collisions altogether. For example, some manufacturers are providing systems that can apply a car's brakes automatically, at least at low speeds, to avoid certain types of potential collisions. Even before these recent developments, systems like antilock braking and electronic stability control have long been augmenting a driver's ability to respond to hazards.

Future systems aim to provide even more collision avoidance at higher speeds, and in more complex situations. Potential solutions may be purely autonomous ' relying on the vehicle's own sensors and processing ' or use vehicle-to-vehicle (V2V) communications to sense other vehicle's locations.

V2V Communications

This potential for improved safety from V2V communications safety has captured the attention of federal officials. In February 2014, the Department of Transportation (DOT) announced its intent to take “steps to enable [V2V] communication technology for light vehicles” in order to improve safety by exchanging “basic safety data, such as speed and position, ten times per second.” This followed on a DOT pilot program in Ann Arbor, MI, involving nearly 3,000 vehicles with V2V technology. The agencies working on analyzing V2V technology include the National Highway Traffic Safety Administration (NHTSA) and the Federal Highway Administration (FHA). In August 2014, NHTSA released another report regarding “Readiness of V2V Technology for Application,” that further elaborates on the strong interest in, and assessment of, V2V technology.

Smartphones

The growing connectivity of vehicles, however, is not limited to V2V communication. More than 60% of Americans are now smartphone owners, and 4G cellular networks can provide high-speed data connections even to phones moving at freeway speeds. As more people rely on smartphones for more services, there is a major opportunity to provide expanded services to vehicle occupants, provided that it is done safely.

There are competing theories of how to deliver better hands-free and console-based services in a car. In a traditional approach, each car manufacturer provides its cars' information and entertainment systems, in their entirety. This is being challenged, however, by those who want cars to offer an open platform to which portable computing devices can connect to run applications. One example is the MirrorLink standard developed by the Car Connectivity Consortium. MirrorLink “mirrors” a mobile device's interface onto a console display, albeit with certain interface restrictions to encourage safe driving, so that its applications may be used through the car's controls.

Another approach involves phone manufacturers and software developers providing their own platform for integrating mobile devices with vehicles. For example, Apple is promoting CarPlay, designed to integrate iOS devices with selected, forthcoming car models. Google, meanwhile, is promoting the Open Automotive Alliance, an industry alliance aimed at bringing the Android platform to cars.

Smart mobile devices and applications, which tend to have faster upgrade and development cycles than cars, can thus increase the range of available services. This requires the car's manufacturer, however, to give up some degree of control over how occupants interact with its systems.

All of these developments are linked by threads of increasing connectivity and intelligence. New vehicle designs are steadily improving the ability to sense, communicate with, and respond to, the world around them. Meanwhile, users want to be ever more connected at all times. These trends will raise many legal issues for businesses.

Product Liability and Insurance

One counterintuitive concern about driverless cars is that, as great as the technical challenges may seem, the legal and financial challenges may prove to be at least as serious. Replacing a driver with a more reliable, automated system might seem at first to be a clear benefit for all involved. Studies often place the rate of driver error in causing accidents above 90%. For example, a 2001 NHTSA study concluded that driver error caused or contributed to 99% of accidents. So, if car manufacturers can replace a driver with something safer, would it make sense for them to do so? The answer may not be so simple.

Even if technology can do better than a human, there may be serious financial and legal obstacles to its adoption. Currently, liability in most auto accidents rests with at least one of the drivers. That liability is, in turn, borne largely by a highly regulated system of insurance with mandatory coverage requirements controlled at the state level. As manufacturers take on greater degrees of control from the driver, they could also take on greater risk of sharing liability. This potential shift from drivers to manufacturers (and suppliers who indemnify the manufacturers), poses a risk of discouraging the adoption of technology that may otherwise provide safety benefits. This leads to a host of complex legal, regulatory, and business questions, such as:

• To what extent will an individual's insurance policy cover an accident caused by a failure of an automated driving system? What about a crash caused by combined action of the driver and the system?
• How do we assess the relative responsibility between the driver and automated systems? Are such questions too complex to warrant the cost of most litigation? Should any presumptions or default rules be put into place to streamline assessment of liability in typical cases? Are existing rules of contributory/comparative negligence sufficient to analyze these situations?
• Should manufacturers/suppliers be responsible to insure automated driving systems? If so, how will that be regulated ' e.g. , at the state or federal level? Could such insurance replace existing forms of mandatory auto insurance or merely supplement them?
• How should autonomous driving systems be approved and monitored? Do they need some new kind of “driver's license” or other regulatory approval? Will they require some type of regulated inspection/maintenance regime?
• Can alternative forms of insurance regulation/liability rules spur adoption of safer technology? For example, might some form of expanded no-fault coverage simplify challenges in dealing with insurance for increasingly automated vehicles?

