Germany: Update on product liability law

Background and objectives of the reform

The current Product Liability Act dates from 1989 and has not undergone fundamental revision since then. In the meantime, technological and societal developments—particularly the growing importance of software, AI systems, and connected products—have given rise to significant gaps in protection. Injured parties also frequently face the problem that manufacturers are domiciled outside the EU, which complicates the enforcement of compensation claims. Moreover, the increasing complexity of modern products can make it considerably more difficult for claimants to discharge their burden of proof.

The reform therefore aims to adapt product liability law to digitization, the circular economy, and global value chains, while ensuring a high level of protection for consumers and other natural persons. The draft legislation also expressly emphasizes that product liability will in future be an "important building block for the liability of manufacturers of artificial intelligence systems".

Further legislative proceedings: The draft was referred to the Legal Affairs Committee (Rechtsausschuss), which has lead responsibility. Substantive deliberations will take place there before the Bundestag votes on the legislation in its second and third readings. Given the transposition deadline imposed by the EU Directive of December 9, 2026, a swift conclusion of the legislative process is to be expected.

Key elements of the reform

Expanded product definition and digitization

• Software as a product: In future, software will be considered a product regardless of how it is provided—whether stored on a device, accessed via the cloud, or delivered as software-as-a-service. This extends product liability law to manufacturers of AI systems. Open-source software developed outside the course of a commercial activity remains exempt, however.
• Control after placing on the market: Manufacturers who exercise control over their product after placing it on the market—through updates/upgrades, digital services, or connected components—may be held liable for defects that arise only after the product has been placed on the market or put into service.
• Defectiveness: When assessing the defectiveness of products, cybersecurity requirements and the ability of products—particularly AI systems—to continue learning or acquire new functions after being placed on the market will also be taken into account.

Connected services as components

A notable innovation is the express inclusion of connected services (e.g. navigation systems, voice assistants, health monitoring services) within the scope of component liability. Under the previous law, only physical sub-products were covered. Going forward, providers of digital services integrated into a product will also be liable as joint and several debtors alongside the manufacturer of the end product. The draft legislation cites the concrete example of an autonomous vehicle with a navigation service: if the navigation service suddenly fails and the vehicle subsequently causes an accident, both the vehicle manufacturer and the provider of the navigation service are jointly and severally liable.

Circular economy and substantial modifications

Products that are substantially modified after being placed on the market (e.g. through "upcycling") are treated as new products. Any person who substantially modifies a product without the manufacturer's consent and subsequently makes it available on the market or puts it into service is liable as its manufacturer. For AI systems, this means continuous learning may constitute a substantial modification, with the consequence that the ten-year limitation period begins anew.

Any person who substantially modifies a product without the manufacturer's consent and subsequently makes it available on the market or puts it into service is liable as its manufacturer.

Extended liability in global value chains

In addition to the manufacturer, other actors may in future be held liable where the manufacturer is domiciled outside the EU:

• EU importers and the manufacturer's authorized representatives
• Fulfillment service providers, where no importer or authorized representative exists
• Suppliers under certain conditions
• Certain providers of online platforms

Facilitation of evidence and disclosure obligations

Injured parties will receive extensive procedural support:

• Disclosure of evidence: Courts may order defendants to disclose relevant evidence—such as technical documentation or design records. Disclosure must be limited to what is necessary and proportionate; trade secrets must be protected. Defectiveness is presumed if the defendant fails to comply with its disclosure obligation.
• Statutory presumptions: A product defect is presumed if the product does not comply with mandatory safety requirements or if there is an obvious malfunction. The causal link between the defect and the injury is also presumed where the injury sustained is typically attributable to the defect in question. In cases of technical or scientific complexity, proof of the probability of a defect or causal link suffices—particularly where the functioning of an AI system is at issue.

Elimination of liability limits

The previous deductible for property damage (EUR500) and the cap on liability for personal injury (EUR85 million) is abolished. Damages arising from the destruction or corruption of data not used for professional purposes are now also recoverable.

Development risk and defenses

The manufacturer may still escape liability if the defect was not discoverable according to the objective state of scientific and technical knowledge at the relevant time (the so-called development risk defense). This defense may not be available where the manufacturer—for example, in the case of learning AI systems—retains control over the product after placing it on the market.

Contributory negligence in relation to software updates

Contributory negligence on the part of the injured party may in particular be found where the injured party fails to install software updates or upgrades provided by the manufacturer that are necessary to ensure or maintain the safety level.

