For the past couple weeks, I’ve been immersed in projects and events related to social media and entrepreneurship: Crisis Commons’ Haiti efforts (affectionately referred to as “Geeks Without Borders”), Twiistup in Los Angeles, and Social Media Week in San Francisco. I’ve been fortunate to learn from thought leaders and connect with innovators with wisdom to share on a bewildering range of topics – enough material for at least a dozen blog posts. There’s been so much to ponder that I’ve had trouble distilling it down to discrete topics to write about in blog-sized chunks until now.
On Tuesday, as part of Social Media Week, I visited the Autodesk Gallery for a panel discussion entitled “The Next Challenge For The Crowd: Quickly Build Real, Hard, Complex Shit That Matters (Like Cars).”
With a title like that, I was not about to miss it. The Rally Fighter parked out front (right around the corner from a Tesla roadster, natch) foreshadowed the fascinating discussion inside. Many of the ideas which had been swirling around in my head for the past week coalesced in this vibrant 90-minute conversation with Jay Rogers, CEO and co-founder of Local Motors; Marten Mickos, former CEO of MySQL; and Chris Anderson, Editor-in-Chief of Wired, moderated by Matt Johnston.
Others who know far more than I do about the auto industry have covered Local Motors and the Rally Fighter in detail already, so I won’t repeat it here, although I encourage readers to check out the links. As a startup lawyer and social media industry executive, what I find fascinating are the legal, regulatory and risk management aspects of taking on this kind of challenge. Open source and crowdsourced software development still makes many IP lawyers queasy on a gut level; it’s antithetical to the very notion of intellectual property as a proprietary right that must be kept a closely guarded secret to maintain its economic value. Nevertheless, many entrepreneurs have figured out how to build successful businesses out of open source.
At the panel, Chris made the point that open source began as a movement in software development solely because techies were the only people to enthusiastically adopt the Internet as a collaboration tool prior to the dawn of the commercial Web (driven by graphical Web browsers starting with NCSA Mosaic in 1993 — although a few of us geekier non-engineers were mucking around with things like Usenet and Gopher), and therefore had a running head start on everyone else. As we’ve seen in recent years, many other types of projects can be developed using an open source or crowdsourcing model. The product of these initiatives is generally intellectual property; as long as we can get culturally comfortable that the IP belongs to the community rather than the individual, and get the necessary assignments and licenses in place to avoid any legal scuffles down the road, why not pursue ambitious design projects this way?
Having gotten comfortable with the IP issues, the subject that most concerns me is potential liability. If a piece of software crashes, you can reboot, roll back to the previous release, or restore from a backup. If a car crashes, people die. I asked the panelists to address this question and it prompted an interesting exchange. Jay likened the current state of the market to the world of custom shops and garage tinkerers, in which drivers who choose to make aftermarket modifications to their cars assume the related risks. (I’m not a personal injury expert, but I think it’s fair to say that in most cases, making mods that affect the vehicle’s performance, handling or safety would bar recovery in a product liability suit against the automaker if a causal relationship could be shown.)
As with open source software, it’s possible to disclaim many types of warranties by contract, but consumer protection law is paternalistic, with legislation and court decisions often making certain types of disclaimers void as a matter of public policy. Plaintiffs’ lawyers are an aggressive bunch, and I think it’s safe to say that they will do their best to poke holes in the most conspicuous waiver, disclaimer or release, however voluntarily entered into by the consumer. That led to Jay’s next point at the panel, which was that in the long run, if this business model is to be successful, it will be necessary to rethink and recalibrate some of these long-established legal and regulatory norms.
In reflecting on this potential shift, I’m reminded of the period in the late 1990s that marked a high point in the philosophy of cyberspace exceptionalism – described by Professor Eric Goldman as “the belief that the Internet was unique/special/different and therefore should be regulated differently.” 
Already recognizing the power of the consumer Internet as a communications medium, Congress enacted two critical “safe harbor” laws in 1996 and 1998 (Section 230 of the CDA and Section 512 of the DMCA, respectively) to shield online service providers from liability for user-generated content that is infringing, defamatory or otherwise actionable. (More about these in a future post.) As I often reminded friends and colleagues at MySpace, without these twin pillars of statutory immunity, we would have been sued out of existence within weeks or months at most (as would every other major social media site). It took some lobbying by the titans of the online industry (then companies like AOL, CompuServe and Prodigy), pitted against powerful interests on the content side (studios, networks, publishers and record labels), but in the end, Congress stepped in to protect the fledgling commercial Web. A similar approach could be taken with crowdsourced design in manufacturing complex products like cars, but given the patchwork of state and federal laws, regulations and court decisions related to product liability, this could prove to be a daunting political challenge.
