The Liability of Things

David Wagner, Managing Editor | 4/30/2014 | 14 comments

David Wagner
At the heart of the Internet of Things is a series of devices making decisions without you, and I can’t help but wonder who is liable if your “things” go crazy. The question started because of an article on the Brookings Institute page about who is liable if your self-driving car has an accident, but really it goes much deeper than that. Imagine if your autonomous refrigerator ordered a dozen cartons of eggs instead of a dozen eggs. Do you have to pay? Does the grocery store have to swallow the loss?

There are two related but slightly different liability issues going on here: the product “breaking” and causing serious damage to life or property and the minor defect that causes customer service issues. The breaking scenario is pretty clear. Say you built a self-driving car and because of an error in your design, it hits a group of school children in a crosswalk. You’re going to be sued by the parents of the children and maybe the school. But you might have a new and interesting plaintiff on your hands -- the guy sitting in the car who has the emotional trauma of knowing his car killed a bunch of kids and there was nothing he could do about it.

You might not enjoy the new people who might sue you, but really, existing liability law covers most of this. It really isn’t that different than if you make a car with any other safety defect. This article by a couple of lawyers and the Brookings article agree: We don’t need to change our laws too much to handle this.

But when it comes to these customer service moments, things get a little trickier. It is easy when it is your own product. You make the offer to replace or repair the product just like any other defect. The more interesting thing is how to handle malfunctions from someone else’s products. Let’s say you are the grocery store in the scenario where someone’s fridge goes haywire and orders a bunch of stuff. The best business practice is usually to say that the customer is always right and refund the money even if the product can’t be resold. But that really isn’t enough.

You could consider knocking on the door of the refrigerator maker and try to get your money back from them, but good luck with that. One thing you can do is start building checks into the system like a credit card company protects itself from fraud. You need capabilities that show you whether an order is out of whack with what is normal for the house. Maybe the family is having a big party. Maybe the fridge went crazy. The best way to protect yourself is to find out before you fill the order just as a credit card company calls you if you suddenly go on a wild shopping spree.

Another thing you need to figure out is your policy around autonomous machines to begin with. Do you require a human to confirm? How do you verify and communicate with these systems? How are accounts set up?

There’s quite a lot of work to be done here. And it is good to start working it out now instead of waiting until the Internet of Things overwhelms you with its sheer size. There aren’t too many autonomous coffee pots or cars running around yet. But they’re coming. Get ready.

What about your enterprise? Have any of you started an Internet of Things policy discussion? Comment below.

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mejiac   The Liability of Things   5/30/2014 3:21:27 PM
Re: Similar Scenerios

I think it can be safely stated that having information provided within an acceptale timeframe is somewhat expected by today's standards.

I mean, people will complain if they don't get an email as soon as it's sent.

This is something that's essentials for many organizations, to avoid delays in communications reaching the proper channels in an adequate time.

In the consumer world, many retail and entertainment business are trying to take the customer experience to new levels by combining smartphone/tablet technology with the physical experience.

I good example is Disney's "Magic Band",|G|4141321.NG.AM.02.07&keyword_id=shcL0CCCq_dc|disney%20magic%20band|56529813328|e|15402cl14044
mejiac   The Liability of Things   5/30/2014 3:08:34 PM
Re: Similar Scenerios


Thanks for your reply...and it makes sense for security protocols to be placed, that given time will probably become the standard.

While surfing the Iphone app store, I laught when I saw an app that on it's descriptiong stated "No internet connection requried, no in app purchase.... just plain fun"
MDMConsult   The Liability of Things   5/15/2014 1:06:04 AM
Re: Similar Scenerios
Yes, Technologies such as smartphones, tablets and mobile apps have made data information conveniently available to the customer. This is a way to help people receive information in less time and by making more informed decisions.
Joe Stanganelli   The Liability of Things   5/8/2014 8:11:01 AM
Re: Old law still works on new tech.
Yes, third-parties always make contract conundrums more complicated.  And every situation is different.

That said, I had a tax law professor who had a great saying about this sort of stuff: "Equity finds its way."

And so it would here.  If a person had a robot fridge going haywire and secretly ordering all sorts of food in crazy amounts (doesn't this remind you of a Looney Tunes cartoon scenario?), that person would almost certainly be entitled to be kept or made whole financially in almost every scenario I can imagine.
batye   The Liability of Things   5/6/2014 1:01:54 AM
Re: Similar Scenerios
interesting observation Joe... but until legal problem happens and everyone start finger pointing game...
David Wagner   The Liability of Things   5/5/2014 2:10:52 PM
Re: Old law still works on new tech.
@Joe- Thanks! That's what i lvoe about our community. We have so much expertise. That said, there seems to be some disagreement on that front from other legal folk, because the "mistake" comes from a new source. By bring in a 3rd party, according to them, it at least muddles the legal situation.

Clearly, I'm no expert. Just reporting what they say.
Joe Stanganelli   The Liability of Things   5/2/2014 1:27:25 PM
Re: Similar Scenerios
> Developers won't hear them, but I hope the business product people and the legal department do.


Yeah, but developers don't like to listen to the legal department.  ;)

Joe Stanganelli   The Liability of Things   5/2/2014 1:22:49 PM
Old law still works on new tech.
Existing contract law deals with your dozen eggs vs. dozen cartons of eggs example.  It goes to Article Two of the Uniform Commercial Code (which is pretty much codified in some form or another in every or almost every US jurisdiction) -- specifically, the parts that deal with a "Mistake."  If the Party A has reason to know of the mistake that Party B made, Party A generally doesn't get to take advantage of that fact.

So, for instance, if Smith's Groceries knows that Mrs. Carter generally orders a dozen eggs every two weeks from their store via her automated system, and then one day it shows up as 144 eggs, there is an argument that could be made that Smith's should at least call up Mrs. Carter to say, "Are you SURE you want 144 eggs?"

Of course, even in those circumstances where Party B would be on the hook for the order of the dozen cartons of eggs, the the manufacturer/fridge seller/etc. could be on the hook to reimburse Party B under a strict liability theory under existing product liability law for the extra eggs.


(Disclaimer: The above is provided for informational, educational, and/or entertainment purposes only. Neither this nor other posts here constitute legal advice or the creation, implication, or confirmation of an attorney-client relationship. For actual legal advice, personally consult with an attorney licensed to practice in your jurisdiction.)
Ariella   The Liability of Things   5/1/2014 12:42:57 PM
Re: Similar Scenerios
@Jastro it also reminds me of the mops continuing to carry in water until the place flooded in "The Sorcerer's Apprentice" sequence of Fantasia. They just follow orders, but sometimes what you think is helpful gets out of control and becomes destructive.
David Wagner   The Liability of Things   5/1/2014 11:47:13 AM
Re: Similar Scenerios
@jastro- Anyone who has ever tried to get a snack out of a vending machines knows never to trust one. :)
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