GPS: Charting New Terrain: Legal Issues Related To GPS-Based Navigation and Location Systems


Many companies are developing or adopting satellite navigation and location technologies, such as those that rely on the Department of Defense's GPS (Global Positioning System) satellites. The ability of GPS-based technology to provide an instant answer to "where am I on earth?" has tremendous commercial utility, particularly in navigation, agriculture, real time surveying and precision machine control. When coupled with terrestrial or satellite communications systems, such as low earth orbit (LEO) satellites, GPS-based technology gives companies the additional capability to precisely answer the question "where are my assets at all times?" Because of this capability, GPS-based location technologies are being used for dispatching, fleet routing, fixed and mobile asset tracking, and inventory management.

There are many different markets for GPS-based location technologies at various levels, including OEMs, system integrators, value-added resellers, etc., each with its own unique risks and business models. End users range from small municipalities to international shipping fleets. Fortunately, this technology does not present insurmountable legal obstacles that will prevent its further development and widespread commercial application. It does, however, give rise to certain legal issues and, in some cases, certain legal risks unique to the technology.

For obvious reasons, the legal issues in this area depend on numerous factors, including the precise commercial applications, business operations and markets involved. With proper evaluation, planning and action, companies can identify these issues and, if necessary, take steps to reduce risks in a timely manner. Because of our resources in guiding clients involved with this emerging technology, we can assist business executives in this process in a logical and cost-effective fashion.

LEGAL ISSUES FOR COMPANIES AND AGENCIES THAT USE GPS-BASED NAVIGATION AND POSITION TECHNOLOGIES

Companies and public agencies that are using, or would like to use this technology, face a host of legal issues. Some are identified below.

PRIVACY ISSUES

Many commercial and public fleets are turning to satellite-based tracking technologies for tracking and coordination of vehicles, untethered trailers and other assets. These technologies can significantly reduce operating costs, facilitate "just in time" manufacturing and delivery without the need to maintain large inventories, and improve cargo security. In the trucking industry, satellite-based Automatic Vehicle Location (AVL) technologies are used for precise position and load status reporting, calculating ETAs, route guidance and fuel tax mileage reporting. The Truckload (TL) carriers have led the way, followed by the Less Than Truckload (LTL) fleets and, less pervasively, taxi and utility services fleets. In the public sector, police and emergency fleets have adopted AVL, as have some public transit and public service fleets.

Unlike in consumer applications, where consent mitigates privacy concerns, privacy issues are present in nearly every business application where the company or agency has the ability to know, sometimes without the knowledge of the affected employees, the precise location of its fleet vehicles. Companies and agencies that seek to use AVL for fleet management should anticipate resistance on privacy grounds. For example, certain police unions have objected to AVL units being mounted in police vehicles. Truck drivers have expressed similar concerns, claiming that fleet owners do not have a right to detailed information regarding how they traveled from point of pickup to point of delivery. Across the country, resistance has ranged from union pressure to minor sabotage of receivers and transmitters. Ultimately, proper evaluation of these privacy issues depends on several factors, including the specific application (e.g. fleet vehicles, specific employees, etc.), the business relationships involved (e.g. independent contractors, union employees, non-union employees, etc.), the limitations imposed on the tracking (e.g. work hours only or 24 hours per day), and the jurisdictions and laws involved.

We urge any company or agency interested in adopting location technology to stay in front of these issues. Many times countervailing considerations, such as improved safety and security, ultimately outweigh perceived privacy issues and, with advance planning, can be used to arrive at a resolution of this issue. This process can range from timely education of the workforce to negotiation of these issues in collective bargaining. We are very familiar with the issues and can assist any company in this process.

