Regulatory

Impact of China’s Generics Push on Innovator Drug Companies

Sherrie Holdman, MJLST Staffer

With a population of 1.42 billion, China presents a large market for both innovator manufacturer and generic drug companies.  Currently, about 95% of marketed drugs are sold by generics. However, many patients in China opt to use more expensive, imported, brand-name drugs.  In an effort to address this problem, China’s State Council has announced its “Opinions Concerning Reforms of Policies to Improve the Supply and Utilization of Generics” to encourage the people of China to use generic drugs early this year.  As a regulatory document, the Opinion shed light on the future direction of China’s generic market.

The Opinion identifies three important suggestions to guide implementation. The first suggestion is to promote research and development of generic drugs in China.  The Opinion proposes a drug list to be compiled that identifies drugs for which generic counterparts don’t exist yet. The Opinion also encourages the government to develop key technologies in manufacturing generics.  The second suggestion aims to improve the quality and efficacy of generic drugs. Generics will only be approved if their quality and efficacy are equivalent to the original drugs.  To facilitate this goal, the State Council proposes speeding up the conformity assessment of quality and efficacy of generic drugs and improving the quality management of generic drugs.  The third suggestion is to provide policy incentives for generics development, including implementation of a tax policy for generic manufacturers. Under this policy, a generic manufacturer, once designated as a “high technology enterprise,” will have a preferential tax rate of 15%, compared to the 25% rate for other companies.  In order to be a “high technology enterprise,” the generic manufacturer will need to meet certain qualifications. Meanwhile, the Opinion encourages patentees to voluntarily grant compulsory licenses to Chinese generic manufacturers when there is “a serious threat to the public health.”  However, despite its long existence in Chinese patent law and regulation, the compulsory licenses are historically rare in practice, partly because of the difficulty in defining what constitutes a “serious threat to the public health.”    

In order to balance the interests of innovator and generic drug companies, the Opinion provides recommendations for strengthening the enforcement of intellectual property rights.  For example, the Opinion proposes establishing an “early warning patent system” to prevent generic manufacturers from infringing on valid patents and thus mitigating the risk of infringement.  Moreover, the State Council proposed to enhance accessibility of innovative drugs, especially imported oncology drugs, by applying no tariffs on imported new drugs. A five-year patent extension for new drugs was also proposed to enhance the intellectual property protection of innovator drugs.

Following the announcements promulgated in the Opinion, on April 25, 2018, China Food and Drug Administration (CFDA) released its “Public Comment Draft of Pharmaceutical Data Exclusivity Implementing Rules (provisional).” The Draft proposes that “innovative new drugs” will enjoy six years of data protection and “innovative therapeutic biologics” will enjoy 12 years of data protection.  By proposing data protection for new drugs, China encourages multinational corporations to include China in international multicenter clinical trials and to concurrently apply for market introduction in China.  Even if the new drug is introduced to China at a later time, the drug will still be entitled to a data protection period (e.g., from one to five years). The public comment period for the Draft was closed on May 31, 2018 and the final rule is expected soon.  

Facing China’s generics push, innovator drug makers can strengthen their IP strategy in numerous ways.  For example, companies should disclose information about the patents in the drug list in a timely manner, making the public and government aware of the patents.  Further, companies should also establish a multi-directional scheme for IP rights protection including not only patent, but also knowhow, trade secret, design, trademark and copyright.


Tesla: Can the Electric Car Company Overcome its CEO’s Erratic (and sometimes illegal) Behavior?

Joe Hallman, MJLST Staffer 

Elon Musk, the ingenious and at times controversial CEO of Tesla, Inc., has been a fixture in the national news cycle of late with many questioning his erratic behavior. Musk has garnered negative attention recently for incidents ranging from publicly smoking marijuana to hurling wild accusations against critics on Twitter. However, Musk’s most significant faux pas in recent months was likely a tweet that resulted in him being charged with securities fraud by the Securities and Exchange Commission (“SEC”).

