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To safeguard consumer rights, Taiwan enacted the Consumer Protection Act (CPA) in 1994. The CPA, most recently amended in 2015, serves as the principal legislation governing product liability. As Taiwan has not passed standalone legislation on product liability, product liability issues are addressed in chapter 2, section 1 (Health and Safety Protection) of the CPA, and apply only where a consumer relationship exists.

Product liability claims

Under the CPA, the term “consumption” refers to “final consumption”, namely, the use of goods or services not intended for further production or commercial exploitation. A “consumer” is any person who, in relation to a commercial practice, acts for purposes of consumption in transactions for goods or services.

In terms of interpretation of the rights holder, the scope may encompass third parties; however, such third parties are limited to those who can be reasonably foreseen by the manufacturer as potential victims of harm resulting from unsafe goods or services.

Although the CPA does not explicitly limit consumers to natural persons, prevailing theories and practice hold the view that legal persons may, under certain circumstances, engage in consumer activities and thus qualify as rights holders. For example, a company may be deemed a rights holder under a consumer dispute when leasing vehicles for an employee’s trip.

Nevertheless, transactions conducted between business entities for non-consumptive purposes do not constitute consumer activities and are therefore excluded from the application of the CPA.

Product liability is also governed by the Civil Code, specifically the provisions on tort liability (articles 184 to 198) and contractual liability (articles 227 and 360). Particularly, the 1999 amendment to the Civil Code introduced article 191-1, which establishes product manufacturer liability under tort law. Accordingly, even when a consumer relationship is absent, an injured party may still pursue damages based on tort liability (usually under article 191-1) or contractual liability (under the Civil Code).

The CPA, on the other hand, governs product liability in the context of consumer products, where such product liability constitutes a civil liability for special tort. In cases where both the Civil Code and the CPA are applicable, the consumer may seek compensation under either or both legal regimes.

Product liability proof

Product liability regulated under the CPA is subject to a strict liability standard known as liability without fault, or risk liability.

According to article 7 of the CPA: “Business entities engaging in the design, production or manufacture of goods, or in the provision of services, shall ensure that the goods or services provided meet and comply with the contemporary technical and professional standards with reasonably expected safety requirements when placing the goods into the stream of commerce, or at the time of rendering services.”

When a product causes damage to the lives, bodies, health or properties of a consumer or third party, the courts will assess factual elements such as whether the product lacked safety, and whether there exists a causal link between the safety defect and the damage (i.e. the causation necessary to establish liability) when determining whether the business entity shall bear product risk liability under article 7 of the CPA.

Regarding the allocation of the burden of proof on the issue of product safety, article 7-1 of the CPA expressly provides: “Business entities shall bear the burden of proof where it is claimed that the goods or services provided meet and comply with the contemporary technical and professional standards of reasonably expected safety requirements when placing the goods into the stream of commerce, or at the time of rendering services.”

Hence, if the consumer has established that the product was used according to a reasonable method, yet the consumer still suffered damage, the burden then shifts to the product manufacturer to prove the product’s safety.

Concerning the allocation of the burden of proof related to the causation necessary to establish liability, Taiwan’s Supreme Court held that the CPA implements a strict liability regime, relieving the consumer from proving intent or negligence of the business entity. Nevertheless, the consumer still needs to prove that a reasonable causal relationship exists between the product’s lack of safety and the damage suffered.

The courts may consider factors such as the relative financial and professional resources of the parties, their respective access to information, the difficulty of providing evidence, and evidentiary asymmetry, and may accordingly reduce the consumer’s evidentiary burden or shift the burden of proof pursuant to article 277 of the Code of Civil Procedure.

In contrast, the product manufacturer’s liability under article 191-1 of the Civil Code, which stipulates the liability of product manufacturers, remains subject to a fault-based standard.

Such a provision presumes the manufacturer’s negligence, the product’s lack of safety, and that the damage is causally linked to the product when damage arises from the ordinary use or consumption of the product. In other words, the manufacturer bears the burden of proving the absence of negligence, the conformity of the product to safety standards, and the absence of a causal nexus between the product and the damage.

Product recalls insurance

Pursuant to article 7 of the CPA, business entities are obliged to ensure that the goods or services they provide conform to the contemporary technical and professional standards with reasonably expected safety requirements.

Where evidence indicates that goods or services available on the market present risks to consumer safety or health, business entities are required to recall or discontinue the provision of such goods or services to prevent or mitigate harm to consumer rights and interests.

The CPA delineates distinct mechanisms for both voluntary recalls (or service discontinuation) initiated by business operators (see article 10 of the CPA) and mandatory recalls (or service suspension) imposed by competent authorities (see articles 36 to 38 of the CPA). Furthermore, the CPA prescribes administrative sanctions for non-compliance, including the imposition of fines and orders to cease operations.

In addition to the obligations set out in the CPA, business entities may, either voluntarily or pursuant to specific regulatory requirements, procure product liability insurance to mitigate the risk of compensation claims arising from damages suffered by consumers or third parties as a result of product defects.

AI products

In recent years, artificial intelligence has been extensively integrated into goods and services. Civil liability arising from damages caused by defects in AI products primarily encompasses user liability and producer liability. The former can be pursued through general tort liability provisions under the Civil Code, such as asserting civil tort liability against the driver of an autonomous vehicle.

The latter applies the relevant business entities’ liability under the CPA and the product manufacturer’s liability under the Civil Code. Business entities may be presumed to have failed to meet the safety standards reasonably expected, given the prevailing technological standards at the time, potentially incurring strict liability or presumed negligence liability. For example, claims may be asserted against the designers or manufacturers of autonomous vehicles under article 7 of the CPA and article 191-1 of the Civil Code.

Conclusion

As AI products become increasingly prevalent, disputes concerning product liability are likely to increase. Business entities should prioritise ensuring product safety and establishing robust mechanisms for emergency recall or disposal. Furthermore, business entities are advised to make prudent use of risk mitigation tools such as product liability insurance to address potential legal risks arising from the strict liability provisions under the CPA and the manufacturer liability provisions under the Civil Code.

Lee and Li, Attorneys-at-Law
8F, No.555, Sec 4, Zhongxiao E Rd
Taipei 110, Taiwan
Tel: +886 2 2763 8000
5F, Science Park Life Hub
No.1, Industry E 2nd Rd
Hsinchu Science Park, Hsinchu 300, Taiwan
Tel: +886 3 579 9911
Email: attorneys@leeandli.com