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This article was originally published in Automotive World.

The future of the mobility is dependent on AI, but without greater understanding among consumers, trust could be hard to build.

The mobility sector is keen to realise the full benefits of artificial intelligence (AI), not least to open up the revenues which data-driven connected services could offer. But moving forward, it must balance these opportunities with the rights of drivers, passengers and pedestrians. A number of concerns have already surfaced, all of which will become more pressing as the technology is further embedded into vehicles, mobility services and infrastructure.

Privacy and liability are two of the major challenges. As Christian Theissen, Partner, White & Case explains, mobility has become inherently connected to consumer habits and behavioural patterns, much like the e-commerce and social media industries. “The access, ownership, storage and transmission of personal data, such as driving patterns, must be taken into consideration by both lawmakers and companies gathering and using data,” he says. Meanwhile, in a world of AI-powered self-driving, at what point do regulators start blaming the machine when something goes wrong?

Part of the challenge in considering these issues is that as things stand, there is limited understanding among consumers around what rights there are. “Consumers appreciate AI,” says Cheri Falvey, Partner, Crowell & Moring, “and in particular the ease with which navigational apps help guide them to their destination. Whether they appreciate how their data is accumulating and developing a record of their mobility patterns, and what their rights are in respect to that data, is another question.”

There is often little precedent for regulators to rely on when making new policy in this arena, so it’s a good time to create a proactive regulatory strategy that invites discussion and collaboration from the start

This is in part because it is not always clear when AI is at work. A driver may register when a car’s navigation system learns the way home, but won’t necessarily realise that data on how a car is driven is being collected for predictive maintenance purposes, or that their data is being fed into infrastructure networks to manage traffic flow.

Theissen agrees. “Many consumers, even so-called digital natives, are entirely oblivious of how Big Data and AI are already in use today and affecting their lives,” he says, “and most are not aware of their rights in relation to them.” AI is often behind the scenes, from spam filters to ride-hailing apps, where it is used as an optimisation tool.

Transparency will need to improve. In the future, AI will drive vehicles and ultimately take responsibility for road-users’ safety, as well as power the mobility services which cities and governments hope will reduce emissions and congestion. Without developing understanding and knowledge among consumers of their rights on data ownership, the industry risks alienating people and harming its own ability to deploy the technology.

“AI is critical to the future of the automotive industry,” says Falvey, “and so is the ability of consumers to understand their rights and protect their data. If consumers cannot understand, they won’t trust AI or the companies that use it, and this will impact the future of innovation.” Already there have been some cautionary tales, she adds, with privacy lawsuits against ride-share companies which have had user data compromised by hackers. However, she adds, it is clear that automakers and tech companies are working with lawmakers, ensuring that there are mechanisms in place to help clearly define how data can be used.

Tricky business?

Unsurprisingly, this is unlikely to be straightforward. The primary question, says Theissen, particularly when it comes to autonomous driving, is whether old law can regulate new issues. Up until now, he suggests, the answer has been yes: in Germany, for example, traditional tort and product liability law has remained unchanged with regards to automated driving. The country brought new regulations for autonomous vehicles (AV) into force in 2017, and in 2016 established an ethics commission which produced a report comprising of 20 rules prioritising human safety, data protection and transparency.

NHTSA guidance makes it clear they expect autonomous vehicle operators to have documented processes for assessment, testing and validation of their crash avoidance capabilities and design choices, many of which have AI functionality

“However,” he continues, “the complexity of AI is definitely a factor that will shape regulation. One of the key challenges will be to develop cutting-edge technology in parallel with processes to adopt legislation and get the type-approval for new software. To cope with that, it seems increasingly likely that industry and legislators will have to work hand-in-hand.”

The issue of ‘AI literacy’ is also relevant: regulators and legislators will have to understand how it functions, and how it is applied in specific products and services. Furthermore, legislators will need to consider whether AI can really be regulated by ‘black letter law’—which is to say, specific and unambiguous laws—or whether governance through guidelines and self-regulation is more appropriate.

“Access to source code to understand what has happened when things go wrong is critically important,” says Falvey, adding that processes also need to be established for when things go wrong. “How AI may have changed the functionality of a vehicle through changes to the software presents another challenge,” she explains. “Telemetry data can help, but accessing telemetric data on a fleet of vehicles for use in root cause analysis and other safety functions requires significant planning to avoid unreasonable data storage demands.” Preserving and producing it to regulators, she adds, will present significant challenges as well.

