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«JOURNAL OF LAW, ECONOMICS & POLICY VOLUME 10 SPRING 2014 NUMBER 2 EDITORIAL BOARD 2013-2014 Steve Dunn Editor-in-Chief Crystal Yi Meagan Dziura Sarah ...»

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Drones may also be used like tracking beepers and GPS tracking devices to track suspects. The Supreme Court has held that attaching a tracking beeper to a drum of chloroform did not violate the Fourth Amendment rights of the eventual purchaser.80 Similarly, the Court has held that “[a] person travelling in an automobile on public thoroughfares has no reasonable expectation of privacy in his movements from one place to another” and that the use of a tracking beeper is analogous to following a vehicle and tracking through visual surveillance.81 However, the Supreme Court held that the use of a tracking beeper to reveal information that law enforcement “could not have obtained by observation from outside the curtilage of the house” constituted a search in violation of the Fourth Amendment.82 In U.S. v. Jones, the Supreme Court considered the Fourth Amendment implications of a GPS tracking device.83 Building upon the previous tracking-beeper jurisprudence, the Court applied a property-based trespass approach to the Fourth Amendment and held that the Government conducted a search under the Fourth Amendment when it physically trespassed on private property to install the GPS tracking device.84 The Court did not address whether the search could have been considered reasonable given the circumstances.85 The Supreme Court has not directly addressed drone surveillance;

however, the technology is analogous to the other forms of surveillance discussed above. While the Fourth Amendment jurisprudence protects the privacy of an individual’s home, there is little constitutional privacy protection outside of the home.86 If drones become commonly used by the public, that could significantly affect the Fourth Amendment analysis under the test established in Kyllo.87 80 United States v. Knotts, 460 U.S. 276, 278–79, 285 (1983).

81 Id. at 281.

82 United States v. Karo, 468 U.S. 705, 715 (1984).

83 United States v. Jones, 132 S. Ct. 945, 948 (2012).

84 Id. at 949–53.

85 Id. at 954.

86 For further discussion of drone surveillance and the Fourth Amendment, see generally, Joseph J. Vacek, Big Brother Will Soon Be Watching—Or Will He? Constitutional, Regulatory, and Operational Issues Surrounding the Use of Unmanned Aerial Vehicles in Law Enforcement, 85 N.D. L. REV. 673, 679–84 (2009) (discussing the limits of police UAV surveillance); Travis Dunlap, comment, We’ve Got Our Eyes on You: When Surveillance by Unmanned Aircraft Systems Constitutes a Fourth Amendment Search, 51 S. TEX. L. REV. 173, 183–92 (2009) (exploring Fourth Amendment violation tests in the

context of requiring police warrants for aerial surveillance); Paul McBride, comment, Beyond Orwell:

The Application of Unmanned Aircraft Systems in Domestic Surveillance Operations, 74 J. AIR L. & COM. 627, 639–51 (2009) (exploring the evolution of warrantless surveillance activities and modern jurisprudence).

87 Kyllo v. United States, 533 U.S. 27, 40 (2001).

2014] AN ECONOMIC PERSPECTIVE 451 According to the Restatement (Second) of Torts, an aircraft may be liable for trespass “if, but only if, (a) it enters into the immediate reaches of the air space next to the land, and (b) it interferes substantially with the... use and enjoyment of [the]... land.”88 While the courts have not yet determined whether this rule applies to “space rockets, satellites, missiles, and similar objects,”89 it is reasonable to believe that any flying drone, regardless of its size, could be considered an aircraft. Accordingly, this comment proceeds under that assumption.

