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Product liability for suspected defects? Landmark ruling by ECJ awaited

Ina Brock, Hogan Lovells, Germany

The German Federal Court of Justice (Bundesgerichtshof - BGH) has referred to the European Court of Justice (ECJ) the question as to whether producers can be held liable for suspected defects.

The ruling of the ECJ on this question might influence many rulings on product liability law. The question is especially key with regard to liability for Class III medical devices – on the one hand given the special significance of these products for the health of the patients and on the other because the devices are products that patients simply cannot "escape". If such a product turns out to be defective, it is not just the case that this might have a major impact on a patient's well-being. In addition, it usually has to be removed in an operative procedure.

The referral to the ECJ is based on two cases dealing with the question of whether mere suspicion of defectiveness establishes claims under the German Product Liability Act.

The first case involves two persons with pacemakers which were explanted and replaced. The operation reports state that the replacement was being performed because of safety information issued by the producer. A component used in the devices could give rise to serious health complications. The risk of defectiveness was 0.31% – 0.88%. The producer recommended considering replacement of devices. The court considered the pacemakers to be defective because the devices had a significantly higher risk of failure.

The second case deals with damages for replacement of a potentially defective implantable cardioverter defibrillator (ICD). A magnetic switch in the ICD was found to be potentially defective. Four incidents out of 46,000 devices were confirmed. In the four cases the patients became aware of the problem by audible beep tones of the ICD and the device was replaced. The Court decided that the mere possibility of a defect in the magnetic switch established a product defect that was associated with all potentially affected ICDs. Whether the ICD had actually been defective in the specific case was irrelevant.

The BGH has referred this question to the ECJ. The ECJ will have to clarify whether, under the European Product Liability Directive, a product can be considered defective when devices of the same product group have a significantly higher risk of failure even if no defect has been proven in the device in the specific case.

Of particular relevance in this regard are Article 1 and Article 4 of the Directive. Article 1 states: "The producer shall be liable for damage caused by a defect in his product." Article 4 clarifies the burden-of-proof rule in this regard: "The injured person shall be required to prove the damage, the defect and the causal relationship between defect and damage."

In the German judgments referred to above, the burden of proving the product defect is softened. It is argued that the defectiveness of an individual product in this regard would infect the entire series. The product was thus defective if the "adjacent" products were proven to be defective. This furnished the necessary proof.

It is doubtful whether this interpretation of the production of evidence for a product defect is in line with the Product Liability Directive. The key question is what the term "product" in the Product Liability Directive means. Does "defect in his product" mean only the individual product (the individual unit) or all products of the same type from the same series (a pacemaker of type XY as product)? On a closer view it becomes clear that only the individual product can be meant.

The clear wording argues against inclusion of product groups. Article 1 explicitly refers to "defect in his product". Article 4 also refers to the necessity of proving the relationship between defect and damage. Since health damage will be individual in each case, it also has to be demonstrated that the respective defect in each case is individually responsible for the damage.

Furthermore, if the phrase "defect in his product" is interpreted to mean not only individual products but also whole production series, it would no longer be possible to distinguish between a design defect and a manufacturing defect. That is because the product would no longer satisfy safety expectations even in the case of a manufacturing defect. If individual products were unsafe, that would always result in the totality of products being unsafe. Since in practice it is not possible to avoid such manufacturing defects, such an interpretation of the concept of product would mean that liability would always be automatic. This cannot be intended and correct.

The questions referred ultimately relate to issues of reasonableness. A softening of the burden of proof would result in an unpredictable broadening of liability. Whenever liability risks are unforeseeable, this makes it more difficult to bring innovative products to the market. And it has to be considered that only with such innovative products many patients are able to lead an independent and pain-free life.

This does not mean that damage and harm caused by products should not be taken seriously nor that producers are discharged from their responsibility. But if rates of defectiveness in the per mill range or low per cent range trigger comprehensive liability, such liability could run out of control. The regrettable consequence might be that many producers – which is happening already – will withdraw from this product group. That would mean less progress and innovation, ultimately to the detriment of patients. This surely cannot be in the interest of the legislator or the public at large. Also in that regard the awaited ruling of the ECJ can be considered a landmark ruling.