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This is a very common opinion, but if you delegate the assignment of liability to the court, then you will get even more problems about state overreach.
Consider the following scenario: A consumer buys some smart lights for their house. The smart lights are hacked, and hacker uses these smart lights as a proxy to launch ransom-ware attacks against hospitals. The hospitals are collectively "forced" to pay $100 million in ransom to continue their operations. Who is liable in this case? The consumer who didn't put the smart lights behind a firewall? The hospitals who had employees fall for phishing emails? Or the IOT company for not updating the security of their devices? If you don't have legislation defining what makes someone liable, then unaccountable judges will be forced to legislate from the bench about who is liable and who is not. If you don't like the decision, then you can't just vote them out of office the same way you can with legislators.
Just cap the liability costs at 10x the costs of the device. This should be enough to get vendors to take security seriously without having to worry about black swan outcomes.
Also, a hospital getting attacked by ransomware should obviously not only be liable for the ransom they elected to pay, but be fined on top of that if it turned out that any patient files were accessible to attackers.
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Of course the problem of codifying responsibility doesn't magically dissolve if we oppose someone doing it.
Most of the issues raised by your hypothetical can be resolved by the content of the contract signed by the parties.
The only crucial thing that isn't there is what the standard for being negligent about your security is, and while I get the argument that it's easier to resolve if codified by politicians, I actually think it's fuzzy and contextual enough that it is better left to the courts.
I also am under no such delusion as to believe that I could vote legislators out of doing the bidding of the interests that pay for all of their campaigns. Judges might at least accidentally stumble upon some good sense and integrity. Politicians are constitutionally incapable of such things.
I do not want to live in a word where people buying a $10 device from walmart have to sign a contract.
To some extent we do live in that world already: your $10 electronic device from Walmart probably already has a click wrap license that you have to accept to use the product. The validity of those is perhaps subject to question, but they aren't, to my knowledge in the US, categorically invalid.
Funny you mention clickwrap, because this whole topic reminds me of Ross Scott's campaign on stopping the destruction of live-service-type games, and the legal precedents in the US that basically give consumers no rights over software publishers.
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That's too bad, because you already live in one.
I too hate that we don't distinguish strongly enough between computers bolted onto appliances and regular appliances. It's confusing. But when your fridge is actually a computer with a delivery service that happens to come with a free fridge, we have to deal with the complexities of the former, not the latter.
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