The Restatement view is based on a 1946 Supreme Court opinion that “had the effect of making the upper air, above the prescribed minimum altitudes of flight, a public highway.”90 The Supreme Court “preserve[d] the action of trespass as a remedy where the ‘immediate reaches’ are invaded by flight” by holding that “if the landowner is to have full enjoyment of the land, he must have ‘exclusive control of the immediate reaches of the enveloping atmosphere,’ and ‘invasions of it are in the same category as invasions of the surface.’”91 The term “‘immediate reaches’ of the land has not been defined as [of] yet, except to mean that ‘the aircraft flights were at such altitudes as to interfere substantially with the landowner’s possession and use of the airspace above the surface.’”92 The Restatement authors suggest that “flight within 50 feet” would be within the “immediate reaches,” while flight above 500 feet would not be.93 Flight at altitudes in between 50 and 500 feet would likely “present a question of fact.”94 While the trespass doctrine provides a potential cause of action for drones flying close to the ground, the doctrine of nuisance could potentially apply to drones flying at higher altitudes.95 In general, a cause of action for nuisance may exist when there is an intentional and unreasonable “invasion of another’s interest in the private use of enjoyment of land.”96 Accordingly, an individual must reasonably demonstrate that high-altitude drone surveillance interferes with the use and enjoyment of their land to have a valid cause of action.

Given the current state of the law, which is pieced together from constitutional and tort law, new laws will be necessary to address the deployment of domestic drones. The next section discusses the economic perspective of privacy to establish an economic framework that may be used to evaluate potential new laws and policies.





88 RESTATEMENT (SECOND) OF TORTS § 159 (1965).

89 Id.

90 Id. § 159 cmt. i; see generally United States v. Causby, 328 U.S. 256 (1946) (case discussed by the restatement authors).

91 RESTATEMENT (SECOND) OF TORTS § 159 cmt. j (1965) (quoting Causby, 328 U.S. at 264–65).

92 Id. § 159 cmt. l.

93 Id.

94 Id.

95 Id. at § 159 cmt. m.

96 RESTATEMENT (SECOND) OF TORTS § 822 (1979).

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III. ANALYSIS: AN ECONOMIC PERSPECTIVE

In the absence of current legislation and settled law, economic analysis provides a cogent framework to analyze the societal effects of the domestic use of drones. This section discusses the economic view of privacy and explains Song’s economic model of surveillance, which may be used to analyze potential legal and policy alternatives regarding domestic drone surveillance.

A. Economic Model of Surveillance

Economic models may be used to analyze the utility and costs of surveillance to assist in determining the socially optimal amount of surveillance.97 These models are predicated on the assumption that individual citizens are “rational economic agents” who will “seek to maximize their ‘selfinterest’” when making decisions about their own behavior, privacy, and other activities.98 Utility may be directly and indirectly derived from privacy.99 Direct utility from privacy includes the intrinsic value that individuals and society place on privacy, including intimacy and seclusion.100 Indirect utility of privacy results when individuals or society “value privacy because it facilitates other benefits,” such as “avoid[ing] sanctions for socially undesirable conduct.”101 While utility is generated by privacy, surveillance may also generate social utility by promoting security.102 Surveillance promotes security through a combination of prevention and deterrence of harm.103 Prevention includes law enforcement interventions that prevent crime and interventions that enhance public safety, such as preventing swimmers from drowning or 97 See, e.g., Song, supra note 6 (developing a model for finding the optimal privacy protections for both accounting for both the benefits of privacy and the benefits of deterrence); Hugo M. Mialon & Sue H. Mialon, The Economics of the Fourth Amendment: Crime, Search, and Anti-Utopia (July 4, 2004), available at http://ssrn.com/abstract=591667 (using a game theoretic model to determine the conditions where the protections of the Fourth Amendment are likely to produce positive results).

98 HENRY N. BUTLER & CHRISTOPHER R. DRAHOZAL, ECONOMIC ANALYSIS FOR LAWYERS 5 (2d ed. 2006); see generally Alessandro Acquisti, The Economics of Personal Data and the Economics of Privacy, 7–24 (Working Party for Info. Sec. and Privacy & Working Party on the Info. Econ., Background Paper No. 3, 2010), available at http://www.oecd.org/sti/interneteconomy/46968784.pdf (presenting and critiquing several economic theories of privacy, particularly the Chicago School).

