New Study Sheds Light on How Product Liability Affects Innovation

In 2016, product liability cases accounted for approximately 70 percent of the personal injury cases filed in all U.S. district courts. One recent example is the case brought against General Motors in connection with faulty ignition switches, which resulted in a $2.5 billion settlement.

An important new study out of Harvard Business School examines the issue of how product liability risk faced by upstream suppliers could negatively affecting downstream innovation in implant technologies. Specifically, while many have long assumed that product liability is so extreme and uncertain that it has gotten to a point where it is retarding innovation, this study takes a closer look at under what specific circumstances an increase in liability risk negatively affects innovation.

The Biomaterials Access Assurance Act (BAAA): What It Does & Does Not Do

The study itself focuses on medical implants, finding that an unexpected increase in the liability risk faced by upstream suppliers could have a substantial negative impact on downstream innovation. Medical devices like the ones at the source of the study are used to support or sustain human life and/or prevent impairment of human health.

The Biomaterials Access Assurance Act provides liability exemption for the suppliers of bulk components and raw materials for implants in an effort to protect innovation. Therefore, if a company falls within this exemption, they can file a motion to dismiss or for summary judgment, if a product liability suit is filed against it, pursuant to its statutory rights. However, the law fails to protect companies in engaged in the design, testing, and production of implants, as well as those involved in downstream production. In order to qualify under the law’s exemptions, a company must directly or indirectly supply a component part or raw material; thus, the law does not apply if the supplier also manufactures or sells the devices, or fails to meet the definition of relating to the “component part” or “raw material.”

In other words, there are instances where, pursuant to state law, apportionment of fault can be assigned to a component part manufacturer, in spite of this exemption, and if the company is not shielded by the BAAA, they can be held liable. As a result, the study purports that an additional federal exemption could be a useful instrument when state product liability laws are insufficient to insulate important players in innovation from disproportionate liability risk. More broadly, the study provides direct evidence concerning how the tort system may affect innovation incentives and suggests that relevant policies should be designed with these potential effects in mind.

The Very Best In Texas Product Liability Defense

Colvin, Saenz, Rodriguez & Kennamer, L.L.P. have decades representing manufacturers in litigation and fighting the tremendous amount of frivolous product liability lawsuits that are frequently brought. Contact one of our Brownsville product liability defense attorneys today to find out more about our work in the field.

Resource:

hbs.edu/faculty/Publication%20Files/19-002_8f0ca6a8-a4d4-4aab-8b4f-527be4de1144.pdf