April 13. 2024. 4:54

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EU Commission clarifies digital implications of new product liability framework

Last week, the European Commission circulated a non-paper with EU governments to clarify the digital elements of the new Product Liability Directive (PLD). which aims to make it fit for the digital age.

The revised directive is meant to bring the EU’s product liability framework, which dates back to 1985, up to date with the complexity of digital technologies, including Artificial Intelligence and other types of software.

The non-paper, dated 8 February and obtained by EURACTIV, strives to clarify with the national representatives gathered in the EU Council precisely how these types of digital products will be covered, as in the previous definition of ‘product’, it was not clear if the software was included or not.

“The current regime refers to the manufacturer of the ‘finished product’, but given that products today develop after being placed on the market (e.g. through software updates or machine learning), this term no longer seems fit for purpose and was not retained in the proposal,” the document reads.

EU Commission proposes extending product liability rules to software and related services

The European Commission’s proposal for a revised Product Liability Directive is intended to bring the EU’s liability regime up to speed with the digital age. An additional directive has been put forth targeting specific damages caused by Artificial Intelligence.

The Commission explained that the draft legislation does not include a definition of software on purpose, as that would run the risk of quickly becoming outdated. For instance, in the 1990s, software would have been defined as a computer programme which would not include mobile apps, AI and operating systems.

Therefore, the original proposal covered any type of software, regardless of how it is used or supplied, as a product that would entail liability in case it causes damage for being defective.

Similarly, digital manufacturing files like the Computer-Aided Design files for 3D printing have been included in the definition of a product, whilst digital content that is not likely to cause harm, like e-books and media content, have been kept out as their inclusion was considered disproportionate.

The revised PLD includes a definition of ‘components’ to differentiate the liability regime for items outside the manufacturer’s control, for example, when a new app is installed on a smartphone. The legislation also covers the related digital services that can determine the safety of products.

The notion of ‘related service’ is the same as in the Data Act, legislation regulating data access and sharing for connected devices. Examples of related services include the continuous supply of traffic data for navigation systems, temperature control, voice assistants, and cloud backup.

At the same time, the EU executive clarified that such related services should be distinguished from other digital services that might prevent the product from functioning but that are outside the manufacturer’s control, like internet connection.

The concept of manufacturer control is at the core of the new directive, as it determines whether a manufacturer is liable for one of the product’s components, when a manufacturer should assess defectiveness, for instance, in the case of rolling out an update, if a product is substantially modified or if the defect could not be known at the time of market launch.

As software is deemed a product, software providers would also be liable for damages caused by defective software updates. But if the updates are within the manufacturers’ control, they would also be liable for any damage.

“This approach recognises that it is in the nature of software to be maintained and improved by updates, without an entirely new product being deemed to have been placed on the market,” the document reads.

In other words, the victim would not need to identify if the damage was caused by the hardware, the original software. or the update, as the overall product is deemed defective, and the same economic operators are liable.

However, if the software update substantially modified the product, namely replacing the underlying software entirely, the liability would fall only on the software provider.