99 Song, supra note 6, at 8.

100 Id.

101 Id. at 9.

102 See id. at 3.

103 Id. at 6–7.

2014] AN ECONOMIC PERSPECTIVE 453 children from being hit by cars.104 Surveillance has a deterrent effect since the information gathered increases the probability of punishment for criminals.105 Assuming the presence of surveillance is known, potential criminals will be less likely to commit crimes since they know authorities are observing the criminals’ activities.106 What Song refers to as “privacy disutility” results as individuals lose privacy and the associated utility.107 Song identifies the three main causes of “privacy disutility” as losing informational, attentional, or physical privacy.108 Informational privacy is lost if information that an individual desires to be kept private is exposed.”109 Attentional privacy is lost due to mere unwanted attention, even if nothing is actually exposed.110 Physical privacy is lost from the presence of a third party in a location where seclusion or intimacy is expected.111 Privacy and security are competing externalities.112 A desire for security leads to increased surveillance and the need for others to sacrifice privacy.113 A desire for increased privacy would potentially lead to less surveillance and decreased security for other members of society. Applying the Coase theorem, if transaction costs are zero, the higher valuing user of information should be able to compensate the owner of the information for any externality caused by the value-maximizing activity.114 Whether information is disclosed will depend upon the value the owner places on keeping the information private relative to the value that other users place on obtaining the information.115 Surveillance would then prevail when the value of increased societal security is greater than the perceived value of increased individual privacy. As discussed above, this value calculation will depend on the utility and disutility associated with specific activities and types of information. This would be true if the transaction costs were zero; however, the transaction costs of bargaining for the privacy of information will likely be substantial. Given these high transaction costs, there will be a significant loss of utility if private information is revealed by increased surveillance.

104 Id.

105 Song, supra note 6, at 6–7.

106 Id.

107 Id. at 7.

108 Id. at 7–8.

109 Id. at 7.

110 Id. at 7–8.

111 See Song, supra note 6, at 8 (discussing the privacy disutility created by the presence of a dog on an intimate date).

112 Kathleen Wallman, The Tension Between Privacy and Security: An Analysis Based on Coase and Pigou, 3 J. TELECOMM. & HIGH TECH. L. 397, 397–408 (2005).

113 Id. at 404.

114 See id. at 403–04.

115 Acquisti, supra note 98, at 4.

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Since individuals behave rationally116 and seek to maximize utility, it is logical that individuals will look for ways to minimize privacy disutility.117 Individuals may respond by “avoid[ing] the behavior altogether due to the lack of privacy” or employing defensive measures.118 An individual will likely focus on her private marginal utility and rationally decide “not to engage in an activity if the marginal privacy disutility outweighs the [private] marginal utility from engaging in the activity.”119 However, since there may be “external benefits to engaging in the activity,” “the social marginal benefit from the activity may be greater than the private marginal utility to the individual.”120 Therefore, social costs of avoidance will result if individuals choose not to participate in socially beneficial activities due to a loss of privacy from surveillance.121 Imperfect information regarding surveillance may increase social costs of avoidance since people may not perform socially beneficial activities since they think they are being watched.122 In addition, “social costs from avoidance will generally increase as the area subject to surveillance encompasses more activities.”123 Instead of completely avoiding activities impacted by surveillance, individuals may choose to engage in defensive measures.124 While defensive measures, such as encryption of data or privacy fences, are costly, the use of defensive measures will “reduce [the] overall social costs of surveillance” since rational “individuals will [only] take defensive measures to protect their privacy... if the cost of the defensive measure is less than or equal to their privacy disutility or private benefit forgone from avoidance.”125 In addition, surveillance results in administrative costs in the form of “collection costs” and “processing costs.”126 These costs are incurred by the party undertaking the surveillance and are related to the means and scope of the surveillance undertaken.127 Accordingly, “the surveillance actor has the socially optimal incentive to minimize” these costs.128 As technology lowBUTLER & DRAHOZAL, supra note 98, at 5.

117 Song, supra note 6, at 11.

118 Id.

119 Id.

120 Id.

121 Id.

122 See id. at 12–13 (discussing example of teenager who fails to use birth control since she feels

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