On August 7, 2018, Musk tweeted “Am considering taking Tesla private at $420. Funding secured.” The SEC sued Musk in federal court on September 27 for misleading investors with his tweet. Musk settled with the SEC two days later on September 29. The terms of the settlement required Musk to pay a $20 million personal fine and step down as chairman for three years, although he was allowed to remain CEO of the company. Although not charged with fraud, Tesla also settled with the SEC for $20 million.

Tesla’s stock price plummeted shortly after the SEC’s lawsuit was filed. Tesla shares were trading at about $305 prior to the lawsuit and on September 28, the day after the SEC filed suit, Tesla’s shares dropped to about $269. However, after that initial dip Tesla’s stock rebounded, eventually closing at $341.06 on November 6.

Many have questioned Tesla’s viability as a company over the years and it has been a common short sell among investors. However, considering Musk’s curious recent behavior, the stock price has been resilient. Meanwhile, on October 24, Tesla released its 2018 third-quarter earnings report showing surprise profits and positive cash flow. The earnings report is good news for shareholders who eagerly wait to see if Musk’s electric car company can eventually turn the corner and achieve a significantly higher market cap as Musk has promised.

Although Tesla seems to have been largely unaffected by the SEC’s lawsuit and other strange behavior by Musk, other top executives of publicly traded companies will likely take notice and learn from Tesla’s tumultuous past few months. Going forward, I would expect CEO’s of high-profile companies like Tesla to be careful about Twitter usage and seek to avoid negative attention in the press.


PyeongChang: The Opening Ceremony

MJLST Staffer, Amber Peterson

 

The opening ceremony of the Olympics is always a big show and the 2018 Winter Olympics’ opening ceremony in PyeongChang, South Korea was no exception. Intel created a display that featured a world-record setting 1,218 drones. The display featured drone murmurations that depicted images of a snowboarder that morphed into the Olympic rings using four billion color combinations enabled by onboard LEDs. This display surpassed Intel’s previous Shooting Star drone world record which flew 500 drones simultaneously in Germany in 2016.

Intel’s Shooting Star drones are each about a foot-long, weigh eight ounces, and can fly in formation for up to 20 minutes given the limitations of current lithium-ion battery technology.

While the show is certainly impressive, from a software perspective, it is very much similar to flying a smaller, 300-drone show. The additional drones simply increase the resolution and quality of the images to create more depth. Every drone is operated from a central computer system, which tweaks things such as individual battery life and GPS signal. The drones communicate with this central computer instead of with each other. After animators draw up the show using 3D design software, each individual drone acts as an aerial pixel to fill the night sky.

The only minor tweak that Intel had to make to the design of the drone was to the rotor cages to account for the cold and windy conditions in Pyeongchang. Intel ran test flights in Finland, which has a similar climate to Pyeongchang, to make sure the drones could handle the climate.

This record for the “most unmanned aerial vehicles airborne simultaneously” may have an asterisk however, since the display was pre-recorded after a last minute logistical issue which prevented the record setting drones from flying live at the ceremony. The show that was pre-recorded last December was instead broadcast during the event.

The South Korean laws and regulations that Intel had to comply with are as follows: 1) the maximum height that a drone can fly is 492 feet and if the flights are higher than this distance, government approval is required; 2) drones can only be flown during the day unless government approval has been given; 3) drones must be operated in a range that is viewable from the naked eye; 4) certain zones are banned for drone flights; and 5) drones must always yield to manned aircraft.

Drone law has developed from the explosion of online shopping in Korea. Korean privacy laws however, are some of the strictest in the world so a vexing issue remains as to how to deal with the invasion of privacy from drones. Maintaining a balance between supporting technological advances and being cognizant of protecting safety and individual rights remains an issue that requires further debate.


Changing Families: Time for a Change in Family Law?

MJLST Staffer, Hannah Mosby

 

Reproductive technology allows individuals to start families where it may not otherwise have been possible. These technologies range from relatively advanced procedures—those using assisted reproductive technology (or “ART,” for short)—to less invasive fertility treatments. ART encompasses procedures like in vitro fertilization—in fact, the CDC defines ART as including “all fertility treatments in which both eggs and embryos are handled” (Link to: https://www.cdc.gov/art/whatis.html)—while other kinds of reproductive assistance range from artificial insemination to self-administered fertility drugs. In a study published by the CDC, the number of ART procedures completed in 2014 in the U.S. alone was almost 170,000. As scientific knowledge grows and new procedures develop, that number will undoubtedly increase.

