2024 was a year of significant policy developments and legislative changes by the EU legislator to improve consumer protection and redress. In addition to the new General Product Safety Regulation (GPSR), which came into force on 13 December 2024, and the growing importance of the EU class action regime under the Representative Actions Directive, a big milestone for consumer redress was recently the adoption of the new EU Product Liability Directive 2024/2853 on 23 October 2024. It will replace the existing Product Liability Directive 85/374/EEC from nearly 40 years ago. The New Product Liability Directive aims to modernize the product liability rules and remove obstacles for consumers. Below we provide an overview of what medical devices companies should know about the new product liability rules and how they can prepare in 2025.
Product liability is regardless of fault
The New Product Liability Directive is relevant to all companies placing products on the EU market.
It regulates when companies are liable for damage caused by a defect in their product. A product is defective when it does not provide the level of safety that a person is entitled to expect. Importantly, the test remains one of strict liability, meaning that consumers do not have to prove negligence or fault of the company. Product liability only requires that i) a product was defective, ii) a person suffered damage and that iii) there was a causal link between the defect in the product and the damage suffered.
Adapting the product liability regime to the digital age
One of the main aims of the New Product Liability Directive is to modernize the product liability rules and adapt them to the digital age. The manufacture and sale of products has changed considerably since the Old Product Liability Directive from 1985.
The New Product Liability Directive therefore includes the following amendments:
- The definition of a "product" is amended to include software (embedded and standalone) and AI integrated products. This also includes digital health products.
- Manufacturers can be liable for damage resulting from missing or insufficient software-updates or weak cybersecurity protection of products.
- Claimants can sure for wider damage including destruction or corruption of data. The New Directive also removes the current deductibles and maximum liability limits.
- The New Product Liability Directive introduces new liability risks for additional defendants, including the authorized representatives of the manufacturer, fulfilment service providers (i.e. storage, packaging and shipping service providers) and - under strict conditions - even distributors and online marketplaces operators.
- Companies that "substantially modify" a product can also be strictly liable (regardless of fault) as manufacturers.
Making it easier to bring product liability claims
A further aim of the New Product Liability Directive is to remove obstacles of consumer redress. The New Directive therefore makes it significantly easier for claimants to bring product liability claims for defective products.
The New Product Liability Directive includes the following amendments:
- The definition of “defectiveness” in the new directive takes the requirements of product safety rules into even greater account. For example, an intervention by a regulatory authority due to product safety, such as a product recall, would indicate a product defect.
- The New Directive eases the burden of proof for the plaintiff by establishing a presumption of defectiveness and a causal link if i) proof is “excessively difficult” due to the technical or scientific complexity of the product and ii) a product defect and/or causality is at least “probable”. This could be particularly important for innovative medical devices, which the EU legislator expressly mentions as an example (recital 48 of the new Directive).
- Under the New Product Liability Directive, courts can oblige defendants to disclose relevant evidence in their power or disposal, if the injured party has made a sufficiently plausible claim for damages. This aims to address potential disadvantages of the injured party regarding access to information on the manufacture and functioning of the product. Importantly, the courts must take measures to protect the defendant's business secrets.
- The New Directive further limits some of the existing exemptions from liability. Of particular importance for medical devices companies is that the long-stop is extended from 10 to 25 years in case of latent damage. As a result, product liability claims generally no longer expire 10 years after the product is placed on the market.
What about the EU plans for an AI Liability Directive?
In addition to the New Product Liability Directive, manufacturers and providers of digital health products or medical products with AI components should keep an eye on the EU plans for an AI Liability Directive in the future.
The European Commission published the proposal for the AI Liability Directive in September 2022 as part of a package with the AI Act and the New Product Liability Directive. While the latter two have since been adopted, the legislative process for the AI Liability Directive has stalled. On September 19, 2024, the European Parliamentary Research Service published a study on the draft of the AI Liability Directive, which is currently being discussed. If adopted, the AI Liability Directive, together with the New Product Liability Directive, will form a civil liability system to hold manufacturers and providers of AI systems and software fully accountable.
There are however differences between the two directives. Under the New Product Liability Directive, manufacturers or providers of defective AI systems that cause physical harm, property damage or data loss to individuals are liable without fault. The draft AI Liability Directive, on the other hand, covers non-contractual fault-based liability, for any type of damage (including pure financial losses and non-material damages) and in favor of any type of injured party (including legal entities).
Outlook and how to prepare in 2025
The New EU Product Liability Directive introduces a more claimant-friendly product liability regime in the EU and reduces legal certainty for businesses. This can have a significant impact on medical devices companies as it will make it easier for consumers to bring claims in the EU for defective products, particularly where there are evidential difficulties caused by complex scientific and technological concepts.
The New Product Liability Directive will have to be implemented by Member States by 9 December 2026. The old Product Liability Directive 85/237/EEC will continue to apply to products already on the market by then. Companies should use the time to review regulatory compliance, review their product liability risk profile, review their insurance coverage, review existing monitoring and recall systems and review their third party seller agreements for the distribution of the product liability risks.
