In short:
The EU’s proposed new Product Liability Directive will be particularly important for the life sciences industry. Many of the leading cases under the current “no fault” regime concern pharmaceuticals and medical devices, and the Commission has singled out the sector as being one where consumers face excessive burdens when bringing product liability claims. The proposed Directive brings new products and economic operators within scope, expands the definition of defect, reverses the burden of proof in some cases and extends limitation periods for consumers to sue. Relevant companies will need to review their potential exposure to product liability claims, as well as their distribution, insurance and other contractual arrangements ahead of the new regime entering into force, which is likely to be in 2024-2025.
In greater detail:
The Product Liability Directive 1985 (the 1985 Directive) has proven remarkably adaptable to technological and scientific developments. For over 35 years, it has allowed consumers who suffer physical injury or other harm as a result of a defective drug, medical device or other consumer product to recover compensation from the producer without having to show fault.
Periodic reviews of the legislation by the European Commission – most recently, in 2018 – have concluded that the regime is broadly fit for purpose. Despite this, the Commission has formed the view that such significant reform is necessary that an entirely new directive is needed. On 28 September 2022, it published its proposal for a revised Product Liability Directive (the proposed Directive). Our blog here provided an overview of our initial reactions.
Here, we explore in more detail the potential impact of the proposed new regime for the life sciences sector.
What is staying the same?
Many life sciences companies, particularly those which produce, import or supply physical products (such as medical devices and vaccines) for use in the EU will be well-acquainted with the current product liability regime under the 1985 Directive. Products, and the producers of those products, which previously fell within scope of the 1985 Directive will remain within scope.
The core elements of the proposed Directive will also be familiar. It will remain a no-fault liability regime, whereby individuals who can prove that they have suffered personal injury, death or property damage caused by a defective product can sue the manufacturer, own-brander, importer or (in certain circumstances) the distributor of that product for compensation.
Many of the existing defences for producers will remain – including the development risks / state of the art defence. Some defences have been narrowed slightly, but overall the limited changes in this area will be welcomed by industry.
Overall, the proposed Directive still aims to strike a fair balance between the interests of producers and consumers, although as we will come on to, many of the proposed changes seem likely to shift the balance further in favour of consumers.
New life sciences companies and products brought within scope
The proposed Directive will bring new life sciences products within its scope. Most notable is the express inclusion of additional intangible products, including software and digital manufacturing files (eg for 3D printing purposes), whether or not they are incorporated into another product. Certain life sciences software is already within scope of the EU’s Medical Devices Regulation (MDR) and In Vitro Diagnostic Medical Devices Regulation (IVDR), though the proposed definition in the Directive will capture additional software beyond that with a specified medical purpose, as is the case in the MDR/IVDR.
The concept of ‘producer’ under the 1985 Directive will be replaced by that of ‘economic operator’, similar to that used in other EU product-related legislation, including the MDR and IVDR. The use of more consistent terminology is likely to be a welcome change, although the definitions do not align perfectly at present, and the Commission has not clarified the rationale for the differences.
The proposed Directive will retain and expand a hierarchy of potential defendants. As under the current Directive, the manufacturer, own-brander and/or importer into the EU of a relevant product can be sued, on a joint and several basis. A distributor may be sued in the alternative, if it fails to identify for the claimant one of these primary producers within one month of being asked to do so (previously, this information had to be provided ‘within a reasonable time’).
Additional economic operators, not recognised under the MDR/IVDR, may face liability under the proposed Directive even if they do not have obligations under the MDR/IVDR – for example, a natural or legal person who substantially modifies a product after it has been placed on the market, if this is outside of the original manufacturer’s control. This could have particular implications for medical devices and other healthcare products which can be combined with other products, where the user (whether a professional or otherwise) exercises discretion and may combine product components in a way not envisaged by the original manufacturer.
Controversially, fulfilment service providers may also be liable, for the first time in a medical devices context. The proposed Directive will also expressly bring authorised representatives within scope, where the manufacturer is based outside the EU, reflecting the position in Regulation 11(5) MDR. This may lead ARs and manufacturers to re-examine their existing agreements and arrangements, eg insurance.
We described other changes to the scope of potential defendants in our earlier post.
Additional criteria for assessing defect
The 1985 Directive provides that ‘a product is defective when it does not provide the safety which a person is entitled to expect, taking all circumstances into account…’ This principle, confirmed in case law to mean the expectations of persons generally – an objective test, rather than the subjective expectations of an individual claimant – has often caused confusion on the part of claimants.
Helpfully, the proposed Directive proposes clearer wording on this point, stating expressly that a product will be considered defective when it ‘does not provide the safety which the public at large is entitled to expect.’ However, it remains to be seen how this clarification will interact with the later provision that the ‘specific expectations’ of the intended end-users must be taken into account when assessing defect. Further guidance on this would be welcomed, particularly in the life sciences context where products are often highly targeted to alleviate specific symptoms or conditions, or otherwise improve quality of life in a specific patient population.
The proposed Directive provides further clarification on the relevant circumstances to be taken into account, including expressly stating that ‘the presentation of the product’ includes its ‘instructions for installation, use and maintenance.’ We expect this to be a particularly welcome change in the life sciences context, where we see many claims relating to harm which could have been avoided if the clear and detailed instructions for use provided with a product had been heeded. However, its interaction with the need to take into account ‘the reasonably foreseeable use and misuse of the product’ is uncertain. This provision is, presumably, intended to mirror the general safety and performance requirements for medical devices to demonstrate conformity with the MDR, as part of a risk assessment process. If a reasonably foreseeable misuse of a medical device is specifically warned against in its instructions for use, does that warning carry more weight in determining whether the product is defective? Again, further guidance would be helpful here.
