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When a chip fails, which I have not personally seen yet, it just stops broadcasting its barcode number, the chips themselves are a lot like little antennaes. So the server would not neccisarily know that the item was stolen, it just wouldn't even pick up the tag.
Unless the tag sends out a "#23521351 is dying" broadcast, how is that behavior any different than someone walking out with a item undetected? And how would you find that item on the shelf? Try to think what your workplace's reaction would be to a failed chip even though it may not have happened yet, I'd be interested to know.