On 14 March 2023, the European Parliament adopted the Data Act, which regulates the fair access and use of data that is generated from connected devices to boost innovation by removing barriers that obstruct access to Internet of Things ("IoT") data.
The Data Act predominantly focuses on the untapped potential of industrial data, 80% of which the European Commission estimates is left unused. The Commission believes that, across the digital economy, data re-use is hampered by the lack of clarity of data rights, imbalances in negotiating power, limited access to fair and trustworthy cloud services, and a lack of cross-sector data interoperability.
The Data Act sets out the following rules to promote data sharing.
Business-to-Business and Business-to-Consumer Contracts
Article 3 of the Data Act attempts to govern data-sharing contracts between the company and manufacturer, by ensuring that both manufacturers and designers design products and provide services in a way that makes the data easily accessible by default.
Article 4 further governs the business-to-consumer contract, allowing consumers to be granted access to their generated data without delay, free of charge, and where applicable, continuously, and in-real time. This obligation extends to allow the user to request for their generated data to be made available to a third party. These pro-competitive provisions ensure that consumers have access to data portability and unrestricted choice.
This will help alternative providers and also aftermarket services providers, who can gain access to the trove of mostly unused information, to offer more personalised services and compete on an equal footing with comparable services that are offered directly by manufacturers.
The Data Acts complements: (i) the recently adopted Data Governance Act, which aims to facilitate the voluntary sharing of data by individuals and businesses and harmonises conditions for the use of certain public sector data; and (ii) the Digital Markets Act, which will requires a small number of very large providers of core platform services ("gatekeepers") to provide, more effective portability of data generated through business and end users' activities.
Start-ups, small and medium-sized enterprises and companies from traditional sectors with less-developed digital capabilities struggle to obtain access to relevant data. The Data Act aims to facilitate access to data for small and medium-sized enterprises and companies from traditional sectors with less-developed digital capabilities that currently struggle to obtain access to relevant data.
On the other hand, the gatekeepers leverage considerable power in the market, and accumulate and aggregate immense volumes of data, with the technological infrastructure to monetise such data. Therefore, gatekeepers providing core platform services are not able to rely on the Data Act to request or obtain access to users' data that is generated by the use of a product or related service or by a virtual assistant.
Trade Secrets
The Data Act Article 4(3) sets out that information that is "trade secrets" shall only be disclosed provided that all specific necessary measures are taken to preserve its confidentiality. The data holder and the user can agree such measures, particularly when information is to be shared with third parties.
The Data Act further sets limitations as to the extent of which public sector bodies can access and use data held by the private sector. The threshold proposed under Article 14 limits public sector access to when there is an "exceptional data need", such as public emergencies.
Cloud switching and international data transfers
The Data Act positively facilitates switching between providers of cloud, edge and other data processing services, ensuring that there is a "minimum level of functionality" for customers who switch to another service provider.
However, Article 27 of the Data Act controversially limits the scope by which non-EU governments and companies can access data. This provision has been criticised in the digital market as an open invitation to exclude non-EU cloud companies, which may trigger a decline in the availability of cloud technologies in Europe.
Nonetheless, the EU Parliament are confidently optimistic about the Data Act, describing the legislation as "an absolute game changer, providing access to an almost infinite amount of high-quality industrial data", driven by competitiveness and innovation.
The text has now been officially adopted, with MEPs ready to enter negotiations with the EU Council on the final shape of the law. The Act shall also boast an extra-territorial nature, meaning that entities outside of the EU must be aware, as they too may be bound by its obligations when operating with customers and businesses in the EU.
Find the Data Act here.
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