Product liability in a connected world

Historically, product liability laws on both sides of the Atlantic have channelled liability towards the manufacturer or producer of a defective product. However, these existing liability regimes are struggling with interconnected products and the Internet of Things (IoT), which involve sophisticated interdependencies between hardware, software, networks and data. Where something goes wrong, it is hard to determine who is – and, as a matter of legal principle, should be – liable.

Imagine that you are driving, swerve your car into a neighbouring lane and cause an accident. Historically, liability would rest either with you (as the registered owner of the vehicle, and a bad driver) or the vehicle manufacturer (if it was e.g. a vehicle fault that caused you to swerve). But imagine that your car was an interconnected, automated vehicle. Responsibility for the accident could lie with you; the vehicle manufacturer; the designer of the system, mapping and/or sensor software; the provider of data to the mapping app; the network provider; perhaps even a third party cyber attacker; or a combination of these.

The EU’s current product liability regime is not fit for purpose in an interconnected world; for example, it is not even clear that downloadable software constitutes a “product” under the Directive (and the same is true of US products law). The Commission has launched a consultation on this issue, but change will take time.

In the meantime, whilst claimants and their lawyers ask the court to impose duties to fill this vacuum, there are measures that IoT businesses can take to protect themselves. These may look traditional but in the future, as today, who pays will largely be decided by contractual wording and what information is provided to end users and other affected parties. Therefore you should be clear in your contracts and product information about the intended uses of a product and seek to limit or exclude liability where possible. Similarly you should be clear about the allocation of risks between the hardware providers, software vendors and network providers. It is also worth exploring insurance options, as this market is evolving, with premiums expected to decrease over time.

For further information please see a more detailed article on the subject available on Freshfields Digital.