Unde­re­sti­ma­ted risks: the signi­fi­can­ce of the GDPR for pro­duct development

Ana­log pro­ducts seem to be a thing of the past. In any case, the­re is a mas­si­ve trend towards digi­tal pro­ducts and IoT devices and, for many manu­fac­tu­r­ers, this means retoo­ling pro­duc­tion with a grea­ter focus on digi­tal tech­no­lo­gies. But when­ever a manu­fac­tu­rer deve­lo­ps a pro­duct which is desi­gned to pro­cess data for users, that pro­duct must con­form to the pre­sent legal frame­work for digi­tal pro­ducts, in terms of IT secu­ri­ty and data pro­tec­tion. Con­tra­ry to wide­spread opi­ni­on, manu­fac­tu­r­ers do need to adhe­re to the requi­re­ments of the Gene­ral Data Pro­tec­tion Regu­la­ti­on (GDPR) if their pro­ducts will be used to pro­cess per­so­nal data, i.e. infor­ma­ti­on rela­ting to an iden­ti­fied or iden­ti­fia­ble natu­ral person.

I.    The GDPR from the view­point of manufacturers

In theo­ry, the GDPR appli­es only to con­trol­lers, i.e. tho­se who deter­mi­ne the pur­po­ses and means for the pro­ces­sing of per­so­nal data. The role of manu­fac­tu­r­ers, on the other hand, is typi­cal­ly limi­t­ed to sup­p­ly­ing the pro­duct to con­su­mers: in many cases, manu­fac­tu­r­ers do not pro­cess data on their own.  Accor­din­gly, the GDPR does not impo­se requi­re­ments on manu­fac­tu­r­ers direct­ly, but only “encou­ra­ges” them “to take into account the right to data pro­tec­tion when deve­lo­ping and desig­ning such pro­ducts, ser­vices and appli­ca­ti­ons and, with due regard to the sta­te of the art, to make sure that con­trol­lers and pro­ces­sors are able to ful­fil their data pro­tec­tion obli­ga­ti­ons” (Reci­tal 78 to the GDPR).

The idea behind this is simp­le: the GDPR does not have to requi­re manu­fac­tu­r­ers to com­ply, becau­se the mar­ket will regu­la­te them on its own: users will ulti­m­ate­ly deci­de against a pro­duct if using it means that they, as con­trol­lers, will be unable to adhe­re to data pro­tec­tion requi­re­ments. This crea­tes an indi­rect “requi­re­ment” for manu­fac­tu­r­ers to design their pro­ducts in such a way that users will be able to adhe­re to the requi­re­ments of the GDPR when pro­ces­sing data in the future. In the event that manu­fac­tu­r­ers are invol­ved in the future ope­ra­ti­on of digi­tal pro­ducts as well, the requi­re­ments of the GDPR will also fre­quent­ly app­ly to them direct­ly. This may be the case, for exam­p­le, if the manu­fac­tu­rer ope­ra­tes back-end sys­tems or plat­forms for IoT devices whe­re per­so­nal data is pro­ces­sed. It is the­r­e­fo­re in the manu­fac­tu­rer’s own inte­rest to adhe­re to the GDPR in such a case, begin­ning in the pro­duct deve­lo­p­ment phase.

II.    Requi­re­ment to design pro­ducts which can be used in con­for­mance with data pro­tec­tion requirements

Manu­fac­tu­r­ers who fail to adhe­re to data pro­tec­tion requi­re­ments for their pro­ducts do not neces­s­a­ri­ly face pen­al­ties under the GDPR. But this does not mean that they should­n’t heed the requi­re­ments of data pro­tec­tion law; after all, such vio­la­ti­ons may trig­ger lia­bi­li­ty in accordance with the laws gover­ning con­tracts of sale and con­tracts for works and ser­vices. If the manu­fac­tu­rer knows that its pro­duct will be used to pro­cess per­so­nal data and fails to adhe­re to the legal requi­re­ments so as to enable the pro­duct to be used in con­for­mance with data pro­tec­tion law, such a fail­ure may con­sti­tu­te a defect in the pro­duct and result in lia­bi­li­ty for the manu­fac­tu­rer. Moreo­ver, we can­not rule out the risk of manu­fac­tu­rer’s lia­bi­li­ty in accordance with § 823(1) of the Civil Code in con­junc­tion with the right to pri­va­cy, e.g. pur­su­ant to Artic­le 8 of the EU Char­ter of Fun­da­men­tal Rights and Artic­le 16 of the TFEU, the fun­da­men­tal right to infor­ma­tio­nal self-determination and the gene­ral right of pri­va­cy. The­r­e­fo­re, manu­fac­tu­r­ers should abso­lut­e­ly adhe­re to the requi­red data pro­tec­tion and cyber­se­cu­ri­ty stan­dards and fami­lia­ri­ze them­sel­ves with the legi­ti­ma­te secu­ri­ty expec­ta­ti­ons of the expec­ted user group. In par­ti­cu­lar, manu­fac­tu­r­ers should per­form a cri­ti­cal assess­ment as to the lawful­ness of any trans­fers of per­so­nal data to non-EU count­ries, par­ti­cu­lar­ly the US, given the pre­sent chal­lenges asso­cia­ted with data trans­fers to third count­ries ari­sing from the ECJ’s “Schrems II” ruling and the ongo­ing inves­ti­ga­ti­ons by data pro­tec­tion aut­ho­ri­ties.

III.    Stra­te­gic implementation

Stra­te­gic imple­men­ta­ti­on of the­se requi­re­ments at the ear­liest pos­si­ble date redu­ces the risks for manu­fac­tu­r­ers enorm­ously. A sui­ta­ble manage­ment sys­tem will allow you to iden­ti­fy appli­ca­ble regu­la­ti­ons, deri­ve spe­ci­fic requi­re­ments and then imple­ment them in your deve­lo­p­ment and manu­fac­tu­ring pro­cess. We would be glad to help you in this regard.

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