Publication of judgments

Appellate and supreme courts (Berufungs- und Revisionsgerichte) are required to publish final judgments in product liability cases in electronic form and in an easily accessible manner. This is intended to promote transparency and encourage consistent case law.

Transitional provisions

Assessment by the Federal Council and the Federal Government

Federal Council (Bundesrat)

The Federal Council anticipates significant (financial) additional burdens for manufacturers, particularly due to the stricter rules on evidence and the removal of liability caps. It calls for ongoing monitoring of the effects and proposes specific legislative amendments – including protection for repair and maintenance businesses, an express prohibition on fishing expeditions, and stricter specificity requirements for disclosure requests.

Federal Government

The Federal Government, by contrast, sees only a moderate increase in burden, since, among other things, the abolished liability limits were largely irrelevant in practice. It rejects the Bundesrat's proposed amendments as either unnecessary or posing risks under EU law, but will monitor further developments.

Recommendations for companies

Companies should consider the following measures within the remaining transposition period:

• Clarify scope of application: Assess whether own products—particularly software and AI systems—now fall within the expanded product definition.
• Evaluate role in the supply chain: Determine whether the company is liable as an importer, fulfillment service provider, or online platform provider.
• Review documentation: Ensure that technical documentation and product monitoring data are accessible and prepared for potential disclosure proceedings.
• Adapt contracts: Review supplier and distribution agreements regarding extended liability risks and, where appropriate, include indemnity clauses.
• Review insurance coverage: Adapt product liability insurance to the extended liability risks and the abolition of liability caps.

Outlook: Product safety as a comprehensive package

The modernization of product liability law forms part of a comprehensive EU reform package in the area of product safety.

In parallel with the new Product Liability Directive, the EU has already replaced the General Product Safety Directive (2001/95/EC) with the General Product Safety Regulation (EU) 2023/988 (GPSR), which has been in force since December 13, 2024 and harmonizes product safety law across the EU.

Product liability and product safety

Product safety law plays a central role alongside product liability: both regulatory frameworks pursue different but complementary approaches. While product liability law primarily governs civil law claims between economic operators and consumers, product safety law takes a preventive approach and serves to avert economic harm caused by unsafe products.

In this respect, product safety law particularly provides for requirements for packaging and labeling, traceability obligations, provisions for warnings and recalls, and information obligations vis-à-vis the competent market surveillance authorities. Previously, these requirements were regulated differently across Member States.

Reform of product safety law

Against this background, the GPSR serves to harmonize product safety requirements across all Member States and establishes minimum standards. As directly applicable EU law, it does not require transposition into national law in the Member States.

Key innovations of the GPSR

The GPSR is not merely a continuation of the previous regulatory framework in different form. Rather, it introduces substantive tightening and extensions that reflect changed market conditions and new technologies:

• With few exceptions (such as foodstuffs, plant protection products, aircraft), it is in principle applicable to any product.
• The GPSR generally imposes obligations on all economic operators, such as manufacturers, importers, distributors, authorized representatives, and now also providers of online marketplaces.
• The GPSR tightens safety requirements (such as packaging and labeling obligations) and traceability requirements, particularly for online commerce and the design of recalls.
• Like product liability law, the GPSR also takes account of increasing digitization by regulating safety requirements for digital products in particular. For AI systems, however, the AI Regulation (EU) 2024/1689 applies primarily, insofar as it contains more specific provisions.

Implementation of the GPSR in Germany

In Germany, the GPSR has largely superseded the Product Safety Act (Produktsicherheitsgesetz), which now applies only on a subsidiary basis or as implementing legislation. Specific product-related requirements continue to be regulated in the national Product Safety Ordinances (1st–15th ProdSV). The authorities of the federal states remain responsible for market surveillance in Germany; there is no nationwide central authority in this regard. Given the short period during which the GPSR has been in force, there is as yet no administrative practice or notable case law. The practical significance of the harmonization under EU law therefore remains to be seen.

Conclusion and outlook

Both regulatory areas—product liability and product safety—must be considered in conjunction: while product safety provisions aim to prevent unsafe products from being placed on the market, product liability law governs compensation claims where damage nevertheless occurs. The new facilitation of evidence rules in product liability law—particularly the presumption of defectiveness in the event of a breach of product safety requirements—illustrate the close interconnection of both areas of law.

For companies, the increasing product-related regulation raises compliance pressure along the entire supply and distribution chain and underscores the need for robust safety, monitoring, and recall processes. Against this background, companies are more than ever required to take into account the compliance and liability risks arising from the latest EU-wide developments.