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EU Data Act - unlocking the value of industrial data in Europe

Derek du Preez Profile picture for user ddpreez February 24, 2022
Summary:
Whilst data transfer challenges between the EU and the US continue, the European Commission ploughs ahead with new data legislation to make industrial data reusable.

GDPR

This week the European Commission (EC) has proposed new rules - in the form of the EU Data Act - to unlock the value of industrial data across the region, making data generated by devices and users reusable and shareable. 

The EC said that the Data Act, which forms one of the ‘building blocks' of the Commission's data strategy, will ensure fairness in the digital environment, stimulate a competitive data market and make data more accessible for all. 

The EU has toughened up on its data laws in recent years, advocating data privacy for citizens, through the introduction of its GDPR legislation. It has also taken aim at the US tech giants, with ongoing legal disputes taking place around the transfer of data across the Atlantic. 

The latest dispute has seen Meta (formerly known as Facebook) threaten to withdraw its services from Europe, unless a solution to the now cancelled Privacy Shield agreement, which allowed for data transfers to take place, is found. 

However, the European Commission's primary focus is on ensuring an effective data regime within the EU, one which both protects the privacy of citizens and also enables innovation. 

Margrethe Vestager, Executive Vice-President for a Europe fit for the Digital Age, said: 

We want to give consumers and companies even more control over what can be done with their data, clarifying who can access data and on what terms. This is a key Digital Principle that will contribute to creating a solid and fair data-driven economy and guide the Digital transformation by 2030.

Not yet making the most of data

The European Commission explains that data is a non-rival good, meaning that it can be consumed over and over again without its quality being impacted or its supply being depleted. The volume of data is also growing constantly, with the EC estimating it could reach 175 zettabytes in 2025 (up from 33 zettabytes currently). 

However, the EC believes that the majority of this data is not being used to its full potential at present, with 80% of industrial data never used. Industrial data in this context means data generated by machines, devices and users. 

The Data Act, the EC states, addresses the legal, economic and technical issues that lead to data being under-used. It believes that the new rules will make more data available for reuse and generate €270 billion of additional GDP by 2028.

Simply put, the EC believes that data should be comparable to when you buy a ‘traditional' product. In that when you buy a ‘traditional' product, you acquire all parts and accessories of that product. However, when you buy a connected product (e.g. a smart home appliance or smart industrial machinery) generating data, it is often not clear who can do what with the data. Or it may be stipulated in the contract that all data generated is exclusively harvested and used by the manufacturer.

The Data Act aims to give both individuals and businesses more control over their data through a reinforced data portability right, copying or transferring data easily from across different services, where the data are generated through smart objects, machines and devices.

Proposals for the Data Act

The key proposals for the Data Act, include: 

  • Measures to allow users of connected devices to gain access to data generated by them, which is often exclusively harvested by manufacturers; and to share such data with third parties to provide aftermarket or other data-driven innovative services. It maintains incentives for manufacturers to continue investing in high-quality data generation, by covering their transfer-related costs and excluding use of shared data in direct competition with their product.

  • Measures to rebalance negotiation power for SMEs by preventing abuse of contractual imbalances in data sharing contracts. The Data Act will shield them from unfair contractual terms imposed by a party with a significantly stronger bargaining position. The Commission will also develop model contractual terms in order to help such companies to draft and negotiate fair data-sharing contracts.

  • Means for public sector bodies to access and use data held by the private sector that is necessary for exceptional circumstances, particularly in case of a public emergency, such as floods and wildfires, or to implement a legal mandate if data are not otherwise available. Data insights are needed to respond quickly and securely, while minimising the burden on businesses.

  • New rules allowing customers to effectively switch between different cloud data-processing services providers and putting in place safeguards against unlawful data transfer. 

The EC states that consumers and businesses will be able to access the data of their devices and use it for "aftermarket and value-added" services, like predictive maintenance. Meanwhile, business and industrial players will have more data available and benefit from a competitive data market, argues the EC. 

Thierry Breton, Commissioner for Internal Market, commented on the proposed new rules and said: 

Today is an important step in unlocking a wealth of industrial data in Europe, benefiting businesses, consumers, public services and society as a whole. So far, only a small part of industrial data is used and the potential for growth and innovation is enormous. 

The Data Act will ensure that industrial data is shared, stored and processed in full respect of European rules. It will form the cornerstone of a strong, innovative and sovereign European digital economy.

My take

The proposals from the EC are interesting and certainly have the potential to create whole new markets and business models for organizations and users in Europe. Industrial data has held a lot of promise for a while now, but it's true that it goes under utilized. And that's largely because organizations collecting this data are reluctant to open it up to others - holding onto it for themselves to develop. And this is where there is likely to be friction from tech players, which may see this as a threat. But ultimately what this could mean is more competition, which will likely lead to better services and products. EU data legislation is never a smooth path though, so we will have to see what hurdles come up before this becomes a reality. 

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