Product Liability -- 2017

T.H., a Minor v. Novartis Pharm.   (California Supreme Court)

Brand name manufacturer liability after divestiture

The issue in this case is whether the brand name manufacturer of a pharmaceutical drug that divested all ownership interest in the drug can be held liable for injuries caused years later by another manufacturer's generic version of that drug. That would subject a manufacturer that invents a product to perpetual liability for harms caused, not by its own product, but for comparable products made and sold by entirely different businesses. This theory for liability, dubbed “innovator liability,” has been widely rejected in federal and state courts around the country, even when the defendant is still manufacturing its own version of the product. The lower court’s innovator liability approach in this case may be highly detrimental not only to pharmaceutical companies but to the manufacturing industry overall.

The NAM filed an amicus brief with the California Supreme Court detailing why innovator liability should not be upheld in California and why tort theories do not allow courts to circumvent fundamental principles of liability law against product manufacturers. Future plaintiffs will undoubtedly argue that there is no principle limiting the lower court's assertion that, when an innovator makes, markets and sells its own products, it is “foreseeable” that years later someone will be harmed by a comparable product made by someone else. The practical complications of requiring a manufacturer to retain liability over the design and warnings of products it no longer sells are vast. The net result would be to punish innovation and interfere with the common practice of manufacturers of divesting and purchasing product lines, which are essential to enhancing efficiencies to the benefit of consumers, investors and employees.

On December 21, 2017, the California Supreme Court ruled 5-3 to impose liability on the original manufacturer. It justified imposing innovator liability by separating its obligation to warn about the product it used to make from its obligation to warn when others make and sell the drug. It found that it was foreseeable that the branded drug company's label would be used by others, and that it had a greater incentive to update the warning labels when the drug went generic.

Related Documents:
NAM amicus brief  (December 7, 2016)


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