EU Data Act: A trade secret exception?

Trade secrets have been one of the most controversial topics of the EU’s Data Act. While trilogue negotiations among the EU’s co-legislators are ongoing, the European Commission would be open to introduce an exception to protect trade secrets, as reported in the press.

Data Act

The draft Data Act is part of the EU’s digital regulatory framework and sets forth rules to allow users of connected devices to gain access to data generated by them. Such access may be requested by consumers, businesses, and, in certain cases, by public authorities. They could also share such data with third parties to provide aftermarket or other data-driven innovative services. “Gatekeepers” would not be eligible to receive data on a user’s request.

Users would also be able to switch between different cloud data-processing services providers.

The draft also puts in place safeguards against unlawful non-personal data transfers.

Protection of trade secrets

Stakeholders in the industry have strongly opposed to the draft Data Act. While US companies argue that transfers of non-personal data are too restrictive, EU companies are concerned that sharing data may lead to the disclosure of trade secrets. Indeed, the access rights of the users provided in the draft Data Act would in principle cover confidential information.

The European Commission proposed that trade secrets would only have to be disclosed to third parties insofar as necessary to fulfil the purpose agreed between the user and the third party. This proposal did not satisfy trade secret holders.

The Council embraced these concerns and called for amendment of the Commission’s proposal by introducing stronger measures to protect trade secrets and intellectual property. In particular, it proposed the possibility for organisations to reject an access request if they can prove that it will likely result in serious economic damage, such as a risk of insolvency.

In return, MEPs were more reluctant to increase the protection of trade secrets, defending that it would undermine the purpose of the law by allowing organisations to refuse access requests unilaterally. Instead, it proposed provisions to require a contractual arrangement to be entered into between the parties listing the reasons for refusal.

In this context, the European Commission appears to be open to finding middle ground by considering the safeguards proposed by the Council, as long as such trade protection mechanism is used on an “exceptional basis”, as reported in the press. Finally, there seems to be a consensus.

Next steps

Trilogue negotiations are still ongoing as there are other controversial topics, such as data protection and compensation for data sharing. However, there might be a political agreement by the end of June.

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