ELECTRONIC DATA RETENTION AND USE ISSUES

Another evolving area is the right of the federal, state and local regulatory agencies to collect, retain, use and disseminate electronic location data recorded and maintained by companies in their business operations. In the trucking industry, the Federal Highway Administration (FHWA) has initiated a pilot project that allows participating motor carriers to use GPS tracking systems to monitor compliance with the hours-of-service (HOS) requirements of the Federal Motor Carriers Safety Regulations, 49 C.F.R. ' 395.15, and that exempts drivers from maintaining paper logs. See 63 Fed.Reg. 16697 (1998). Certain carriers have elected to participate, but others are concerned that the government will increasingly seek access to their electronic data. In the consumer area, the FBI has recently proposed to the FCC certain technical requirements that would enable it to obtain call location data from cell phones that satisfy the E911 mandate. As electronic satellite data collection becomes more common, it is likely that other government agencies will get involved, such as the Department of Labor in the areas of wage and hour and OSHA compliance. We can minimize these concerns for companies that have adopted location technologies by developing or auditing electronic data retention policies, working with regulatory agencies on their behalf, and other actions.

Of course, some companies seek to affirmatively use their location data to establish compliance with regulatory or contractual requirements. For example, utilities and other highly-regulated companies increasingly would like to use satellite data to rebut claims of poor service delivery made by regulatory bodies and others. Companies that seek to use location data in this fashion may want to review their contracts to allow for use of location data to measure contract performance, to require data retention by subcontractors, and so on.

On the subject of using the data, companies and agencies that intend to rely on position data in court need to consider that the admissibility of such evidence is largely untested. While there is no logical reason that GPS data should be inadmissible given a proper foundation, there may be challenges. For example, in one maritime decision, an expert was allowed to cast doubt on the integrity of GPS position reports by testifying that GPS "...can be off by as much as two or three miles." Korpi v. United States, 961 F.Supp. 1335, 1340 (N.D. Cal. 1997), aff'd, 1998 U.S. App. LEXIS 8437 (9th Cir. 1998). In another case, civil charges against a South Florida gambling cruise line were dismissed after undercover agents could not confirm GPS readings that appeared to show that gambling took place within the "three mile limit." Companies and agencies that intend to use GPS data in court need to take care in developing, preserving and presenting this evidence. We are familiar with the law regarding the admissibility of this type of evidence, and can guide companies in this area.

LABOR & EMPLOYMENT

Another rapidly evolving area is the use of satellite-based technologies for human resources purposes, such as developing wage and hour data. For example, some operators of large mobile workforces, such as sales forces and delivery personnel, would like to use location data to objectively determine hours of work, and incentive pay and overtime entitlement. Employers may also seek to use location data to monitor or audit driver performance, or to manage sales territories. The capabilities of employee and vehicle tracking can implicate state and federal law, as well as collective bargaining agreements, employment policies and employment contracts, and should be carefully analyzed in light of these limitations.

The impact of tracking technology on the independent contractor status of affected workers is currently unknown. The key test of whether a worker is an employee or independent contractor (for tax and other purposes) is the extent to which the company controls the activities of the worker. Arguably, a company that can monitor the precise location of its workers has a greater level of control. It remains to be seen how the courts will handle this.

INTEGRATION ISSUES

Integrating satellite-based technologies into your business can give rise to a host of issues, ranging from failures caused by improper installation of hardware to inadequate training of the workforce in the new technology. Integration issues can arise in connection with harmonizing business operations and contract documents with the new technology; for example, modifying independent contract relationships with fleet drivers, updating insurance claims forms and other records, etc.

EOW ROLLOVER/Y2K ISSUES

Each of the 24 GPS satellites contains atomic clocks that provide extremely precise time information for navigation and worldwide time synchronization. On August 21, 1999, at 23:49:57 hours, GPS timing mechanisms, which are based on epochs of 1,024 "GPS weeks," will "rollover" (reset) from week 1023 to week 0000. While this phenomenon, known as End of Week (EOW) Rollover, will not cause a problem for most modern receivers, according to the U.S. Coast Guard "...it is not proven that the firmware in all receivers will handle the rollovers in stride; receivers may claim wrong locations in addition to incorrect dates." Certain older receivers are also subject to Y2K risks.

