The Product vs. Service issue.

A central issue in the realm of software engineering surrounds the definition of software as either a product or a service. This determination is important: if software is deemed to be a sevice, then product liability laws will not apply to software.

Four concepts are relevant (Mortimer, "Computer-Aided Medicine: Present and Future Issues of Liability", 9 Computer Law Journal 177 (1989) at 183):

Tangibility

The concept of tangibility is important only in that is has historically been a requirement for the application of product liability law: a product is legally defined to be something that is tangible.

This issue has not been settled by the courts, but the dicta of a products liability case involving canned mushrooms hinted that software should be considered a tangible product. Surprisingly, this small inference caused a stir in the press and in the computer industry because such a determination could make software companies liable under product liability laws.

Ownership

"One of the hallmarks of a product is its capacity to be held in one's possession" (Mortimer 184).

The concept of ownership can be used to distinguish different instances of software use. This concept is applied by Mortimer to distinguish two types of software use:

Possibilty for correcting defects.

Mortimer argues that the ability to correct defects implies that the entity is a product. Services on the other hands cannot be corrected at a later date.

Method of distribution

Under this distinction, programs custom made for a particular client would be considered a service while mass produced software would be considered product.

Conclusion

The courts seem to be swaying towards the ruling that software is a product and thus falls under many of the existing products liabilty laws, notably the Unform Comercial Code. We believe this determination to be the correct policy choice. Software may stretch the traditional definitions of a product, but it is clearly a tool used by many people that is seen by many as a product. But instead of just including software under existing laws, new rules should be created that take into account the unique nature of software.