Developments today

Work has already begun on the regulatory framework which will safely allow for the deeper integration of AI into vehicles and mobility. A February 2020 white paper on AI published by the European Commission stressed the need for a solid, European-wide approach that would improve lives and keep the bloc competitive on a global basis, whilst keeping any AI deployment in line with the EU’s values and protecting people’s privacy.

A regulatory and investment approach is recommended. Long-term, the bloc aims to build an ‘ecosystem of trust’ which gives companies the confidence and legal certainty they need to innovate. The EU identifies AI as a key technology in meeting its environmental targets, and notes the role the technology could play in enabling cheaper, more sustainable transport.

AI is critical to the future of the automotive industry, and so is the ability of consumers to understand their rights and protect their data. If consumer’s can’t understand, they won’t trust AI or the companies that use it

In the US, Falvey believes California leads the way, moving earlier this year on legislation that requires micromobility operators to submit anonymised trip data for its own use. The law will also apply for AVs, and clarifies protections for trip data.

“At the federal level in the US,” she continues, “NHTSA guidance makes it clear they expect autonomous vehicle operators to have documented processes for assessment, testing and validation of their crash avoidance capabilities and design choices, many of which have AI functionality.” NHTSA is also signalling expectations with regard to autonomous vehicle system architectures, and their potential to address pre-crash scenarios.

The challenge for regulators will be to protect citizens without stymieing innovation, and many have signalled they want to communicate with companies early and often, concludes Falvey: “There is often little precedent for regulators to rely on when making new policy in this arena, so it’s a good time to create a proactive regulatory strategy that invites discussion and collaboration from the start.” Automakers must not build their products in the dark: having a voice in the room now could save a lot of trouble later.

 

In the wake of the COVID-19 pandemic, product manufacturers and distributors—many of whom have pivoted to create PPE-related products for the first time—are now faced with a veritable morass of guidelines and requirements to navigate from a variety of governmental agencies. Recent enforcement actions by federal agencies have only highlighted the importance of understanding exactly how a product must be produced, advertised, labeled, and sold.  This begs the important question: who is the regulator and what is the rule?

Our product risk management team has been speaking to several trade associations in September 2020 about how to navigate the alphabet soup of federal agencies supervising COVID-19 product distribution.  The biggest takeaway:  How a product is advertised for sale plays a critical role in how it is regulated and by which agency .  The regulatory profile can mean the difference between required manufacturing registration or specific requirements as to product labeling.

This article outlines a few of the major players involved in regulating products designed to mitigate or prevent COVID-19—specifically, the Food and Drug Administration (“FDA”), Federal Trade Commission (“FTC”), and Environmental Protection Agency (“EPA”)—and discusses high-level considerations for entities who find themselves caught up in the regulatory alphabet soup.

Continue Reading Who is the regulator? What is the rule?: Navigating the Alphabet Soup of COVID-19 Product Requirements       

Recalls in Review: A monthly spotlight on trending regulatory enforcement issues at the CPSC.

Electric scooters have taken American cities by storm as micromobility companies expand to meet consumer demand for more convenient transportation options. As with bicycles, scooters have become a go-to option for consumers who are seeking socially distant activities and modes of transportation amid the COVID-19 pandemic.

The regulation landscape for powered scooters is still being charted. Although a federal safety standard which addresses electrical systems and lithium-ion batteries in personal e-mobility devices (ANSI/CAN/UL 2272) exists, there is no corresponding safety standard for regulating the overall operational, mechanical, or electrical safety aspects of powered scooters. Additional standards may be promulgated in the near future, however. The American Society for Testing and Materials (ASTM) Consumer Products Subcommittee on Powered Scooters and Skateboards (F15.58) has begun developing a proposed standard intended to minimize the common hazards associated with use of commercial electric-powered scooters by adults.

Given the lack of a mandatory federal safety standard for powered scooters, it is unsurprising that recalls of powered scooters were infrequent in in the first two decades that the products were on the market. The Commission has conducted 34 total recalls of powered scooters. Only nine of the recalls occurred between 1996 and 2015. The small enforcement “spike” in 2005 corresponds with CPSC efforts to track emergency-room visits related to powered scooters. At least 10,015 emergency room-treated injuries occurring between July 2003 and June 2004 were related to powered scooters. Recalls increased dramatically as hoverboards (also referred to as “self-balancing” electric scooters) were introduced to the market. Fourteen recalls of powered scooters were conducted in 2016 alone, closely followed by another ten recalls in 2017.