The risks associated with EOW Rollover and Y2K problems may be significant. For example, in the maritime context, companies involved in accidents due to navigational failures caused by EOW Rollover or Y2K problems may be held responsible for these accidents. Insureds may have insurance problems if they suffer casualty losses related to the rollover problem. Insurers may deny liability if the insured is aware of a potential rollover problem in its navigation equipment (and, therefore, may have knowledge of a condition of "unseaworthiness") and takes no corrective action. Similar defenses may be asserted in other insurance contexts. To properly manage this risk, managers should audit and remediate any rollover or Y2K problems, and assess the company's insurance portfolio to resolve and eliminate coverage issues.

INSURANCE & CLAIMS MANAGEMENT ISSUES

The ability of LEO satellite technology to accurately record the precise location of mobile assets, such as cargo containers and trailers, can greatly improve insurance claims management for shippers and others who must move inventory and other assets. The emergence of accelerometers and other devices that can record the precise location and time of damage to mobile assets will significantly impact and simplify claims management. GPS receivers, coupled with radio transmitters capable of sending location information to a central facility, are increasingly used to recover hijacked cargoes. GPS-based underwriting, while not here yet, is on the horizon. Cargo shippers and other companies need to evaluate their insurance policies and claims management practices in light of the technical developments and will need to revise their policies and practices accordingly to maximize the financial benefit of this technology.

ISSUES FOR MUNICIPALITIES

Municipalities and other public bodies are increasingly turning to location technologies for everything from snowplow guidance to prisoner monitoring. Properly integrating the technology into municipal business operations should include consideration of contract and third-party liability issues that are often overlooked.

Leading the way for municipalities is the use of location technologies to improve emergency services delivery. In part, this is being driven by the E911 mandate, by which the FCC has mandated that by October 1, 2001, wireless carriers be able to locate 911 callers to within 125 meters at least 67% of the time. As location technology matures and is integrated with more advanced PSAP (Public Safety Answering Points) databases, complex issues will arise regarding who is at fault for service failures or delays. Municipalities will need to develop contractual mechanisms to protect themselves for losses caused by hardware or software problems, or problems related to signal accuracy, integrity and availability (discussed below.)

LIABILITY BASED ON THE FAILURE TO USE SATELLITE TECHNOLOGY FOR NAVIGATION OR PUBLIC SAFETY

As satellite-based navigation and location technology becomes increasingly available and inexpensive, sooner or later, an injured party will claim that the failure to make use of the technology falls below the relevant standard of care. It is most likely that these claims will be made where applicable statutes or regulations require use of satellite-based navigation or emergency location technology; for example, a party who suffers losses when a passenger or cargo ship fails to use certain satellite navigation and emergency location beacons (which, as of February 1, 1999 must be used for all international passenger or cargo vessels that exceed 300 gross tons) may claim that such failure constitutes gross negligence.

Similar claims may eventually be made against municipalities that fail to integrate location technology into their emergency response system. According to a recent Business Wire report, last year there were more than 4,000 lawsuits pending against public safety agencies for inadequate emergency response. Sooner or later, a party injured by slow emergency services delivery will claim that the failure to use GPS-based location information fell below the relevant standard of care.

LEGAL ISSUES FOR MANUFACTURERS, SYSTEMS INTEGRATORS, VENDORS AND SERVICE PROVIDERS

PRODUCT LIABILITY ISSUES

Any company offering a product or service that utilizes satellite navigation or location technology must protect itself against product liability risks. There are at least three types of risks:

  1. the risk of liability for product misuse,
  2. the risk of liability for product failures or inaccurate location or navigation information, and
  3. the risk associated with inaccurate descriptions of the capabilities and limitations of the product.

Most manufacturers, systems integrators and vendors who offer, or would like to offer, location-based products or services are aware of these limitations (and are often working on technical solutions) but are not sure how to reduce their exposure.

In terms of product misuse, there is virtually no limit on how consumers can misuse GPS-based products. NTSB reports include accidents caused by pilots incorrectly entering waypoints and relying on inaccurate position information. There are well-publicized cases of recreational sailors misusing GPS handhelds to "guarantee" against getting lost at sea.

