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updated 3/11/2013 11:50:57 AM ET 2013-03-11T15:50:57

For every U.S. military drone such as the Predator, there are about seven hobbyist craft in America that can barely carry a camera, much less a missile. But they present their own legal challenges for privacy and safety.

The Unites States has 40 to 50 thousand hobbyist drones (vs. about 7,000 for the military), said Chris Anderson, former editor-in-chief of Wired magazine and now CEO of 3D Robotics, a seller of equipment for building small drones. He and other experts were speaking at a panel discussion on drones and the law on Monday (Mar. 10) at the South by Southwest Interactive conference in Austin, TX.

And while far less dangerous, small drones are in an even greater legal limbo. As essentially flying cameras, drones test the right to privacy in the U.S. The general rule has been, if you're inside, you have an expectation of privacy, if you're outside, you don't.

But what if a drone flies into your yard and then peeks into your window? "Things like drones are starting to chip away at [privacy rights], said Ryan Calo, assistant professor at the University of Washington Law School, "because it's getting so easy to follow us around." [See also: Drones Large and Small Coming to US ]

Liability is another fuzzy area. "What happens in the case of an accident where it's not really clear who is responsible?" asked Calo.

Technically, a drone isn't just a radio-controlled plane or helicopter, but one equipped with GPS and the smarts to fly itself. That could allow drone owners to program the craft to visit a set of GPS "waypoint" coordinates and then fly back home, for example.

It also enables "geofencing," limiting the drone to a certain "box" in the air that it won't leave even if the pilot loses control.

Calo and Anderson have called drones "flying smartphones," because they pack the motion sensors, GPS, wireless communications and processing power similar to what's inside an iPhone or Android device. If the comparison holds, will there also be drone apps in the future?

"Someone's going to be the operator and download [an app]," said Calo. "So all the geofencing is wonderful, but on the other side of that ledger, there's' going to be a dive-bomb app." Who would be responsible for a crash, he asked, the drone owner or the app coder?

One thing that's fairly clear for hobbyist drones is where they cannot fly. The FAA limits them to no more than 400 feet in altitude and restricts them from airports or built-up areas. So a drone shouldn't be flying through Manhattan — or near Kennedy Airport at 1,750 feet — where one was reportedly spotted last week.

That's hobbyist drones. In 2015, the FAA will release regulations for commercial drones that might, for example, be used for filming areal scenes in independent movies and music videos (as they already are now, under the legal radar, as it were). They will likely play a role in news reporting as well.

Will that translate into a fleet of TMZ drones chasing celebrities?

"I think the drone journalism aspect really brings to the fore a clash of values," said Nabiha Syed, an attorney working at the Information Society Project at Yale Law School.  "On the one hand, it would be really hard to have a law challenging the newsgathering aspects of drones," she said. However the First Amendment protects people gathering in public from "undue surveillance," she added.

And then there's the matter of bad press around safety. "It would be awful optics to be running your drone after Lindsey Lohan and take her out," said Syed.

© 2012 TechNewsDaily

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