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GPS: Charting New Terrain – Legal Issues Related to GPS-Based Navigation and Location Systems
April 1999
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Howrey LLP
Background
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 and 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 and 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 Strategic Partnerships or 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.
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For more information about the issues covered in this report, please contact Paul Berning in our San Francisco office at 415-848-4996 or at paulberning@howrey.com or contact your Howrey attorney. For more information about Howrey’s Construction Practice Group, click here.
©1999 Howrey LLP
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