For manufacturers, system integrators and vendors, there are no statutes, regulations or decisional case law that gives them tort immunity or otherwise protects them from liability for product misuse. Nor is there any guarantee that juries will conclude that users who misuse the product are fully responsible for any resulting damages. Further, even meritless lawsuits can be expensive in terms of attorney fees. Thus, careful steps must be taken to avoid tort or contract liability for product misuse, and to discourage litigation. These steps include developing legally binding disclaimers, warnings, arbitration clauses, damages exclusions and other items.

As for liability for product failures and inaccurate information, we can help in this area. For example, as all manufacturers know, commercial applications used in urban environments can suffer from "shadowing" caused by tall buildings, signs and even large vehicles -- anything that interferes with the line of sight between the receiver and the satellites to which it is initialized -- and an increased risk of multipath errors caused by glass, steel and neon sign reflection. We can assist manufacturers of devices to be used in urban environments to limit their potential liability if the technology fails. Likewise, learning from the experiences of the cellular providers, we can help any company offering an in-vehicle navigation system that incorporates a "heads down" user interface (such as a moving map) to protect itself from lawsuits arising from accidents. Providers of mayday devices and services need to be especially mindful of the potential liability that may arise if the product or service fails in a crisis situation. We can assist any company in developing appropriate devices designed to reduce liability exposure.

In terms of liability arising from inaccurate descriptions of the capabilities and limitations of the product or service, manufacturers, integrators and vendors must bear in mind that consumer expectations regarding GPS can be unrealistic. To avoid liability under consumer protection laws, manufacturers and systems integrators must be careful to accurately describe the capabilities of the product or service in light of limitations of signal accuracy, integrity and availability. We can assist companies in developing product descriptions, warranty language, disclaimers, and other devices to reduce exposure in this area, and to insure compliance with consumer protection laws.

DEVELOPING STATEGIC PARTNERSHIPS FOR OTHER COMMERCIAL RELATIONSHIPS

In certain market sectors, such as roadside service, navigation assistance and other location-based telematic services, there is a tremendous push to generate new sources of revenue through strategic partnerships, affinity relationships, joint ventures, etc. These often involve developing sophisticated, cross-industry contractual relationships between auto component manufacturers, electronics component manufacturers and content providers, among others. Industry insiders generally recognize that success in areas such as location-based information services will require careful coordination of multiple companies working together. Ineffective legal advice that does not properly "marry" these companies can lead to disputes even if the project is successful. Litigation between GPS joint venturers is not uncommon. See, e.g., Advance Technology Consultants, Inc. v. RoadTrac, No. A98A1938, 1999 LEXIS 141 (Ga. App. Feb. 5, 1999). Because of the complexity and scope of these arrangements, advice regarding joint venture responsibilities, financing, tax considerations and liability protection, among other issues, should be obtained and carefully evaluated.

ISSUES RELATED TO SIGNAL ACCURACY, INTEGRITY AND AVAILABILITY

As all manufacturers know, GPS accuracy, integrity and availability are constrained by various limitations, including selective availability (intentional degradation of accuracy by the government) and multipath distortion caused by urban canyons and other structures. A recent Johns Hopkins University study identified amateur and broadcast radio, unlicensed transmitters, mobile satellite communications and television harmonics, among other things, as sources of interference. An increase in solar activity, which the National Oceanic and Atmospheric Administration (NOAA) forecasts will reach an all-time high between 1999 and 2002, may lead to errors. Some enhancements and corrections that improve accuracy, integrity and/or availability are available in certain contexts; however, even enhancements and corrections do not provide a solution for every application and in all conditions.

Of course, there are many solutions on the way to improve accuracy, integrity and/or availability. For example, some companies are developing devices that can use the GPS constellation and GLONASS, the Soviet-deployed equivalent constellation, for greater coverage and accuracy. Vice-President Gore recently announced that radiobeacon DGPS (an enhancement that employs reference stations to correct for errors in position fixes) will be expanded to provide corrections on a nationwide basis. Even so, all of these systems are subject to certain constraints.

