Increased liability due to the new EU Product Liability Directive: what does this mean for the medical and pharmaceutical industry?

Christoph von Burgsdorff

Luther, Hamburg

Christoph.von.Burgsdorff@luther-lawfirm.com

Luisa Kramer

Luther, Hamburg

luisa.kramer@luther-lawfirm.com

Products in the medical and pharmaceutical industry must fulfil the highest quality standards in order to ensure safety and efficacy for consumers. A defective product can have serious consequences for the health of consumers and not inconsiderable liability consequences for manufacturers. In view of the advancing digitalisation in the healthcare and life science sector, legislators at national and European level are being called upon to adapt and modernise product liability regulations to the digital age.

What is the status quo?

In addition to tortious, ie, fault-based manufacturer liability under tort law (eg, Section 823 paragraph 1 of the German Civil Code), German law also provides for strict liability under the German Act on Liability for Defective Products (Produkthaftungsgesetz). The German Act on Liability for Defective Products was enacted to implement the European Union Product Liability Directive (85/3747 EEC) adopted in 1985. If someone is killed, their body or health is injured, or property is damaged as a result of a product defect, the manufacturer of the product is obliged to compensate the injured party for the resulting damage. A product within the meaning of the law is any movable object as well as electricity. It does not matter whether the manufacturer is responsible for the defect.

It is obvious that these definitions and liability issues are no longer up to date in the digital age. Since 1985, the manufacture and distribution of products has considerably changed. Digital health products are no longer unknown in the economy. The EU has recognised this and published the new EU Product Liability Directive (2024/2853) in the Official Journal of the EU on 18 November 2024, which is due to come into force on 9 December 2026. EU Member States then have until 9 December 2026 to transpose the new product liability regulations into national law. This will result in fundamental changes to the German Act on Liability for Defective Products.

The new EU Product Liability Directive will completely replace the current EU Product Liability Directive from 1985 and lead product law to the digital age. However, modernising product liability regulations and simplifying the assertion of claims for damages against liable manufacturers will also be accompanied by an expansion of the group of liable persons and increased liability for manufacturers.

The biggest change that the new EU Product Liability Directive will bring along is the extension of product liability to digital and artificial intelligence (AI)-based products. Software and digital health products such as operating systems, computer programs or applications are becoming more and more widespread on the market, and play an increasingly important role in product safety. In the information age, products can be physical or non-physical. Digital health products include apps, wearables, AI tools and electronic health records. Software can be placed on the market as a standalone product or later integrated as a component into other products, and cause damage when used.

The circle of liable economic operators from manufacturers, importers and suppliers is extended to include liability and adapted to AI-based products such as software, AI models and AI systems. In addition, component manufacturers, persons who substantially alter products, importers or EU representatives of manufacturers based outside the EU but who import and sell their products to consumers are now also liable. In some cases, the manufacturer remains liable even after the product has been placed on the market, for example if they can control the product through software updates.

The new EU Product Liability Directive also presumes the defectiveness of the product or the causality between the defect and the damage if certain conditions are met. For example, the defectiveness of the product is presumed if the economic operator responsible for the product under the EU Product Liability Directive does not fulfil the obligation to disclose evidence (see Article 10 of the Directive). This results in a reversal of the burden of proof in proceedings for damages caused by a defective product.

Finally, the new EU Product Liability Directive stipulates that the liability of an economic operator may not be limited or excluded by contractual provisions or national legislation.

Also under discussion is the European Commission’s proposal of a directive on non-contractual civil liability to AI (the so-called AI Liability Directive) of 28 September 2022. This directive is intended to supplement the new EU Product Liability Directive by creating uniform and specific requirements for high-risk AI systems and facilitating the enforcement of claims for damages.

Under current law, liability for the use of AI is governed by general fault-based tort law under the German Civil Code (Bürgerliches Gesetzbuch). The Regional Court of Kiel recently ruled that an economic operator is liable as a user of AI if it uses AI that was inadequately programmed to answer its users’ search queries because it failed to recognise mapping errors. If an AI compiles incorrect information, fails to recognise errors in the information or automatically publishes incorrect information, the user is primarily liable – not the manufacturer. However, as EU Member States have different national legal systems, this case may be decided differently in another Member State. This legal uncertainty is to be resolved by the EU Product Liability Directive, possibly supplemented by the intended AI Liability Directive as an overall effective civil liability system.

It is advisable for providers and manufacturers of digital health products to monitor the latest developments and to carry out regular risk analyses in order to identify and minimise liability risks at an early stage. All providers and manufacturers want to avoid liability cases and the resulting lawsuits from consumers. For this reason, providers and manufacturers should undoubtedly implement a process that meets the requirements of the new EU Product Liability Directive and keeps an eye on potential developments around the intended AI Liability Directive.

Sources

Regional Court of Kiel, Germany, judgement of 29 February 2024 – file number 6 O 151/23, GRUR-RS 2024, 29599.

Directive (EU) 2024/2853 of the European Parliament and of the Council of 23 October 2024 on liability for defective products and repealing Council Directive 85/374/EEC. Available at https://eur-lex.europa.eu/eli/dir/2024/2853/oj, accessed 14 January 2025.

Council Directive 85/374/EEC of 25 July 1985 on the approximation of the laws, regulations and administrative provisions of the Member States concerning liability for defective products. Available at https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=celex%3A31985L0374, accessed 14 January 2025.

Proposal for a Directive of the European Parliament and of the Council on adapting non-contractual civil liability rules to artificial intelligence (AI Liability Directive). Available at https://eur-lex.europa.eu/legal-content/DE/TXT/?uri=CELEX%3A52022PC0496, accessed 14 January 2025.