Individuals choosing to utilize these reproductive technologies, however, can find themselves in legal limbo when it comes to determining parentage. In instances where an individual uses a donor gamete (a sperm or an egg) to conceive, that donor could be a legal parent of the offspring produced—even if that result wasn’t intended by the any of the parties involved. For example, the 2002 version of the Uniform Parentage Act—variations of which have been adopted by many states—provides for the severance of the parental rights of a sperm donor in the event of consent by the “woman,” as well as consent or post-birth action by the “man” assuming paternal rights. If statutory conditions aren’t met, the donor could retain his parental rights over any offspring produced by the procedure. To further complicate things, the use of gendered terms makes it unclear how these statutes apply to same-sex couples. A new version of the Act was proposed in 2017 to comply with the Supreme Court’s recognition of marriage equality in Obergefell v. Hodges, but it has yet to be adopted by any state . Even murkier than the laws governing donor gametes are those governing surrogacy contracts, which some states still refuse to legally recognize. Overall, these laws create an environment where even the most intentional pregnancies can have unintended consequences when it comes to establishing legal parentage.

For further illustration, let’s revisit artificial insemination. Jane and John, a Minnesotan couple, decide to undergo an artificial insemination procedure so that Jane can become pregnant. However, they aren’t married. Pursuant to Minn. Stat. 257.56, the couple’s marriage is a necessary condition for the automatic severance of the sperm donor’s parental status—therefore, since Jane and John aren’t married, the sperm donor retains his parental rights. The statute also requires that the procedure be performed “under the supervision of a licensed physician” in order for severance to occur. If there was no doctor present, then the sperm donor—and not John—would have legal parental status over the offspring produced. The example becomes more complicated if the couple is same-sex rather than heterosexual, because the statute requires the consent of the “husband” to the procedure. Further still, if Jane lived in a different state, the sperm donor might be able to establish parental rights after the fact—even if they were initially severed—by maintaining a relationship with the child. As one can imagine, this makes the use of known donors (rather than anonymous donors) particularly complicated.

Ultimately, ART and related procedures provide opportunities for individuals to create the families they want, but could not otherwise have—an enormously impactful medical development. However, utilization of these procedures can produce legal consequences that are unforeseen—and, often, unwanted—by the parents of children born using these procedures. The state law that exists to govern these procedures is varied and lagging. In the age of marriage equality and donor gametes, such laws are highly inadequate. . . In order for society to reap the biggest benefit from these life-creating technologies, the legal world will have to play a serious game of catch-up.

 


Airbnb Regulations Spark Controversy, but Have Limited Effect on Super Bowl Market

MJLST Staffer, Sam Louwagie

 

As Super Bowl LII descends upon Minneapolis, many Twin Cities residents are hoping to receive a windfall by renting out their homes to visiting Eagles and Patriots fans. City regulations placed last fall on online short-term rental platforms such as AirBnB, which prompted an outcry from those platforms, do not appear to be having much of an effect on the dramatic surge in supply.

The short-term rental market in Minneapolis has been a renter’s market in the opening days since the Super Bowl matchup was set. There are 5,000 placements in the Twin Cities on AirBnB this week, as compared to 1,000 at this time last year, according to the Star Tribune. The flood of posted housing options has limited prices, as the average listing has cost $240 per night—more than usual, but much less than the thousands of dollars some would-be renters had hoped for. One homeowner told the Star Tribune that she had gotten no interest in her 4,000-square-foot, six-bedroom house just five blocks from U.S. Bank Stadium, and had “cut the price drastically.”