For manufacturers, systems integrators, vendors and service providers, the main liability issue is the extent to which parties who suffer losses caused by signal failures, or inaccurate or degraded signals, will look to them for compensation. (It is unlikely that they will be able to look to the United State government for relief, even where the government is fully responsible, as in the case of recent military jamming exercises which affected civilian users.) It is a mistake to assume that parties who suffer losses caused by signal problems will not look for relief to the companies that provided the device, even if the technology performs perfectly. Any company involved in this area, whether as a manufacturer, system integrator, vendor or service provider, must take steps to minimize the likelihood of being sued for failures or inaccurate navigation or location information. Contractual risk allocation measures, such as indemnity provisions, warranty disclaimers, damage exclusions and arbitration clauses, should be carefully considered.

TAX ISSUES

Tax issues will vary for vendors and users of GPS and wireless services. With respect to application of sales taxes and sourcing rules for income tax purposes, vendors may in some cases confront the same type of uncertainty that faces those who sell through the Internet. Proper tax planning can assist developers of GPS-based technologies achieve the most favorable income tax treatment of their R&D costs. For vendors and users, intercompany transfer pricing issues must be taken into account where these technologies are developed by and/or used among an affiliated group of companies.

REGULATORY ISSUES

The GPS/satellite area raises myriad regulatory issues. Right now, protecting the spectrum is a major regulatory issue. While there are few export restrictions imposed by the United States on civilian GPS receivers, other countries impose special taxes or restrictions on GPS equipment in addition to the usual import tariffs required of other types of electronic equipment. There is discussion of the Department of Defense looking for "industry support" (i.e. funds) for replacing the constellation of satellites, which are approaching the end of their originally designed useful lives. In the aviation area, the use of GPS devices for en route operations and instrument approaches is highly regulated by entities such as the Federal Aviation Administration and the International Civil Aviation Organization. In the maritime area, the International Maritime Organization now requires specific satellite-based navigation and emergency equipment on international passenger and cargo ships in excess of 300 gross tons; additionally, the U.S. Coast Guard has adopted rules that require the use of specific GPS-based navigation devices in certain contexts. In the commercial AVL area, the Federal Communications Commission regulates the bands used for location and vehicle monitoring services. In the consumer area, Congress is considering legislation which would impose certain privacy restrictions on the use of GPS location information generated, for example, by embedded chipsets in wireless handsets. In some cases, industry groups are seeking statutory immunity from tort liability, such as in the emergency response area. We are familiar with the many regulatory issues in this area, and can assist any company in any regulatory matter.

INTELLECTUAL PROPERTIES

As with all emerging technologies, GPS-based location technologies can present intellectual property issues for the company, ranging from obtaining and enforcing patent protection, to developing licensing agreements, to protecting the company's intellectual property through nondisclosure agreements and other restrictions.

E911 ISSUES

The E911 mandate has generated stiff competition between companies that offer cellular network solutions and those that offer GPS solutions such as handsets with GPS-enabled chipsets. Many industry insiders believe that the E911 mandate will cause more wireless carriers to enter the GPS area; in February 1999, after the FCC ruled that wireless carriers may seek waivers to use handsets that incorporate GPS technology to fulfill the E911 mandate, approximately 25 wireless carriers requested such waivers.

Legal and regulatory skirmishes are developing. For example, the FCC recently declined to offer wireless carriers immunity from E911-related lawsuits, leaving the matter to state regulation. Thirty-one states currently offer some form of immunity. Others, like California, have refused to offer tort protection in the face of pressure from trial lawyers and consumer groups. Wireless carriers have been faced with personal injury and wrongful death lawsuits over 911 coverage. Any company involved in this area, including those developing GPS-based products or services for 911 service delivery, needs to carefully evaluate these issues.

SUMMARY

The foregoing is only a partial list of the more obvious legal issues that exist in this area, and that may affect your company or agency. Thelen Reid & Priest can provide further information and counseling regarding any legal issue presented by this emerging technology.