Product or Service

Whether software is a "good" or a "service" decides which law applies to a defect claim, and manufacturers have incentive to keep it classed a service.

Products liability law, built for tangible goods, allows strict liability claims. Contract law, governing services and licenses, limits a customer's remedy to whatever the EULA allows. US courts use a "predominant purpose test" to sort software into one bucket or the other, with mixed results.

The EU's 2024 Product Liability Directive resolves this directly: software is a product, regardless of delivery method.

Discussion prompts

• Why do you think most software is licensed rather than sold, beyond the tax and IP reasons usually given?
• If your product is embedded software inside a physical device, which body of law applies, and does your organization actually know?
• What would change in your contracts if the EU's product classification became the global default?