The proposed Directive also provides new circumstances which are expressly to be taken into account when determining defect, including whether the product can continue to learn (eg through AI) after deployment. Unhelpfully, this list of circumstances is proposed to include the fact of any product safety intervention, such as a recall or other field safety corrective actions (FSCAs), whether by a regulator or the economic operator itself, as well as non-compliance with EU product safety requirements (including cybersecurity requirements). The recitals to the proposed Directive state that such interventions should not, of themselves, create a presumption of defectiveness, but further guidance will be needed to provide comfort to relevant economic operators, and limit the risk of unintended consequences.
Introduction of rebuttable presumptions to prove defect or causation
Perhaps the most significant change under the proposed Directive is the proposed introduction of rebuttable presumptions to help consumers to prove defect and/or causation. The Commission’s 2018 review of the 1985 Directive noted that although the current regime broadly functions well, consumers still face difficulties when seeking to prove these elements of a claim, particularly in cases involving pharmaceutical or other healthcare products.
The Commission had considered reversing the burden of proof, at least for certain complex products (such as those involving AI), so that a manufacturer would have had to prove that the product was not defective. Although the proposed Directive proposal does not (explicitly) go this far, it introduces the concept of rebuttable presumptions to assist a consumer to prove defect and/or causation. This is a significant shift in the balancing of consumer and producer interests, and the practical effect may well be to shift the burden of proof to defendants in some cases, especially those involving scientific uncertainty, which could involve ‘proving a negative.’
The proposed Directive introduces three key rebuttable presumptions:
- Defect: Where the defendant fails to comply with an order to produce information (itself a new requirement, which can be ordered by the court), or the claimant establishes that the product does not comply with mandatory safety requirements or that the damage was caused by an obvious product malfunction during normal use or under ordinary circumstances, the product is presumed to be defective.
- Causation: Where defect has been established (including on the basis of the above presumption), and the damage caused is of a kind ‘typically consistent’ with the defect in question, causation is also presumed.
- Defect and/or causation: Where a court believes that a claimant ‘faces excessive difficulties’ in proving defect and/or causation, because of scientific or technical complexity, then these must be presumed to have been established, if the claimant can demonstrate that the product contributed to the damage, and it is likely that the product was defective and/or that defect likely caused the damage.
Extension of longstop for latent harm
The proposed Directive will retain the requirement for a consumer to commence a claim within three years from the day on which they became aware, or reasonably should have become aware, of the damage, the defect, and the identity of the relevant economic operator defendant. This limitation period will remain subject to a longstop of ten years from the date the product was placed on the market, in most cases.
However, the proposed Directive proposes an extension of this longstop to fifteen years in the case of latent harm. The drafting of this provision could be clearer as to when time for this purpose starts to run. We hope this will be clarified in the upcoming trilogue procedures.
Expansion of types of compensable damage
Along with the extension of the regime to new types of products, the types of damage for which consumers can seek compensation will also be expanded. Consumers will still be able to claim for death, personal injury, and/or property damage/destruction caused by a defective in-scope product. In addition, under the proposed Directive they will be able to claim for:
- ‘medically recognised harm to psychological health.’ We already often see claimants seek damages for distress as a result of harm caused by a defective product, in parallel to claims for physical injuries. The recognition of this type of harm as a discrete form of damage could be particularly significant for providers of software-based medtech tools, particularly in conjunction with the rebuttable presumptions discussed above. It is relatively easy, for example, to envisage a scenario whereby a failure to push through a software update might lead to a person being mis-diagnosed, and later seeking damages for the (medically recognised) psychological distress of believing they had a terminal illness, when in reality they suffered no physical harm. It will be left to national courts to determine what level of harm to psychological health needs to be proved in order to give rise to damages.
- ‘loss or corruption of data that is not exclusively used for professional purposes.’ This could mean that, for the first time, claimants may seek damages where they have suffered personal data loss under this strict liability regime. For example, a claim could be commenced if a defect meant that a product advertised as waterproof or fireproof is breached, or a product was not adequately cyber-secure and was hacked, where personal data is destroyed, corrupted or lost as a result. It remains to be seen how the Commission intends for this regime to interact with others, such as the GDPR.
Representative claims permitted
The proposed Directive requires EU member states to ensure that ‘a person acting on behalf of one or more injured persons’ can bring strict product liability claims. This ties in with the fact that the separate Representative Actions Directive will facilitate mass consumer claims (in some cases, on an opt-out basis) in product liability and other matters (further information here).
When combined with the proposed removal of the current €500 threshold for claims, as well as the other ways described above in which the regime will be expanded, we expect to see strong interest from claimant law firms in representative product liability claims. Healthcare-related product liability claims are already a well-trodden route for many such firms, so it would not be a great leap to assume that some of the first such representative claims are likely to be in the life sciences space.
What’s next for the proposed Directive?
The Commission is currently welcoming feedback on the proposed Directive as adopted, until 11 December 2022 (see further here). Feedback received during this time will be considered as part of the upcoming trilogue negotiations between the Commission, European Parliament and the Council, as the legislation is debated.
We expect that the trilogue process will conclude in late 2023/early 2024, which means that proposed Directive could be transposed into Member States’ national law by late 2024/early 2025, ie after the 12 month transposition period currently contemplated.
The proposed Directive is being considered alongside a raft of other legislative changes affecting life sciences and other product regulation, including the draft AI Act and AI Liability Directive (on which, here).
