Consumer Protection | Cybersecurity & Privacy Law | Technology

Introduction: New Era of Being Connected

From voice-controlled refrigerators to app-connected baby monitors, smart products are rapidly reshaping consumer markets. However, this wave of innovation brings with it a surge of legal complexity. These Internet of Things (IoT) devices—defined by their ability to collect, transmit, and act on data—pose emerging liability risks that manufacturers, designers, and legal professionals must now confront.

Unlike traditional product lines, smart devices introduce new vectors for cyberattacks, privacy violations, software malfunctions, and even physical harm triggered by software bugs or remote interference. As courts, regulators, and litigants begin to grapple with these risks, a new era of connected-product liability is unfolding.

This article explores the evolving legal doctrines surrounding smart products, with a focus on recent litigation, regulatory activity, and best practices for limiting exposure.

I. Defining the Risk: What Makes Smart Products Legally Distinct?

At their core, smart products are physical devices embedded with digital intelligence—sensors, connectivity, data processing, and machine learning capabilities. Common examples include:

• Smart thermostats and locks
• Connected medical devices (e.g., insulin pumps)
• Home security systems with cloud access
• Smart toys and baby monitors
• Wearables and fitness trackers

Their connectivity to external networks—and dependence on ongoing software updates—means that risks can arise long after sale. These include:

• Unauthorized access (e.g., hacked smart cameras)
• Software-driven product failure (e.g., firmware error disables a medical device)
• Data privacy breaches (e.g., location or biometric data leakage)
• Autonomous decision-making (e.g., AI-driven appliances malfunctioning)

These factors challenge traditional product liability doctrines, which are rooted in physical defects and often tied to the point of manufacture or sale.

II. Legal Theories in Emerging Litigation

Plaintiffs are now experimenting with a range of legal claims against smart product makers, including:

1. Negligence and Design Defect

Claimants allege that manufacturers failed to include adequate cybersecurity features, creating foreseeable risk. Courts have begun to treat lack of encryption, poor authentication protocols, and unpatched software vulnerabilities as evidence of negligent design.

• Example: In Smith v. HomeGuard Inc. (D. Mass. 2024), a class action claimed that the manufacturer of a smart doorbell failed to encrypt data streams, allowing stalkers to access live feeds. The court allowed the case to proceed past a motion to dismiss, finding that cybersecurity could constitute a design defect.

2. Failure to Warn / Inadequate Instructions

Many suits allege that consumers were not adequately warned about device capabilities or limitations—especially when apps collect data or devices are vulnerable to third-party access.

• Example: In a 2023 California case, parents sued a smart toy maker whose Bluetooth-enabled doll recorded and stored children’s conversations without proper disclosure. The court emphasized that failure to disclose “connected functionality” may trigger a duty to warn.

3. Privacy and Consumer Protection Statutes

Plaintiffs increasingly rely on state privacy laws (e.g., California Consumer Privacy Act or Illinois Biometric Information Privacy Act) and federal statutes like the Computer Fraud and Abuse Act (CFAA) to allege unlawful data practices.

• Example: In Doe v. BabyTech Inc. (N.D. Ill. 2023), parents alleged that a smart baby monitor collected location and video data in violation of BIPA. While the court dismissed the federal CFAA claim, it allowed the state privacy claim to proceed.

4. Product Recalls and Failure to Update

Because many smart products depend on regular updates, plaintiffs have alleged that failure to maintain post-sale support or notify of security risks constitutes a form of product defect.

• Trend Watch: The CPSC and FTC have signaled support for “right to repair” and “secure by design” standards, pressuring manufacturers to maintain safer lifecycle management.

III. Regulatory Attention and Policy Trends

A. FTC Enforcement

The Federal Trade Commission (FTC) has emerged as the leading federal enforcer in this space. It has issued multiple complaints against smart device companies for deceptive practices related to data collection, sharing, and security.

• In FTC v. Vizio, Inc., the FTC fined a smart TV maker for collecting viewing habits without user consent—framing the violation as both unfair and deceptive under Section 5 of the FTC Act.

B. NIST & Cybersecurity Standards

The National Institute of Standards and Technology (NIST) has issued several frameworks, including the NIST IR 8259 series, which outline baseline cybersecurity features for IoT devices. While not legally binding, these guidelines are now cited in litigation and may inform judicial expectations regarding industry norms.

C. State Legislation

Several states have passed or proposed IoT-specific security laws:

• California’s IoT Security Law (SB 327) requires “reasonable security features” for connected devices sold in the state.
• Oregon HB 2395 (2023) includes similar provisions and grants enforcement authority to the state attorney general.

IV. Liability Challenges Unique to Smart Products

Smart products introduce novel complexities in determining fault, causation, and control, particularly when:

• Multiple parties (e.g., manufacturers, app developers, cloud hosts) share responsibility for device functionality;
• Software updates modify behavior post-sale, potentially triggering liability for changes not envisioned at manufacturing;
• User customization creates unpredictable outcomes (e.g., using third-party integrations or jailbreaking devices).

These dynamics raise important doctrinal questions:

• Can manufacturers be liable for post-sale software vulnerabilities?
• Are third-party app developers responsible for smart product failures?
• What duty, if any, do companies have to patch or support older models?

Courts are only beginning to answer these questions, and results remain inconsistent across jurisdictions.

V. Practical Guidance: Risk Mitigation for Industry

Attorneys advising smart product clients should consider the following best practices:

1. Privacy by Design
   Incorporate data minimization and user controls at the development stage to reduce liability under state privacy laws.
2. Security Defaults
   Require strong default passwords, encrypted communications, and authenticated firmware updates.
3. Disclosures and Consent
   Provide clear, conspicuous notices about device capabilities, data collection practices, and user responsibilities.
4. Update & Patch Policies
   Maintain a documented update lifecycle policy and communicate security patches clearly and promptly.
5. Cross-Functional Risk Assessments
   Ensure engineering, legal, and compliance teams collaborate during product design to flag potential vulnerabilities early.

Conclusion

As smart products continue to permeate everyday life, courts and regulators are signaling that legal accountability will extend beyond hardware to encompass data practices, connectivity risks, and software design. For legal professionals, understanding this intersection of product liability, cybersecurity, and consumer protection is no longer optional—it is essential.

Connected innovation brings connected liability. The smartest companies will not only invent the future—they will build it responsibly.