‘Drone law’ becomes big business

By Clay Dillow

FORTUNE — Last month’s reversal of a U.S. Federal Aviation Administration policy prohibiting the use of unmanned aircraft systems (UAS) for commercial purposes in the U.S. may just be the catalyst the drone industry has sought for years.

The decision could result in an estimated $80 billion-plus economic uptick over the next decade, but it’s not just drone manufacturers and that see boom days ahead. In coming years various federal, state, and local authorities will cultivate a tangled swamp of regulations governing the use of UAS in domestic airspace, and several major U.S. law firms are moving to meet what’s expected to be a huge demand for legal guidance as companies large and small bump up against FAA, National Transportation Safety Board (NTSB), and other civil aviation rules for the very first time.

Even before last month’s ruling — in which a federal judge determined that the FAA has no real authority to regulate small UAS under its existing civil aviation rules — several law firms across the country were in the process of developing special practice groups focused on UAS law. Both Atlanta-based McKenna Long & Aldridge and Richmond, Va.,-based LeClairRyan last month announced the establishment of special “drone law” practice groups. In January, Las Vegas-based Fennemore Craig Jones Vargas did the same. Likewise, various firms focused in whole or in part on aviation law have developed expertise in legal issues surrounding UAS and now have legal experts on offer to help companies and individuals navigate an increasingly complex legal landscape.

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“This is revolutionary technology, really analogous to the introduction of the commercialized Internet back in the early ’90s,” says Brendan Schulman, special counsel at NYC-based Kramer Levin Naftalis & Frankel and the attorney representing Raphael Pirker, the drone operator whose $10,000 fine from the FAA sparked last month’s pivotal ruling. “The intro of that technology upon society now has legal implications that don’t reside in a single area of law.”

Aviation and transportation law remain central to understanding how UAS will be regulated in the future, Schulman says. Given the myriad applications for the technology, the scope of “drone law” is broad, stretching from freedom of speech and press concerns to issues around intellectual property or land use rights, as well as more practical matters of insurance and liability.

That’s not all. UAS manufacturers must mind export controls and UAS operators must draft operating procedures that are in compliance with the law. Further, new businesses entering the UAS industry may also confront law around venture funding and taxes if they are wooed by any one of several U.S. states eager to attract them with UAS-specific tax incentives.

And that’s to say nothing of the issue of privacy, particularly concerning how personal data is collected, which has been front and center in the ongoing domestic UAS debate in Congress and state legislatures. Add to all that the confusing web of regulation around UAS usage — much civil aviation law is federal, for example, but states and municipal governments are increasingly inserting themselves into the UAS debate with drone-related laws; 35 states have some kind of UAS legislation under consideration this year — and the outlook for a drone-maker or operator is formidable at best, says Cameron Cloar, an aviation attorney for Nixon Peabody in San Francisco.

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“Individuals and organizations that weren’t involved in aviation are going to suddenly see oversight by the FAA, by the NTSB,” Cloar says. “There are going to be investigations, there are going to be new regulatory issues that they haven’t had to deal with, and all of these areas are going to be important.”

Through it all, Cloar says, drone technology continues to move faster than the government’s ability to issue regulations governing it. What was illegal last month may be legal this month — but may at some point become illegal once more. Last month’s ruling while welcomed by many, exacerbates the problem.

The FAA is expected to issue proposed rules governing domestic UAS usage by the end of this year, and finalized regulations sometime in 2015 or 2016. Aviation attorneys — especially those with an ear to the ground at the FAA — see a great deal of opportunity in helping companies get their UAS usage policies in line with expected FAA regulations before those regulations become law, saving substantial time, money, and trouble.

Today, “drone law” remains new and small relative to other areas of corporate law, but it is poised to grow considerably in the long term, says Tim Adelman, co-leader of LeClairRyan’s UAS law practice group and one of the first legal experts to move into the nascent field.

“I wonder what some of these other people are doing right now, because there’s not a lot of work yet,” Adelman says. “But it’s right at your fingertips, and as soon as the official rules come out it’s going to be huge. The civilian side [of the UAS industry] is a powder keg waiting to explode, and we’re just waiting for the FAA to light the fuse.”

http://tech.fortune.cnn.com/2014/04/09/drone-law-becomes-big-business/?iid=SF_F_River