Report highlights legal challenges of connected and autonomous vehicles

Out-Law News | 21 Apr 2016 | 10:32 am | 4 min. read

Outdated road traffic laws, complexities in patent licensing and restrictive data privacy rules are among the challenges manufacturers face in developing connected and autonomous vehicles, according to a new report by Pinsent Masons, the law firm behind Out-Law.com.

Legal experts in advanced manufacturing at Pinsent Masons said companies could have to deal with "a messy transitional period" as legal and regulatory frameworks are updated to account for "the new technological realities" associated with connected and autonomous cars.

"As well as disrupting car manufacturers’ business models and revenue streams, autonomous vehicles, and the shift in liability they bring, could require a wholesale rewriting of road traffic law, insurance provisions and contractual relationships across the supply chain," Nicole Livesey of Pinsent Masons said in a report entitled 'Connected and autonomous vehicles - the emerging legal challenges'. "All this brings potentially complex legal changes and challenges, as well as a great deal of uncertainty."

Stephan Appt of Pinsent Masons said that connected and autonomous vehicles are "now a reality, being tested in real conditions". He said their impact will be to deliver "profound cultural and social change" as the whole nature of driving and car ownership is transformed. "In future it might be that 'digital luxury' will be the predominant feature customers look for in vehicles and that this will alter perceptions of what are premium brands in the market," he said.

Chris Reeves and Alastair Ruddle of HORIBA MIRA, which provides engineering, research and test services to the automotive industry, said fully autonomous vehicles could be "on the roads within a few years" if companies driving innovation in the market "can demonstrate that their approach is safe and commercially viable".

Professor Nick Reed, academy director at transport sector consultancy and advisory business TRL, said the development of driverless cars could see a shift towards "shared mobility" amongst the public and help logistics companies improve deliveries.

Professor Paul Jennings of Warwick Manufacturing Group said that public trust in driverless cars will be needed if they are to come into widespread use.

Technical challenges associated with automation and data ownership as well as on cybersecurity also need to be addressed, said professor Neville Jackson, chief technology and innovation officer at engineering consultancy Ricardo. He predicted that "incremental changes" will be made to car technology over time to improve the tools of assistance that "stop drivers doing stupid things".

"There is clearly a huge benefit in removing the potential for human error on the roads and so reducing the terrible toll of road accident casualties across the world," Jackson said. "However, it is important to be realistic about the pace of change and the very real challenges of navigating through the transition period to where we want to be."

Liability for accidents involving connected or driverless cars could reside with car manufacturers rather than drivers, the report said. Although liability could be shared with software providers, telecoms service providers and other suppliers, vehicle manufacturers will need to be wary of the potential risk to their reputations and a "regulatory backlash" if it is perceived that the technology behind connected and driverless cars is "flawed", it said.

"Manufacturers will need to be very clear about their mandatory product liability obligations towards end users and ensure they have the operating procedures, risk management and contractual arrangements with suppliers to manage these obligations effectively," the report said. "They should also explore ways to limit liability through their agreements with automotive customers."

Pinsent Masons said that a shift in liability would have an impact on the motor insurance market.

"If manufacturers do, as they say, agree to accept liability for road traffic accidents then the potential end to traditional motor liability insurance will amount to a significant and wholesale change to the existing insurance regime," the report said. "However, in our view, such insurance is likely to exist in some shape or form for the foreseeable future so long as there is some degree of responsibility on the driver, however diminished that responsibility may be."

Central to the operation of connected and autonomous cars will be the flow of data, Pinsent Masons said. Information such as drivers' location and journey history, diagnostic information and data from new 'infotainment' systems and services will be recorded, it said. This will raise data privacy issues and new questions about data ownership, it said, but "significant potential revenue streams" could also open up to car manufacturers if they manage data effectively.

"More information about the use and operation of vehicles can improve customer satisfaction; allow for predictive maintenance; enable more personalised insurance products; make more effective use of road space and improve safety," Pinsent Masons said. "Clarity is required around the data that may be generated, stored, and used and where required consents secured from owners, drivers and even passengers. This is even more complicated where the vehicle is shared amongst various users or when it is sold. Users of connected data may need to set up procedures to establish contact and obtain consent to the use of the new owner/users’ data."

Pinsent Masons said that manufacturers might need to familiarise themselves with telecoms regulations too if pursuing developments in connected and autonomous cars. Manufacturers could partner with telecoms companies to "procure connectivity" and limit their own exposure to telecoms rules, it said.

New contract models, where benefits and risks are shared across the supply chain, could emerge, said Ben Gardner of Pinsent Masons. "These new models would recognise the collaboration that will be needed across multiple businesses to deliver connected and autonomous vehicles," he said.

Greater collaboration will require "clear regulation of intellectual property rights, both in terms of rights ownership following creation and the on-going rights of use, as well as in the protection and management and the costs of protection and management of the intellectual property created as a result of the collaboration", it said.

There will be a need for technology behind connected and autonomous cars to interoperate with other systems, Pinsent Masons said. New technical standards are therefore required, and this could result in new patents being designated as standard-essential patents (SEPs), it said. Businesses involved in developing technology standards for driverless cars must be conscious of the need to licence any SEPs on fair, reasonable and non-discriminatory (FRAND) terms, it said.

Pinsent Masons also said we can expect a "stream of joint ventures and M&A activity" in the automotive sector as this will enable car manufacturers to match their expertise with that of technology providers and enhance their connected and autonomous vehicle offerings.