Hoverboards are the most frequently recalled type of scooter with 21 hoverboard recalls to date. All of these recalls occurred in 2016 or 2017 and were related to the vehicle’s lithium-ion battery pack potentially overheating, posing a risk smoke, fire, or explosion. The CPSC Office of Compliance has previously stated that the Commission considers hoverboards that do not meet the applicable voluntary standards (UL 2272 and UN/DOT 38.3) to be defective products that may pose a substantial product hazard to consumers. All manufacturers, importers, distributors, and retailers of hoverboards (and other powered scooters) should review their product lines to ensure that their products comply with the voluntary standards.

Recalls for traditional electric-powered scooters have been conducted for a wide variety of reasons, including: failure of the break caliper, improper wiring and wire insulation, and breakage of the weld that connects the handlebars to the scooter frame. Motor scooters, gas-powered scooter vehicles upon which a user sits, and water scooters have each been the subject of two recalls. The motor scooter recalls were conducted because the scooters would accelerate suddenly while in use. The water scooter recalls were conducted because hydrogen gas could build up in the battery compartments and cause the battery cover and battery package to forcefully expel from the scooter.

Powered scooters, and hoverboards in particular, have become a popular choice for winter holiday gifts. Consumers should keep themselves up to date on powered scooter recalls as the holidays approach, and follow instructions for replacement or refund (and proper disposal methods) if necessary. Replacement, refund, and store credit are the typical remedies offered by recalling firms. Less often, the remedy may be limited to repair by a dealer or providing a repair kit to the consumer.

* * * * *

About Recalls in Review: As with all things, but particularly in retail, it is important to keep your finger on the pulse of what’s trending with consumers.  Regulatory enforcement is no different – it can also be subject to pop culture trends and social media fervor.  And this makes sense, as sales increase for a “trending” product, the likelihood of discovering a product defect or common consumer misuse also increases.  Regulators focus on popular products when monitoring the marketplace for safety issues.

As product safety lawyers, we follow the products that are likely targets for regulatory attention. Through Recalls in Review, we share our observations with you.

Mopeds fall within NHTSA’s jurisdiction when they can go over 20 mph and are meant to be used primarily on roads.  They’re considered “motor-drive cycles,” which are a subset of motorcycles.  In NHTSA’s world, a motorcycle is “a motor vehicle with motive power having a seat or saddle for the use of the rider and designed to travel on not more than three wheels in contact with the ground.”[1]  A motor-drive cycle is “a motorcycle with a motor that produces 5–brake horsepower or less.”[2]  Since these mopeds are regulated by NHTSA, they cannot be imported into or sold in the United States without complying with the FMVSS.[3]

Since NHTSA is focused on vehicles meant for road use, one might wonder whether the use of bike paths changes NHTSA’s jurisdiction over mopeds.  Ultimately, though, NHTSA is focused on speed.  According to NHTSA’s published interpretations of its regulations, the agency “believe[s] that vehicles with speeds of over 20 mph are capable of on-road operation,” and therefore fall within their purview.  NHTSA makes classifications for vehicles in interstate commerce.  The classifications are meant to be as applicable in California as they are in Tennessee or Maine.  Some cities may have ample bike lanes such that it would be reasonable for the bikes to never be used on roads, but most do not. NHTSA’s classifications will not change from location to location.

Continue Reading NHTSA versus CPSC Jurisdiction Over Certain Micromobility Products

In light of the recent COVID related wave of bankruptcies affecting fashion brands such as John Varvatos and True Religion, the article explores the trends and implications since the one-year anniversary of ‘Mission Product Holdings v. Tempnology.’

It is no secret that the fashion industry has been steering against a headwind of challenges. Beginning with the rise of e-commerce and the layering on of significant amounts of debt, the current global pandemic might be said to have simultaneously exacerbated these vulnerabilities while also posing new obstacles, such as unforeseen inventory, vendor and supply chain issues.

In the span of five months, apparel companies such as True Religion, John Varvatos, Lucky Brands, and Brooks Brothers have filed Chapter 11 cases, some hoping to reorganize but, more often than not, ultimately pursuing strategic sales of their assets or opting for wholesale liquidations.

These unprecedented challenges are not without opportunities for acquirers and investors as well as licensees of brands. Notably, the wave of bankruptcies also coincides with the one-year anniversary of the Supreme Court’s decision Mission Product Holdings, Inc. v. Tempnology, LLC, a ruling that has a direct impact on the rights of a trademark licensee following the bankruptcy of a debtor-licensor.

Continue Reading Surge of Retail Bankruptcies Coincides With the Anniversary of ‘Tempnology’

On August 14, 2020, California Attorney General Becerra announced that the Office of Administrative Law approved final regulations under the California Consumer Privacy Act (CCPA). The approved regulations, which became effective immediately, guide businesses and consumers on the CCPA.  The final regulations can be found here.

