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An Overview of Intangible Items as Strict Liability “Products”

James M Beck

An Overview of Intangible Items as Strict Liability “Products”
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Increasingly, courts have to decide whether intangible items—computer software, website algorithms, and the like—are “products” for purposes of strict liability. Counsel confronted with this question may want to start with the Second and Third Restatements of Torts. Section 402A of the Second Restatement views “products” as “chattels” or “articles.” Restatement §402A, comments a, d-e. A “chattel” is a “physical object” and “product” as “tangible personal property.” Black’s Law Dictionary, at 251, 1245 (rev. 8th ed. 2004).

The Products Liability chapter of the Third Restatement of Torts explicitly limits the definition of “product” to physical things. Section 19 of the Third Restatement defines a “product” as “tangible personal property distributed commercially for use or consumption,” with a couple of exceptions: electricity and certain forms of real property. However, courts “have, appropriately refused to impose strict product liability” where a plaintiff complains of “the information, not [of] the tangible medium.” Id. §19, comment d. The most influential decision on this point is Winter v. G.P. Putnam’s Sons, 938 F.2d 1033, 1034-36 (9th Cir. 1991)

The sales chapter of the Uniform Commercial Code (UCC) defines “goods”—not “products”—“all things (especially manufactured goods) which are movable at the time of . . . sale.” UCC §2-105(1). The UCC chapter on leases includes the “movable” language but excludes “general intangibles.” UCC §2A- 103h. The less widely adopted Uniform Computer & Information Technology Act §102(a)(35) defines intangible “information” separately from “goods.”

Under several federal statutes intangible items have not been considered products. McIndoe v. Huntington Ingalls Inc., 817 F.3d 1170, 1173 (9th Cir. 2016) (maritime law); ClearCorrect Operating, LLC v. International Trade Commission, 810 F.3d 1283, 1291-93 (Fed. Cir. 2015) (Tariff Act); United States v. Aleynikov, 676 F.3d 71, 73 (2d Cir. 2012) (Stolen Property Act); United States v. Brown, 348 F.3d 1200, 1213 (10th Cir. 2003) (Internal Revenue Code).

This issue is of particular interest currently because plaintiffs bringing cases against internet website operators are increasingly styling their actions as “product liability” as they attempt to avoid the broad preemption imposed by 47 U.S.C. §230(c)(1).