Beyond these questions of managing liability and risk, any legislative or regulatory framework intended to manage increasingly intelligent and connected vehicles may need to consider related questions, such as:

• To what extent should a manufacturer allow third parties access to display apps/services on its in-car systems? Should this be open/standardized or proprietary? For example, too much openness may create liability risk, while leaving a car's systems inaccessible to mobile devices may cause the car to lose appeal and fall behind in the marketplace.
• Should V2V communication capability be mandatory? If so, should it be regulated by the government, determined by industry standardization, or perhaps some hybrid model of government/private collaboration?
• Should vehicle systems be required to keep data to assist with accident assessment? Will this run afoul of privacy concerns ' whether legal or cultural? To what extent should insurance companies be able to use additional data available to monitor drivers and adjust rates?
• What about the risk of malicious interference with automatic driving systems? Does a manufacturer have any responsibility to protect its systems from hacking/intrusion?

These are not just abstract legal considerations. One possible disruption, if new technology delivers on the promise of increased safety, could be a change in the need for automotive liability insurance. Insurance companies may need to innovate and adapt quickly to maintain revenues and market share.

Businesses should also be arming themselves to protect against litigation challenges that may arise against new technologies. Even the best innovations carry a risk that someone will accuse the innovation of causing harm. At some point, large businesses will likely attract litigation alleging product defects, whether justified or not. Some of this risk can be avoided by managing public perceptions. Fear of a technology and its consequences can result in litigation that is very costly to defend, even if there is no underlying fault. But litigation risk cannot be eliminated altogether, and both vehicle manufacturers and their technology suppliers must prepare for lawsuits challenging any designs that take control over the driving process.

Standardization

As cars become increasingly intelligent and connected, the need for standardized interfaces between products is likely to grow ' such as the DOT's promotion of V2V communications or standards like MirrorLink, CarPlay, and the Open Automotive Alliance. Participation in standardization work should be undertaken only with a thorough understanding of its legal implications.

A common question faced by standard setting bodies is how to deal with intellectual property rights implicated by the standard. Creating a standard can increase the risk that the holder of a patent covering part of the standard will demand excessive royalties or otherwise frustrate adoption of the standard. Thus, many standard setting bodies require licensing commitments from participants, and their implications should be considered carefully before becoming involved. One approach is to require member companies to make licenses available to practice the standard for no more than a “fair, reasonable, and non-discriminatory royalty” (a so-called “FRAND” commitment). Some groups even require a royalty-free licensing commitment from their members. Standard setting bodies may also require members to provide certain disclosures about the nature of their intellectual property related to the standard and related licensing commitments. Businesses often agree to these terms because the benefits of the standard and the reciprocal rights received outweigh the value of the rights surrendered. But these commitments should not be undertaken lightly.

Another area to monitor when participating in standards set by these entities is antitrust compliance. Work on standards will not necessarily create any antitrust issues because standardization often provides important, pro-competitive economic benefits. For example, improving vehicle safety through V2V communications might not become possible but for standardization. Nevertheless, businesses should keep a watchful eye on any standards group in which they participate to ensure that the group does not stray into behavior that creates risks of antitrust liability. The antitrust issues surrounding standardization are complex and not quickly summarized here, but some signs of possible concern include: 1) attempts to set prices or other financial terms; 2) activity that seeks to block an entrant to the market or otherwise stifle competition; and 3) other collaboration that is not for purposes of the standard under consideration.

Intellectual Property

Intellectual property should be an important element of the strategy for any emerging technology, whether automotive or otherwise. For cutting-edge developments, patents are likely to be of foremost concern. Whether large or small, patent rights provide innovative companies with important benefits. For large businesses, patents provide opportunities to seek licensing revenues, deter lawsuits from competitors, and exclude others from using patented technology. In addition to these benefits, growing companies often find that investors require a clear intellectual property strategy and commitment to securing patent rights. A solid patent portfolio, and even pending applications, can add significantly to a growing company's valuation. Patents also can give expanding companies an important hedge against the risk that a new product or service will not succeed as expected. For example, even if a company is unable to achieve its goals for direct sales, it might create a licensing revenue stream from other businesses better positioned to provide products or services using its technology.

A business's intellectual property strategy should not, however, be limited to patents. Software is likely to play an increasingly important role in the vehicle technologies discussed here, and copyright and other legal considerations surrounding use, creation, and licensing of software must be carefully managed. For example, businesses may face challenging questions about whether to keep their software entirely proprietary or to make use of open source materials and development models. While open source may not have been common in the automotive industry thus far, the potential for standardized interfaces to play an increasingly important role (e.g., V2V communications or open interfaces to car consoles) may cause the role of open source software to be revisited.

Also, as new technologies lead to new branding and marketing opportunities, businesses should carefully guard the distinctive features of their products and services through mechanisms like trademarks and design patents.

Conclusion

The years and decades ahead will be an exciting time for the automotive industry in which we may see fundamental changes in the nature of what vehicles can do and how people interact with them. Businesses that take a proactive, innovative approach to managing the legal issues discussed here will put themselves in a better position to make the most of these developments.

Josh Becker, a member of this newsletter's Board of Editors, is a partner with Alston & Bird LLP, andfocuses his practice on mass tort and product liability litigation. Byron Holz is a senior associate with the firm.