FAA

Judge: It's always been legal to fly commercial drones in the U.S.

March 10, 2014: 5:00 AM ET

A ruling handed down last week strikes the FAA's prohibition on using unmanned aircraft systems for commercial purposes.

By Clay Dillow

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FORTUNE -- For years now a huge cross section of businesses -- enterprises ranging from utility operators to civil engineers to real estate brokers to wedding photographers -- has been waiting for the Federal Aviation Administration to clear unmanned aerial systems (UAS), more commonly known as "drones," for commercial use. It turns out they need not have waited at all. A federal judge has decided that the FAA's commercial drone prohibition is not actually federal law and that the FAA has no authority over small unmanned aircraft, a ruling that immediately opens U.S. skies to at least some kinds of commercial drone use.

Judge Patrick Geraghty of the National Transportation Safety Board has dismissed a case in which the FAA sought to fine drone operator Raphael Pirker $10,000 for using a lightweight, remotely-piloted styrofoam aircraft to capture aerial footage of the University of Virginia as part of an advertisement for the university's medical school. Pirker and attorney Brendan Schulman appealed the fine to the NTSB, and late last week Geraghty handed down a decision siding with Pirker.

The grounds: The FAA has prohibited the use of drones for commercial purposes since issuing a policy statement back in 2007, but it failed to go through the proper channels to codify that policy into federal law. Further, the decision reads, the FAA has never before defined small model airplanes like the one used by Pirker and most drone hobbyists as "aircraft" subject to broader FAA oversight, and therefore FAA rules and regulations that apply to "aircraft" don't, by rule, apply to these small model aircraft.

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"In plain language it says that there's no federal aviation regulation concerning model aircraft, or what are now more commonly referred to as 'drones,' and that those devices are not considered to be 'aircraft' for purposes of the FAA's rules and regulations," Schulman, a special counsel at Kramer Levin Naftalis & Frankel in New York City. "In reaching that conclusion it also says that the 2007 policy statement from the FAA that implemented a ban on the commercial use of drones is not enforceable as a regulation."

The FAA's blanket prohibition on using drones for commercial purposes may no longer be valid, Schulman says, but that doesn't necessarily mean companies can now take to the sky with UAS and do anything and everything they want to do. There are state and local laws that come into play, as well as privacy issues and matters of insurance and liability that have yet to be hashed out.

Nonetheless, it does open up the skies to commercial drone users who can abide by the letter of state and local laws already in place. And it firmly takes the operation of such aircraft out from under the purview of the FAA, at least for the time being.

That's a welcome development for a large swath of businesses large and small that have been waiting a decade or more for the FAA to issue guidelines and regulations allowing them to leverage UAS technologies to their advantage. The legal use of commercial drones is expected to have an economic impact between $80 and $90 billion in the first decade after the aircraft are cleared to fly, as everyone from Big Agriculture to small aerial photography businesses takes advantage of the cost savings and enhanced capabilities that UAS offer. Oil and gas companies want to use UAS to inspect flare stacks and pipelines, engineers want eyes in the sky over construction projects, utilities want to use drones to keep an eye on their infrastructure, and even mom-and-pop real estate shops want to use them to take better imagery of their properties.

Then there's the drone hardware business itself. Big aerospace players like Lockheed Martin (LMT) and Boeing (BA) and have significant interests in the commercial UAS industry, and several dedicated small UAS makers like Monrovia, Calif.-based Aerovironment, Canada's Aeryon, and Flyterra, and Hong Kong-based DJI all see significant upside in relaxed restrictions on U.S. domestic drone use as businesses large and small either purchase their own UAS or enlist the services of drone engineers and operators (remember Amazon's "drone delivery" stunt late last year?).

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The FAA could appeal the decision, though it's unclear if it will or even if it's in the agency's best interests. A set of proposed rules governing UAS flight is already expected from the FAA later this year, and following a period of commentary from industry and government a finalized set of regulations for domestic drone use will follow (likely in 2015 or 2016). Fighting the court's decision now might not lead to any meaningful decision before the proposed FAA rules come out later this year, and a decision that goes against the agency might further tie its hands during the rule-making process.

All that means that -- for the time being at least -- commercial drones are now free to fly in U.S. airspace, though, as Schulman points out, just because a business can fly a drone doesn't necessarily mean that it should.

"The decision indicates that there's no federal regulation that directly addresses the commercial operation of drones, and as a general proposition in the United States if there's no regulation prohibiting conduct then as American citizens we're free to engage in that conduct," Schulman says. "But that's still subject to standards of negligence and tort law that might apply in the event that someone actually gets hurt or property is damaged. It's not a free license to do anything you want."

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