Being a LEO and a fellow UAV flyer, I see where both sides of this call could have done something different. The flyers clearly wanted to push the fact they weren't doing anything wrong and intentionally refused to comply with the officers request.
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I think once the officers found out this was a drone call, they didn't have a lot of experience with this kind of call so they were winging it.
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I think a simple explanation by the flyers would have gotten them on their way mush sooner and nobody would be in cuffs. I'll bet next time this happens the officers will less lenient and hopefully more informed.
IMO, it's never a good idea to defy the police, whether they are right or wrong. I agree with Briflyer that the cops in the video didn't know the law, but were investigating on the suspicion that a crime had been committed. Their suspicion was probably unfounded, given that simply flying a drone over private property (as the complaint apparently alleged) is not, in itself, illegal (although there may or may not have been other potential violations involved). At one point, an officer stated that he didn't know whether overflight of private property is illegal, so his suspicion that a crime had been committed was tenuous, but he appeared to believe it. It would be interesting to see what the courts say about that if it ever gets there. Do the police have reasonable suspicion if the alleged activity is not illegal but they are unfamiliar with the applicable law? What would have happened if the police had observed a kilo of heroin in the back seat? Would the drug bust get tossed as fruit of the poisoned tree? I don't know, but you can be sure it would be litigated.
In that situation in the video, the approach I would suggest (if I had my wits about me) after being told the reason for the stop would be to say "Officer, I have a registered unmanned aircraft that I have operated legally. The FAA regulates such flights, and I have complied with those regulations. I understand that the complainants don't like that, but my activities have been legal. Do you have any reason to believe I have violated any law or regulation, and if so, what is (are) they?"
When asked for ID, I would be to politely ask "Am I
required to give that to you?" If the answer was yes, especially with video rolling, I would definitely ID up. Keep it friendly and pleasant, but make sure to continue to query the officers as to what they are actually
requiring you to do. Be sure to make it clear that you will comply with what they require, but will not be going beyond that voluntarily. It's also wise to ask pleasantly "am I free to go?" and if not "when will I be free to go?" The time to determine the legality of the stop and ID check is later, through a complaint or court process, not in the field with 7 or 8 armed officers on you. If you keep it friendly, it just seems much more likely that the officers would consider the legality of their actions, rather than digging in their heels. And if they are wrong, contest their actions later.
My $.02, FWIW.