November 21, 2018

IoT Liability: Playing the Blame Game

A worldwide market projected to exceed $1 trillion by 2025, the Internet of Things (IoT) offers tremendous benefits but also significant challenges. Benefits in that interconnected devices can lead to greater efficiency and higher quality. Challenges in that should such devices malfunction, civil liability can result.

In Canada, plaintiffs usually have the burden of proof, but there are exceptional situations such as consumer protection and manufacturers' liability regimes

"The IoT chain usually involves the device user, manufacturer, possibly its distributors, as well as the developers and vendors of the applications that allow the user to communicate with the device or for the device to communicate with other devices as part of its proper functioning," explains Prachi Shah, senior counsel at Clyde & Co Canada LLP.

More than one application at issue

"There can also be more than one application at issue. Some applications may be marketed and sold at the direction of device manufacturers for the purpose of interfacing. Other apps may not meet these requirements and may involve variable levels of improvisation or DIY. The IoT chain also relies on a functioning network for communications to takeplace. "When things go wrong, an investigator may seek to answer any number of questions:

  • Did the loT userfail to update an app when the update contained afix which might have prevented a hack?
  • Was there an error in coding which resulted in a malfunctioningapplication? Is the issue more a traditional case ofproduct liability, involving physical parts of a devicebreaking, cracking or rusting prematurely?"

"These are just some of a number of possibilities created by the complexities of the loT chain of communication," adds Ms Shah.

An onus on loT users to prove they have suffered damage or injury

Another significant issue is the extent to which there is an onus on loT users to prove they have suffered damage or injury - a key component of how courts will go about apportioning liability. "Who has the onus or burden of proof and the level of proof required will depend on the jurisdiction and the applicable regime," says Ms Shah. "In Canada, plaintiffs usually have the burden of proof, but there are exceptional situations such as consumer protection and manufacturers' liability regimes, where certain assumptions apply and the onus shifts to the defendants on certain issues. The burden of proof will also depend on whichdefendant is being sued".

Different criteria and burdens of proof apply for a finding of liability against a manufacturer of a physical device as opposed to the developer of an application used to communicate with a device," advises Ms Shah. "That said, if both committed faults or otherwise breachedduties and thus caused the damages, both could be held liable and a court would have to apportion liability using the apportionment rules applicable in a given jurisdiction."