The digital transformation sweeping across industries has positioned data as a critical asset, driving innovation and competitive advantage. In this context, the EU Data Act, set to take effect in September 2025, has significant implications for businesses, particularly regarding the delicate balance between data sharing and the protection of trade secrets.
Introduction
The Data Act aims to foster a robust data economy by promoting fair and efficient data sharing practices. While this initiative offers numerous benefits, such as increased innovation and competition, it also raises concerns for businesses that possess valuable data containing trade secrets. This article delves into the key provisions of the Data Act, explores the potential conflicts between data sharing obligations and trade secret protection, and provides recommendations for businesses to navigate this complex landscape.
Trade Secrets in the Data Act: Balancing Accessibility and Protection
The Data Act grants users of connected devices the right to access and share data generated by those devices. This raises concerns for original equipment manufacturers (OEMs) who fear that competitors could exploit this data to develop rival products or gain an unfair market advantage. The Act attempts to address these concerns by allowing data holders to refuse data sharing requests under certain circumstances, particularly when it involves disclosing trade secrets. However, these exceptions are limited, and the Act's provisions on trade secrets remain ambiguous, potentially leading to legal challenges and disputes.
Understanding Trade Secrets
Trade secrets encompass a wide range of confidential information that provides a business with a competitive edge. This can include formulas, practices, designs, instruments, or a compilation of information. To qualify as a trade secret, the information must not be generally known or readily ascertainable, have commercial value because it is secret, and be subject to reasonable steps taken by the rightful holder to maintain its secrecy.
The Act's Treatment of Trade Secrets
The EU Data Act acknowledges the importance of protecting trade secrets while promoting data sharing. It stipulates that trade secrets should be disclosed to third parties only to the extent necessary to fulfill the purpose agreed between the user and the third party. Data holders are entitled to agree on proportionate technical and organizational measures to protect their proprietary information, such as:
- Model Contractual Terms
- Confidentiality Agreements
- Strict Access Protocols
- Technical Standards
- Codes of Conduct
If the parties cannot agree on such measures, the trade secrets may be withheld. Additionally, in exceptional circumstances where disclosure would likely cause serious economic damage to the trade secret holder, they can refuse to disclose the information, even if the aforementioned measures are in place.
Potential Challenges
Despite these provisions, several challenges may arise for businesses seeking to protect their trade secrets in the context of the Data Act:
- Defining Trade Secrets: The Act's definition of trade secrets is not explicitly precise, leaving room for interpretation and potential disputes over what constitutes a trade secret.
- Demonstrating Harm: Data holders must demonstrate that disclosing trade secrets would cause "serious economic damage," which can be difficult to prove in practice.
- Balancing Competing Interests: The Act aims to balance the interests of data holders and data users, which may lead to conflicts and uncertainties in its implementation.
- Enforcing Protection: Enforcing trade secret protection in the context of data sharing can be challenging, especially when dealing with cross-border data flows.
