The European market has seen a sharp increase in connected devices in recent years. The use of connected objects, also called the Internet of Things, generates an increasing amount of data. On 11 January 2024 the EU Data Act entered into force, signifying a key milestone in the digital transformation journey. The Data Act has the aim of defining the rights to access and use of data generated within the EU across all economic sectors, with the intention of making it easier to share data.
Data as a resource
As society and the economy becomes more and more dependent on technology, data has become an important and valuable resource. In addition, it is a unique type of resource that can be used and reused for a variety of purposes and to an unlimited degree, without any loss of quality or quantity. However there exists barriers to data sharing that prevent an optimal allocation of data for the benefit of society. Lack of data sharing results in an unnecessary loss of value. The Data Act intends to address these barriers and the loss of valuable data.
Overall Objectives
The Data Act is meant as a complement to the Data Governance Act which became applicable in September 2023. The Data Governance Act includes rules on processes and structures that facilitate voluntary data sharing, while the Data Act clarifies who can create value from data and under what circumstances.
The overall objectives of the Data Act are to boost data sharing and increase legal certainty for businesses and consumers involved in data generation, especially in the context of the Internet of Things. The regulation aim to facilitate the transfer of valuable data between data holders and data users, without compromising confidentiality. Furthermore, the regulation aims to reduce misuse of contractual imbalances that hinder fair data sharing. The act enables small and medium-sized enterprises to participate more actively in the data market, and it is also expected to enable customers to seamlessly switch between different cloud providers. The purpose behind the latter is to promote healthy competition on the market and to prevent vendor lock-in.
Key Elements
The purpose of the Data Act is to enable a fair distribution of the value of data by establishing clear and fair rules for accessing and using data. The regulation is cross-sectoral and does not affect existing legislation such as the GDPR. The Data Act focuses on data generated by connected products and related services. Connected products are items that obtains, generates or collects data concerning its use or environment and that is able to communicate product data via an electronic communications service, physical connection or on-device access, and whose primary function is not the storing, processing or transmission of data on behalf of any party other than the user. A related service is a digital service, other than an electronic communications service, including software, which is connected with the product at the time of the purchase, rent or lease in such a way that its absence would prevent the connected product from performing one or more of its functions, or which is subsequently connected to the product by the manufacturer or a third party to add to, update or adapt the functions of the connected product. The intention of the Data Act is to give the users access to data generated by the products and services, including the opportunity to share such data with third parties.
In addition, the Data Act also addresses data not necessarily generated by a product or service. The regulation also regulates contractual data-sharing terms and the switching of data processing services. There is also an obligation to make data available to public sector bodies, the Commission, the European central bank and union bodies on the basis of an exceptional need. This is, for example, where the data requested is necessary to respond to a public emergency and the public sector body is unable to obtain such data by alternative means in a timely and effective manner under equivalent conditions.
The Data Act will become gradually applicable from 12 September 2025.
Challenges and Positive effects
The Data Act represents a significant step forward in a more data-driven economy, bringing several opportunities alongside some potential challenges. The regulation does promote greater transparency and control over data for consumers and businesses, which is expected to drive innovation, especially in sectors relying on connected products and services. By enabling smoother data sharing, it facilitates the development of new services and business models, fostering competition and a more efficient use of data across industries.
However, the implementation of the Data Act also poses certain challenges. One of the main concerns is ensuring a balanced approach between data accessibility and the protection of trade secrets and intellectual property. In addition, many businesses will likely incur large administration and compliance costs when adapting their systems to the requirements in the Data Act.
Overall, while the Data Act introduces some complexities, it holds the potential to create a more competitive and innovative digital ecosystem, fostering a fairer data economy within the EU. The challenge will lie in achieving the right balance between facilitating efficient data flow and maintaining the integrity of sensitive business information.
