The EU’s Product Liability Directive expands to cover digital technology

The question

What changes to civil product liability have been implemented by the European Commission for defective digital products and software? 

The key takeaway

In March 2024, the European Parliament formally endorsed the revised Product Liability Directive (PLD) expanding product liability to digital technology. Once formally approved by the European Commission, the PLD will become law, with businesses expected to be caught by its obligations by mid-2026. 

The background

The existing Directive on product liability has become outdated in recent years in light of significant ongoing technological advancements. This has resulted in the dramatic shift in the concept of a “product”, specifically those which incorporate AI and digital services. Having recognised the need to revise and update the PLD, in its March 2024 plenary, the European Parliament formally endorsed the revised PLD, which must now be formally approved by the Council.

The development

As endorsed, the key development in the PLD is the expansion of the definition of “product” to include digital manufacturing files (eg those used in 3D printing), software and electricity, as well as software updates, including those rolled out for existing products already on the market.

The following provisions have also been amended to reflect the PLD’s reach to software and AI:

• expansion of potentially liable entities to include authorised representatives of manufacturers and fulfilment service providers
• damage will now include material losses resulting from psychological harm and the loss or corruption of data
• a new disclosure duty is placed on manufacturers to disclose necessary information in court when an injured person presents evidence sufficient to support a plausible claim for compensation, and
• expansion of the circumstances when a product is presumed to be defective through both a presumption of defectiveness in relevant circumstances (including when a manufacturer fails to comply with its disclosure obligations) and a presumed causal link between defect and damage (eg where the type of damage is consistent with typical defects).

Why is this important?

The revised PLD aims to aid consumers who suffer damage as a result of digital technology, therefore improving their means of redress against digital technology manufacturers. Most of this burden will be on manufacturers, but liability will also be borne by other players in the supply chain, including online platform service providers, importers, and authorised representatives.

Once formally approved by the Council, EU member states will have two years to implement the PLD into their national laws. Businesses can expect to be required to comply with the PLD by mid-2026. 

Any practical tips?

The extension of the PLD to cover digital products and software is a major development, not least given its impact on the liability exposure for all businesses engaged in digital development, manufacture and distribution. They should consider:

• the role they play in the supply chain and, therefore, what their potential liability they may attract under the new PLD
• how the new liability regime may affect their supply chain contracting
• the impact on their consumer facing terms
• their product liability insurance policies to assess if liability for the expanded obligations is covered, and
• whether their internal processes need to be reviewed and updated, perhaps to include more fulsome policies around releasing product updates (which resets the limitation period for claims) and record retention.

Summer 2024