The surge in AirBnB listings comes despite ordinances that went into effect in December in both Minneapolis and St. Paul. The cities joined a growing list of major U.S. cities that are passing regulations aimed at ensuring guest safety and making a small cut of tax revenue from the rentals. Minneapolis’ ordinance requires a short-term renter to apply for a license with the city, which costs $46 annually. St. Paul’s license costs $40 per year. As of mid-December, according to MinnPost, only 18 applications had been submitted in Minneapolis and only 32 in St. Paul. That would suggest that many of the thousands of listings during Super Bowl week are likely unlicensed. The cities both say they will notify renters they are not in compliance before taking any enforcement action, but a violation will cost $500 in Minneapolis and $300 in St. Paul.

The online rental platforms themselves had strongly objected to the passage of the ordinances, which would require Airbnb to apply for a short-term rental platform license. This would bring a $10,000 annual fee in St. Paul and a $5,000 large platform fee in Minneapolis. According to MinnPost, as of mid-December, no platforms had submitted an application and it was “unclear whether they [would] comply.” Airbnb said in a statement that it believes the regulations violate the 1996 federal Communications Decency Act, and that “the ordinance violates the legal rights of Airbnb and its community.”

While the city ordinances created controversy in the legal world, they do not seem to be having a similar effect on the ground in Minneapolis, as Super Bowl guests still have a dramatic surplus of renting options.


Initial Coin Offerings: Buyer Beware

Kevin Cunningham, MJLST Staffer

 

Initial Coin Offerings, also known as ICOs or token sales, have become a new trend for startup companies raising capital using cryptocurrency and blockchain technology. ICOs are conducted online where purchasers use virtual currencies, like bitcoin or ether, or a flat currency, like the U.S. dollar, to pay for a new virtual coin or token created by the company looking to raise money. Promoters usually tell purchasers that the capital raised from the sales will be used to fund development of a digital platform, software, or other project and that the newly created virtual coin may be used to access the platform, use the software, or otherwise participate in the project. The companies that issue ICOs typically promote the offering through its own website or through various online blockchain and virtual currency forums. Some initial sellers may lead buyers of the virtual coins to expect a return on their investment or to participate in a share of the returns provided by the project. After the coins or tokens are issued, they may be resold to others in a secondary market.

 

Depending on the circumstances of each ICO, the virtual coins or tokens that are offered or sold may be considered to be securities. If they are classifiable as securities, the offer and sale of the coins or tokens are subject to the federal securities laws. In July 2017, the Securities Exchange Commission (SEC) issued a Report of Investigation under Section 21(a) of the Securities Exchange Act of 1934 stressing that any ICO that meets the definition of a security in the United States is required to comply with the federal securities law, regardless of whether the securities are purchased with virtual currencies or distributed with blockchain technology.

 

Since the SEC issued its July Report regarding ICOs, the Commission has charged two companies with defrauding investors. In the pair of ICOs purportedly backed by investments in real estate and diamonds, the SEC alleged that the owner of the companies, Maksim Zaslavskly, sold unregistered securities. In one instance, the SEC alleges that, despite the representations to investors of Diamond Reserve Club, Zaslavskly had not purchased any diamonds nor engaged in any business operations.

 

Issues with Initial Coin Offerings continue as the Tezos Foundation was hit with its second class-action lawsuit over its Initial Coin Offering after an ICO contributor alleged breaches of securities laws. The two cases have been filed in the California Superior Court in San Francisco and United States District Court in Florida. The Tezos ICO raised over $232 million just months ago and plaintiffs in the suit say that they have not received the promised tokens. Infighting amongst the owners of the company has led to a significant setback in the venture, which aims to create a computerized network for transactions using blockchain technology. The lawsuit alleges that contributors to the fundraiser were not told that it could take more than three years to purchase the ledger for the project’s source code. Additionally, the plaintiffs allege that the time frame was not disclosed to investors despite it being a material fact.

 

It is likely that many issuers of virtual coins and tokens will have a hard time convincing the SEC and other regulators that its coin is a merely a utility rather than a security. For many of the firms, including Diamond Reserve Club, the problem is that the tokens they are selling for the projects only exist on paper, and so they have no other function than to bring in money. Likewise, most investors currently buy tokens not for their utility, but because they are betting that on an increase in the value of the virtual currency. It seems that this will not be an issue that will be resolved quickly and it is likely that heightened regulatory scrutiny will come due to the continuing claims against ICOs for companies like Tezos.