I enjoyed meeting Jay and Matt yesterday, chatting with them at the SF Green Drinks event later that night, and of course ogling the striking Rally Fighter along with the rest of the passersby on Market Street. It will be interesting to see if this is a flashpoint marking the beginning of a bold new era of crowdsourcing in manufacturing. I wish the pioneers at Local Motors the very best and welcome their comments here.
Its really interesting to get your legal view on this. So many of the legal discussions are happening behind doors. Jay and the Localmotors team seem to be creatively working around the issues – I love the analogy to Burt Ratan and experimental aviation.
One interesting issue for me is the role of legal vs community. I say vs because my experience working with the music and movie industry says that even if the law is saying one thing, communities can decide something else. More specifically when we worked with clients who sued downloaders, the court of public opinion reached a different conclusion to the legal system.
What does this means for companies like Localmotors? I think it means that any legal attack on Localmotors will be met with counterattacks by their very supportive community. A charge against Localmotors will be seen as a broader charge against the most active community members too. And so individuals or brands that pursue legal action will have to deal with a slow legal judgement, but a swift community judgement.
Think we are going to see lots of interesting cases of community opinion of fairness vs legal challenges. Curious to hear what you think.
Shaun, thank you for your comment and thoughts on Local Motors – and thank you even more for inviting us to join you for the SMW event!
Antone, what a good question you asked during the panel. I’ve given some thoughtful consideration to two points: first is safety, second is IP.
In the case of safety I like to be very clear that while a car is a complex piece of machinery, we have been building them for over 100 years – and we know how to do it well, and we know how to make them safe. Our first customers understand what makes cars safe, so they assess the safety of the vehicle based on how it is built, which components it includes, as well as the experience of the people engineering and building.
A vehicle is either safe, or not. While liability is shared for the sake of market entry, we must sell safe vehicles in order to exist. Customers will test out just how safe the cars are – and word will spread.
Now a shorter thought on IP: our community is a tight-nit group which is in the habit of self regulating. Designers keep tabs on other designers, and they know the work of their peers. They call one another out for plagiarism, so it rarely happens. The same goes for unique engineering ideas.
Thanks again for the writeup and for taking the time to catch up with us!
Ariel
aferreira@local-motors.com
Shaun, thanks for your insightful comment. Your comparison to file sharing in the media industry is an interesting one. I do think there are some key differences; as you pointed out, community reactions to the RIAA suits and others show that the general public doesn't share the industry's level of moral outrage over economic harm to distributors (or even artists) from copyright infringement. By contrast, personal injury or death in product liability cases can cause emotions to run high, particularly if children are involved.
I agree that the supportive community of enthusiasts is likely to rally (pun intended) around Local Motors and any similar crowdsourced design initiatives. In my view, the key issue is likely to be how elastic the definition of relevant community becomes over time — and the extent to which acceptance of related risks extends into that community. For example, the kind of serious auto enthusiast who would build a kit car or engage in extensive customization could reasonably be said to voluntarily assume all risks associated with those activities, but what about a customer who has minimal knowledge of the engineering involved, but simply loves the exotic design of the Rally Fighter and wants to drive one?
In theory, it should be possible to waive related legal claims arising out of any accidents in the same way a terminal cancer patient may be willing to voluntarily undergo experimental treatment that hasn't been approved by the FDA. Without getting into a soapbox rant about tort reform and personal responsibility, I fear that US legal culture imposes harsh liability on businesses for truly accidental injuries, as embodied in the absurd “Warning: Coffee May Be Hot” warnings that have materialized on paper cups in recent years. Perhaps if we can restore a healthy level of personal responsibility that assumes a certain level of unavoidable (albeit tragic) accidental deaths and injuries, and empower consumers to make informed decisions to proceed in the face of fully disclosed risks, Local Motors will prove to be at the vanguard of a significant cultural shift.
Ariel, I appreciate your response. I really enjoyed the panel and look forward to hearing more from Local Motors.