Who is liable if a product defect occurs due to automation in the smart factory process?

Smart factories are widely considered to be the future of manufacturing with major players in the industry like Mitsubishi, Bosch and Siemens embracing the technology. Smart factories utilise both physical and digital technology to form interconnected networks, using artificial intelligence and machine learning to improve and learn.

Smart factories create new issues in the manufacturing industry; as the technology is constantly evolving, how can manufacturer establish defectiveness if the technology has adapted since it was assessed? If machines are responsible for monitoring and executing all steps of manufacturing, who will be liable if anything goes wrong?

There are issues regarding burden of proof, as the technology is a combination of hardware and software with various interfaces and automatic updates. For the customer this complexity results in a lack of clarity.

Liability

Under English law, the liability for a product defect in a smart factory process falls on the manufacturer. The Consumer Protection Act 1987 (‘the Act’) provides strict product liability, which means that manufacturers can be held liable for unsafe defects without requiring an investigation into the specific failure. Therefore, whether the fault is caused by AI mistake or from the physical machinery, the factory can still be liable.

The EU has been actively clarifying the position regarding liability and AI. The AI Liability Directive proposes that if claimants can demonstrate the truthfulness of their action, they will be entitled to the disclosure of evidence relating to the AI system which is alleged to have caused the damage. Should the defendant fail to comply with disclosure, a rebuttable presumption will apply that the defendant has breached its duty of care.

No special provision is made for Smart Factories, therefore the Act applies. Therefore a claimant must prove that the product is defective, and that the defect caused damage to the claimant.  The claimant does not need to prove the cause or why the product failed, they only need to prove in general terms that a defect exists, and that it caused the damage. This is relevant to Smart Factories as they will not have a defence that the defect was caused by an unauthorised adaptation, as the claimant will only have to prove the defect exists.

Section 3 of the Act provides that there is a defect in a product if the safety of the product is not such as persons generally are entitled to expect. When considering what people are generally considered to expect the following will be considered; the manner the product is to be used and marketed for; what might reasonably be expected to do with the product and the time the product was supplied.

Therefore, if a smart factory produces a product, the position as to if it is defective is the same as in a traditional factory. By creating well-drafted contracts manufacturers can protect themselves against certain liabilities, by including clear and precisely drafted terms that outline each party’s obligations, limit liability and minimise confusion and risk.

The future

The UK values AI as a potential area of growth, predicting the market to grow to $1 trillion by 2035. The National Cyber strategy which aims to strengthen the UK’s security infrastructure while taking the lead in future technologies. As part of this National strategy the government rolled out new consumer protections. This puts new requirements on manufacturers of smart products, banning them for from having weak and easily guessable passwords. This move is indicative that manufacturers will be put on increasingly demanding standards.

In conclusion, the law in these areas currently makes no special provisions for smart factories, but the UK as it seeks to grow and take advantage of the emerging AI and new technologies market, will increasingly draft legislation and impose special requirements on smart factories, exemplified by the UKs National Cyber Strategy. Manufacturers will have to be aware of this changing landscape and be ready to adapt and comply with any changes. Forbes can assist by keeping you up to date with latest legislative changes and trends, ensuring compliance at all times and positioning you to take full advantage of the changes.