The Electric Vehicle: A Microcosm for America’s Problem with Innovation

Zach Sibley, MJLST Staffer

 

Last year, former U.S. Patent and Trademark Office Director, David Kappos, criticized a series of changes in patent legislation and case law for weakening innovation protections and driving technology investments towards China. Since then it has become apparent that America’s problem with innovation runs deeper than just the strength of U.S. patent rights. State and federal policies toward new industries also appear to be trending against domestic innovation. One illustrative example is the electric vehicle (EV).

 

EVs offer better technological upsides than their internal combustion engine vehicle (ICEV) counterparts. Most notably, as our US grid system moves toward “smart” infrastructure that leverages the Internet of Things, EVs can interact with the grid and assist in maximizing the efficiency of its infrastructure in ways not possible with ICEVs. Additionally, with clean air and emission targets imminent—like those in the Clean Air Act or in more stringent state legislation—EVs offer the most immediate impact in reducing mobile source air pollutants, especially in a sector that recently became the highest carbon dioxide emitter. And finally, EVs present electrical utilities that are facing a “death spiral” an opportunity to recover profits by increasing electricity demand.   

 

Recent state and federal policy changes, however, may hinder efforts of EV innovators. Eighteen state legislators have enacted EV fees—including Wisconsin’s recent adoption, and the overturned fee in Oklahoma—ranging from $50 to $300 in some states. Proponents claim the fee creates parity between traditional ICEV drivers and the new EV drivers not paying fuel taxes that fund maintenance of transportation infrastructure. Recent findings, though, suggest EV drivers in some states with the fee were previously paying more upfront in taxes than their ICEV road-mates. The fee also only creates parity when solely focused on the wear and tear all vehicles cause on shared road infrastructure. The calculus for these fees often neglects that EV and ICEV drivers also share the same air resources and yet no tax accompanies EV fees that would also charge ICEVs for their share of wear and tear on air quality.

 

At the federal level, changes in administrative policy are poised to exacerbate the problem further. The freshly proposed GOP tax bill includes a provision to repeal a $7,500 rebate that has made lower cost EVs a more affordable option for middle class drivers. This change should be contrasted with foreign efforts, such as those in the European Union to increase CO2 reduction targets and offer credits for EV purchases. The contrast can be summed up with one commentator’s observation regarding The New York Times who reported, within the span of a few days, about the U.S. EPA’s rollback of the Clean Power Plan and then about General Motors moving toward a full electric line in response to the Chinese government. The latter story harkens back to Kappos’ comments at the beginning of this post, where again a changing U.S. legal and regulatory landscaping is driving innovation elsewhere.

 

It is a basic tenant of economics that incentives matter. Even in a state with a robust EV presence like California, critics question the wisdom of assessing fees and repealing incentives this early in a nascent industry offering a promising technological future. The U.S. used to be great because it was the world’s gold standard for innovation: the first light bulb, the first car, the first airplane, the first to the moon, and the first personal computers (to name a few). Our laws need to continue to reflect our innovative identity. Hopefully, with legislation like the STRONG Patents Act of 2017 and a series of state EV incentives on the horizon, we can return to our great innovative roots.


“Gaydar” Highlights the Need for Cognizant Facial Recognition Policy

Ellen Levish, MJLST Staffer

 

Recently, two Stanford researchers made a frightening claim; computers can use facial recognition algorithms to identify people as gay or straight.

 

One MJLST blog tackled facial recognition issues before back in 2012. Then, Rebecca Boxhorn posited that we shouldn’t worry too much, because “it is easy to overstate the danger” of emerging technology. In the wake of the “gaydar,” we should re-evaluate that position.

 

First, a little background. Facial recognition, like fingerprint recognition, relies on matching a subject to given standards. An algorithm measures points on a test-face, compares it to a standard face, and determines if the test is a close fit to the standard. The algorithm matches thousands of points on test pictures to reference points on standards. These test points include those you’d expect: nose width, eyebrow shape, intraocular distance. But the software also quantifies many “aspects of the face we don’t have words for.” In the case of the Stanford “gaydar,” researchers modified existing facial recognition software and used dating profile pictures as their standards. They fed in test pictures, also from dating profiles, and waited.