Even before final approval of the regulations, the California Attorney General’s Office announced that it had already begun enforcing the CCPA in California. By July 10, 2020, the Office had issued warning notices to online businesses for failure to comply with the CCPA. The businesses receiving these notices will have 30 days to comply with the CCPA, or they risk a lawsuit being filed against them by the Attorney General’s Office. It is expected that in the future the AG will no longer issue warning letters and proceed with enforcement.

Continue Reading California Attorney General Begins Enforcement of CCPA Even Ahead of Regulations’ Approval

Recalls in Review: A monthly spotlight on trending regulatory enforcement issues at the CPSC.

As bicycles become a go-to social distancing option for consumers, we turn our attention in this Recalls in Review segment to an associated (and also closely regulated) product—bicycle helmets.  The CPSC mandates that all bicycle helmets manufactured or imported since March 17, 1995 meet the standard set forth in 16 CFR Part 1203.1(c).  This mandatory standard covers bicycle helmets and multipurpose helmets that can be used when riding a bicycle.  The standard does not cover helmets marketed for exclusive use in another designated activity, such as baseball or skateboarding.  (16 CFR Part 1203.4(b)).

The Commission has conducted 26 bicycle helmet recalls, with the first occurring in 1995 and the latest just last week.  CPSC attention to helmets remains fairly steady over time, with at least one recall most years, and no significant enforcement “spikes” at any point.

Continue Reading Recalls in Review: Bicycle Helmets

On August 14, 2020, California Attorney General Xavier Becerra released final implementing regulations for the California Consumer Privacy Act (CCPA). The CCPA became enforceable on July 1, 2020, and Becerra’s office submitted a final proposed draft of the regulations to the California Office of Administrative Law (OAL) on June 1, 2020. The Proposed Regulations have gone through several revisions since the publication of the initial draft in October of 2019. The OAL approved the final version along with an updated Addendum to the Final Statement of Reasons. The final implementing regulations take effect immediately. All businesses subject to the CCPA must now comply with both the statute and the regulations.

The final implementing regulations are similar to the draft proposed in June. However, the AG’s office has made several changes it characterizes as “non-substantive” and withdrawn certain proposed provisions “for additional consideration.” The “non-substantive” changes are intended to improve consistency in language (e.g., ensuring “consumer” is used throughout the regulations, or reorganizing definitions in alphabetical order) and are described in detail in the Addendum to the Final Statement of Reasons.

Continue Reading California Approves Final CCPA Regulations

As alluded to in last week’s post, Product Safety Regulations for Electric Bicycles and Scooters, micromobility products, such as e-bikes and scooters, fall at the intersection of jurisdiction between two distinct federal agencies: the Consumer Product Safety Commission (CPSC) and National Highway Traffic Safety Administration (NHTSA).

The CPSC is charged with protecting the public from unreasonable risks of injury or death associated with “consumer products.”  “Consumer products” broadly defined includes any product for use in or around residences, schools and in recreation.  CPSC’s jurisdiction expressly excludes “motor vehicles.”[1]

NHTSA, which is charged with ensuring safety on public road ways, has jurisdiction over “motor vehicles.”  “Motor vehicles” are “vehicle[s] driven or drawn by mechanical power manufactured primarily for use on public streets, roads, and highways, but does not include a vehicle operated only on a rail line.”[2]

There is no hard-and-fast rule as to what constitutes a “motor vehicle” subject to NHTSA’s jurisdiction.  Thus in determining whether a product is a “motor vehicle,” NHTSA typically considers such factors as:

  • the product’s intended use;
  • the product’s use of the public roadways and how incidental or predominant that use tends to be;
  • how the product is marketed;
  • the kinds of dealers that sell the product;
  • how or whether dealers may certify or register the product; and
  • the product’s speed.

Continue Reading 20 Miles Per Hour Divides NHTSA and CPSC Jurisdiction Over Micromobility Products

On Monday, more than a dozen states and major environmental and consumer organizations issued notices of intent (available here and here) to sue the Department of Energy (DOE) for alleged violations of the Energy Policy and Conservation Act (EPCA).

As discussed in previous client alerts, DOE administers EPCA by setting mandatory appliance efficiency standards or conservation standards for over 60 covered products. Under the law, DOE is required to reexamine the standards for each product at least once every six years, and must update the standards for certain products by specific deadlines.

Continue Reading States and Major Environmental and Consumer Organizations Threaten to Sue the Department of Energy Over Alleged Delays in Issuing Energy Efficiency Standards