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Litigation Issues Likely to Confront the Wireless Industry

As the word "wireless" replaces previous buzzwords like "Push," "B2B," "Broadband," and "New Economy" as the Next Big Thing, it is appropriate to examine the some of the litigation issues likely to confront the wireless industry over the next two-three years. First of all, everyone is talking about "wireless," but what does it mean? Technology resource www.techweb.com defines wireless as: "Radio transmission via the airwaves." Before we address the litigation issues, let’s spend a moment on the devices, the networks, and the types of services one can expect. This will give an understanding of the issues, and wireless’ huge benefits to business.

Wireless devices include wireless phones, Personal Digital Assistants (PDAs) -- such as the Palm series, Handspring Visor, Compaq iPaq -- connected with modems, two way pagers such as Research in Motion’s popular Blackberry device, and laptops accessing the conventional Web via technologies such as now bankrupt Metricom’s Ricochet service, 802.11b LANs (known as Wi-Fi), as well as competing technology standard Bluetooth.

Wireless transmission is achieved utilizing various technologies, such as infrared line of sight, cellular, microwave, satellite, packet radio and spread spectrum. Current networks transmitting data operate at such low speeds as 9600 baud, reminiscent of the early days of the World Wide Web. These networks will evolve over the next several years into high-speed networks, capable of supporting all sorts of bells and whistles not yet contemplated, as well as those which engineers are currently implementing into prototypes. Examples of the bells and whistles are voice activation/recognition, MPEG 4 video with its myriad interactive capabilities, and Global Positioning System functionality. The types of data to be transmitted will include communication services such as voice, email, Short Message Service, instant messaging, information services such as traffic reports, movie times, sports scores, stock quotes; entertainment such as interactive games, both single player and multi-player, music downloads and streams, even, potentially, video programming; business utilities; and the more futuristic location based advertising and "mCommerce" (using the wireless device to effect financial transactions such as purchases of goods or services, and monetary transfers).

As in many industries, the litigation issues affect the business growth of the wireless industry in three ways: (1) litigants prevailing against industry businesses for problems intrinsic to the industry, (2) high volume of litigation, which, even if unsuccessful, drains money and effort from the growth of businesses, and/or fear of such litigation, which inhibits the entrepreneurial spirit, and (3) governmental regulation designed to protect the citizenry from real or perceived hazards of the industry.

Product liability

Is your cell phone sending carcinogenic waves into your brain? Experts are debating the dangers of radiation exposure from wireless devices. Many studies say that there is no evidence of such a phenomenon, but the body of studies which disagree is growing, and there have been safety standards relating to wireless phone transmissions for many years. Will litigation interfere with the growth of the industry? With the Bluetooth and 802.11b wireless local networking phenomena looming, will people spend their days walking around inside radioactive fields? Even if the answer is no, will that fact prevent litigation from occurring on a large scale? Consumer adoption may be affected by fears relating to this issue. Will governmental regulation prevent the wireless industry from implementing new innovations, or cause the industry significant delays and substantial expenditures in opposing and/or complying with such regulations? It is difficult for non-scientists like us to predict the results of scientific research into the effects of cell phone transmissions and wireless LAN transmissions on regular users of these technologies, but it is not as difficult to anticipate the reactions of consumers and the government. As long as science is conflicted on the issues, some consumers will litigate over these safety issues. If incidence of brain cancer goes up in the business community, among early adopter, the industry will have significant litigation problems. Similarly, as long as fears of such health dangers are not vanquished by scientific study, government will be more likely to continue to regulate the nature and amount of transmissions which emanate from wireless devices. It is certainly conceivable that governmental agencies will issue prophylactic regulations regarding future technological innovations, requiring greater testing, or simply preventing some technologies from being developed without significant adjustments to the technical specifications

Liability to manufacturers, service or content providers for auto accidents

Many municipalities have already passed laws against the use of wireless phones while driving within their own jurisdictional limits. Eight state legislatures have already outlawed the use of cell phones by drivers, unless the drivers are using hands-free kits. Is this legitimate? A recent study by the California Highway Patrol revealed that, during the survey period, more people were involved in automobile accidents as a result of fooling with the car stereo than the cell phone. Of course, more drivers have stereos than cell phones. Regardless of the merits of such legislative action, the movement to regulate wireless phone use while driving is growing. These types of regulation and litigation have been attempted with billboards and other outdoor driving distractions with varied success. They have generally broken down into two categories: (1) Litigation challenging regulation of placement and/or content of billboards along roadways, and (2) Litigation involving parties responsible for the placement and/or content of billboards in the context of an auto accident lawsuit. In general, city and state rights to limit content and/or placement of billboards has been upheld on public health and safety grounds. However, litigants seeking to blame auto accidents on roadside distractions have generally lost these claims. Extrapolating these trends to cell phones, it is conceivable that the regulations against use of a cell phone while driving, if drafted with sufficient particularity, will withstand judicial scrutiny, while attempts by drivers to blame their own lapses on cell phone manufacturers or carriers will fail. Of course, massive litigation itself, without regard to the success of the plaintiffs, can pose a serious problem for any new industry.

Reliability of transactions

Will the industry be responsible for consumer and business losses caused by flaws in the service provider infrastructure? For example, day traders will attempt to pin liability on carriers for failing to execute a trade. Any other time sensitive transactions can raise similar liability issues. Examples include eBay, business auctions, even legitimate online sports betting, assuming that the wireless gaming business is granted any legitimacy. A not-too-distant future scenario may involve participating in multi-player games for "cash or prizes" on a wireless device. Taking a look at similar litigation relating to the wired internet, disputes generally relate to one of two categories: (1) disputes over the legitimacy of class actions for service failures or other system inadequacies, or (2) disputes over the applicability of the arbitration provision in the service agreement at issue, often requiring interpretation of the Federal Arbitration Act ("FAA"), 9 USC §1, et seq. The class action litigation generally relates to the procedural issues of identifying a class and determining who may be in that class. The FAA litigation arises from the nearly universal practice by electronic service providers of including an arbitration provision in its service agreement. Reported cases, then, focus on whether or not a claimant is subject to the arbitration provision in the service agreement.

As with any nascent technology-driven industry, litigation and regulation may play a significant role in the nature and speed of industry development. Attorneys familiar with the legal landscape will be in demand. As the technology and, often, the services will be new, it will be important to be able to look at related and seemingly unrelated areas of litigation and policy, and extrapolate future legislative and judicial responses to the issues. Don’t forget those arbitration provisions. And don’t be afraid to predict the future!

Copyright 1999

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