 

Recognizing patterns in these measurements, the Stanford study’s software determined if a test face was more like a standard “gay” or “straight” face. The model was accurate up to 91 percent of the time. That is higher than just chance, and far beyond human ability.

 

The Economist first broke the story on this study. As expected, it gained traction. Hyperbolic headlines littered tech blogs and magazines. And of course, when the dust settled, the “gaydar” scare wasn’t that straightforward. The “gaydar” algorithm was simple, the study was a draft posted online, and the results, though astounding, left a lot of room for both statistical and socio-political criticism. The researchers stated that their primary purpose in pursuing this inquiry was to “raise the alarm” about the dangers of facial recognition technology.

 

Facial recognition has become much more commonplace in recent years. Governments worldwide openly employ it for security purposes. Apple and Facebook both “recognize individuals in the videos you take” and the pictures you post online. Samsung allows smartphone users to unlock their device with a selfie. The Walt Disney Company, too, owns a huge database of facial recognition technology, which it uses (among other things) to determine how much you’ll laugh at movies. These current, commercial uses seem at worst benign and at best helpful. But the Stanford “gaydar” highlights the insidious, Orwellian nature of “function creep,” which policy makers need to keep an eye on.

 

Function creep “is the phenomenon by which a technology designed for a limited purpose may gain additional, unanticipated purposes or functions.” And it poses a major ethical problem for the use of facial recognition software. No doubt inspired developers will create new and enterprising means of analyzing people. No doubt most of these means will continue to be benign and commercial. But we must admit: classification based on appearance and/or affect is ripe for unintended consequences. The dystopian train of thought is easy to follow. It begs that we consider normative questions about facial recognition technology.

 

Who should be allowed to use facial recognition technologies? When are they allowed to use it? Under what conditions can users of facial technology store, share, and sell information?

 

The goal should be to keep facial recognition technology from doing harm. America has a disturbing dearth of regulation designed to protect citizens from ne’er-do-wells who have access to this technology. We should change that.

 

These normative questions can guide our future policy on the subject. At the very least, they should help us start thinking about cogent guidelines for the future use of facial recognition technology. The “gaydar” might not be cause for immediate alarm, but its implications are certainly worth a second thought. I’d recommend thinking on this sooner, rather than later.


Health in the Fast Lane: FDA’s Effort to Streamline Digital Health Technology Approval

Alex Eschenroeder, MJLST Staffer

 

The U.S. Food and Drug Administration (FDA) is testing out a fast-track approval program to see if it can accommodate the pace of innovation in the technology industry and encourage more ventures into the digital health technology space. Dr. Scott Gottlieb M.D., Commissioner of the FDA, announced the fast-track pilot program—officially named the “Pre-Cert for Software Pilot Program” (Program)—on July 27, 2017. Last week, the FDA announced the names of the nine companies it selected out of more than 100 applicants to participate in the Program. Companies that made it onto the participant list include tech giants such as Apple and Samsung, as well as Verily Life Sciences—a subsidiary of Alphabet, Inc. The FDA also listed smaller startups, indicating that it intends to learn from entities at various stages of development.

The FDA idea that attracted applicants from across the technology industry to the Program is roughly analogous to the TSA Pre-Check Program. With TSA Pre-Check certification, travelers at airports get exclusive access to less intensive pre-boarding security procedures because they submitted to an official background check (among other requirements) well before their trip. Here, the FDA Program completes extensive vetting of participating technology companies well before they bring a specific digital health technology product to market. As Dr. Gottlieb explained in the July Program announcement, “Our new, voluntary pilot program will enable us to develop a tailored approach toward this technology by looking first at the . . . developer, rather than primarily at the product (as we currently do for traditional medical products).” If the FDA determines through its review that a company meets necessary quality standards, it can pre-certify the company. A pre-certified company would then need to submit less information to the FDA “than is currently required before marketing a new digital health tool.” The FDA even proposed the possibility of a pre-certified company skipping pre-market review for certain products, as long as the company immediately started collecting post-market data for FDA to confirm safety and effectiveness.

