1. Workshop
Digital Technologies and Liabilities
EUI, Department of Law,10 April 2012
Software: Product or Service?
FRANCESCO QUARTA E.U.I., Florence
University of Salento, Lecce

2. SOFTWARE
- Tentative Definitions -
1) A set of statements or instructions to be used directly or
indirectly in a computer in order to bring about a certain result.
(U.S. Copyright Act of 1976, § 101, as amended)
2) Intended “to include, but not limited to, the system functional
design, logic flow, algorithms, application programs, operating
systems and support software for design, implementation, test,
operation, diagnosis, and repair.”
(22 U.S. § 121.8 - International Traffic in Arms Regulations – “ITAR”)

3. SOFTWARE
- Tentative Definitions -
3) Organized information in the form of operating systems,
utilities, programs, and applications that enable computers to work.
(businessdictionary.com)
4) A generic term for programs that are used by computers
and other products that contain logic circuitry.
In a broader sense it can also refer to all information
(i.e., both programs and data) in electronic form.
(linfo.org – LINUX Information Project)

4. SOFTWARE
- Tentative Definitions -
5) “The term ‘computer programs’ shall
include their preparatory design material.”
“Ideas and principles which underlie any element of a computer
program, including those which underlie its interfaces,
are not protected by . . . this Directive”.
(Article 1 (1) and (b) of Directive 2009/24/EC of 23 April 2009
on the legal protection of computer programs)

5. WHETHER A PRODUCT
OR A SERVICE
Types of Software
PACKAGED
1) generally sold to consumers as a “finished product”
2) “installed” by the consumer (autonomously)
3) usually, no further technical support is required*
* (but for patches and updates)

6. WHETHER A PRODUCT
OR A SERVICE
Types of Software
CUSTOMIZED
1) designed or modeled for specific end-users
2) usually installed by the vendor
3) extensive technical support is generally required

7. ISSUES OF EXTRA-CONTRACTUAL
LIABILITY RELATED TO SOFTWARE

8. WHETHER A PRODUCT
OR A SERVICE
Definition of ‘SERVICE’
“[A]ny self-employed economic activity,
normally provided for remuneration.”
(Article 4 (1) of Directive 2006/123/EC of 12 December 2006
on services in the internal market)

9. WHETHER A PRODUCT
OR A SERVICE
Definition of ‘PRODUCT’
“[A]ll movables even if incorporated into another movable or
into an immovable. ‘Product’ includes electricity.”
Definition of ‘PRODUCER’
“[T]he manufacturer of a finished product, the producer of any
raw material or the manufacturer of a component part.”
(Articles 2 and 3 of Directive 85/374/EEC of 25 July 1985
on liability for defective products)

10. LIABILITY FOR HARM CAUSED BY
DEFECTIVE PRODUCTS
- Harmonized at EU level  strict liability;
- Based on mandatory minimum protection;
- Only for personal/non professional use;
- Moral damages only recoverable in negligence
(pursuant to national civil liability laws).
- Tangible/intangible: numerus clausus?

11. The ‘Therac-25’ Accidents
in North America
C.R. v. Hyundai Automobili Italia S.p.A.
Trib. Naples, 21 March 2006
General Motors Co. v. Johnston
(592 So.2d 1054) S. Ct. of Alabama, 1992

12. LIABILITY FOR HARM CAUSED BY
DEFECTIVE PROVISION OF SERVICES
- Wholly left with Member States’ statutory and
case law;
- Predominantly, negligence-based liability rules;
- Harmonization provisions in the field of contract
law only;
- Not only consumers are covered;
- Availability of moral damages hotly debated.

13. Centre hospitalier universitaire de Besançon
v. Dutrueux et al.
European Court of Justice (Grand Chamber),
21 December 2011, C-495/10
Veedfald v. Arhus Amtskommune
European Court of Justice, 10 May 2001, C-203/99

14. WHETHER A PRODUCT
OR A SERVICE
“ Suppose that the designer (A) of a navigational software
program incorrectly enters the height of a mountain, causing a
plane to crash. If the software package is to be a ‘product’ for
the purposes of the Directive, is a map incorrectly drawn by B,
which carries the identically incorrect information to the pilot
also to be a product? If so, what about where the same
information is conveyed to the pilot orally by an on-board
navigator (C) – is he the supplier of a ‘product’ ? ”
(Jane Stapleton, Three problems with the new product liability,
in Essays for Patrick Atiyah, Cane-Stapleton Eds., Oxford 1991)

15. WHETHER A PRODUCT
OR A SERVICE
?
Where is the boundary
between
incorrect information
and
defective product design
?

16. SOFTWARE CONTRACTS
DRAFTING ISSUES

17. (1)
SOVEREIGN IMMUNITY
FROM COMMON LAW LITIGATION
Transnational contracts for the sale/licensing/lease of
software between ‘public’ entities and private companies.
(Nokalva, Inc. v. European Space Agency, 3d Cir., 2010)

18. (2)
LIABILITY EXONERATION CLAUSES
Can software manufacturers limit, if not eliminate,
liability for damage somewhat attributable to
software (non-negotiable shrink-wrap or click-wrap
license)?
What types of damages can be excluded by means of
such clauses, if any?
(U.S. Unfair Contract Term Acts)
(E.U. Unfair Contract Terms Directive)
(Article 12 of the European Directive on Products Liability)

19. (3)
IMPLIED WARRANTIES
Can a software developer escape liability for a
known design defect ?
Vertical/Horizontal Privity:
What kinds of damage can be recovered?
Who?
Hou-tex, Inc., v. Landmark Graphics
26 S.W.3d 103 (2000) Court of Appeals of Texas, Houston

20. (4)
CHOICE OF LAW/COURT AGREEMENTS
Freedom of contract
v.
Ordre Public
Main differences between the U.S. and the E.U.,
as witnessed by the recent adoption of the
A.L.I. Principles of Software Contracts

21. WHETHER A GOOD
OR A SERVICE
Sale of Goods
or
Contract for Services?
St. Albany City and District Council v. Int’l Computers Ltd
English Court of Appeal (1996) All ER 481
- CUSTOMIZED SOFTWARE -

22. THANK YOU