While “digital health technology” does not have a simple definition, a recently announced Apple initiative illustrates what the term can mean and how the FDA Program could encourage its innovation. Specifically, Apple recently announced plans to undertake a Heart Study in collaboration with Stanford Medicine. Through this study, researchers will use “data from Apple Watch to identify irregular heart rhythms, including those from potentially serious heart conditions like atrial fibrillation.” Positive research results could encourage Apple, which “wants the Watch to be able to detect common heart conditions such as atrial fibrillation”, to move further into FDA regulated territory. Indeed, Apple has been working with the FDA, aside from the Program, to organize the Heart Study. This is a critical development, as Apple has intentionally limited Watch sensors to “fitness trackers and heart rate monitors” to avoid FDA regulation to date. If Apple receives pre-certification through the Program, it could issue updates to a sophisticated heart monitoring app or issue an entirely different diagnostic app with little or no FDA pre-market review. This dynamic would encourage Apple, and companies like it, to innovate in digital health technology and create increasingly sophisticated tools to protect consumer health.


The Future of AI in Self-Driving Vehicles

Kevin Boyle, MJLST Staffer

 

Last week, artificial intelligence (AI) made a big splash in the news after Russian President Vladimir Putin and billionaire tech giant Elon Musk both commented on the subject. Putin stated that whoever becomes the leader in artificial intelligence (AI) will become “the ruler of the world.” Elon Musk followed up Putin’s comments by declaring that competition for AI superiority between nations will most likely be the cause of World War III. These bold predictions grabbed the headlines; but in the same week, Lyft announced a new partnership with a company that produces AI for self-driving cars and the House passed the SELF DRIVE Act. The Lyft deal and the House bill are positive signs for investors of the autonomous vehicle industries; however, the legal landscape remains uncertain. As Putin and Musk have predicted, AI is certain to have a major impact on our future, but current legal hurdles exist before AI’s applications in self-driving vehicles can reach its potential.

 

One of the legal hurdles that currently exists is the varying laws between state and federal authorities. For example, Companies such as Google and Ford would like to introduce cars with no pedals or steering wheels that are operated entirely by AI. However, most states still require that a human driver be able to take “active physical control” of the car to manually override the autonomous vehicle. This requires a steering wheel and brakes, which would make those cars illegal to operate. At the federal level, the FAA requires that commercial drones be flown by certified operators, not computers or AI. Requiring operators instead of AI to steer drones for deliveries severely limits the potential of this innovative technology. Furthermore, international treaties, including the Geneva Convention, need to be addressed before we see fully autonomous cars.

 

The bipartisan SELF DRIVE Act recently passed by the House attempts to address most of the issues created by the patchwork of local, state, and federal regulations so that AI in self-driving cars can reach its potential. The House bill proposed clear guidelines for car manufacture guidelines, clarified the role of the NHTSA in regulating automated driving systems, and detailed cybersecurity requirements for automated vehicles. The Senate, however, is drafting its own bill for the SELF DRIVE Act. This week, the Senate Commerce, Science, and Transportation Committee will convene a hearing on automated safety technology in self-driving vehicles and the potential impacts on the economy. The committee will hear testimony from car manufacturers, public interest groups, and labor unions. Some of these groups will inevitably lobby against this bill and self-driving technology for fear of the potentially devastating impact on jobs in some industries. But ideally, the Senate bill will stick to the fundamentals from the House bill, which focuses on prioritizing safety, strengthening cybersecurity, and promoting the continued innovation of AI in autonomous vehicles.

 

Several legal obstacles still exist that are preventing the implementation of AI in automated vehicles. Congress’ SELF DRIVE Act has the potential to be a step in the right direction. The Senate needs to maintain the basic elements of the bill passed in the House to help advance the use of the innovative AI technology in self-driving cars. Unlike Musk, Mark Zuckerberg has taken a stance similar to those in the auto industry, and believes AI will bring about countless “improvements in the quality of our lives,” especially in the application of AI in self-driving vehicles.