Governance of IoT Data: Why the EU Data Act will not Fulfill Its Objectives (Second Version)

Available (revised) at: GRUR International, ikac107, https://doi.org/10.1093/grurint/ikac107 (open access).

27 Pages Posted: 20 Apr 2022 Last revised: 11 Nov 2022

See all articles by Wolfgang Kerber

Wolfgang Kerber

University of Marburg - School of Business & Economics

Date Written: July 18, 2022

Abstract

The EU Data Act proposal (DA) wants to introduce new rights for the users of IoT devices regarding access, use, and sharing of the data generated through their use of these devices. This paper presents the results of a first analysis of the effectiveness of this "user right" mechanism from an economic perspective. It comes to the conclusion that the DA will not achieve its objectives of (a) empowering the users of IoT devices (esp. the consumers), (b) unlocking large amounts of IoT data for innovation (for IoT-related services and across sectors), and (c) contributing to a fair sharing of the value from the generated IoT data. Although the DA correctly identifies the main problem that the manufacturers can get through their technical design of the IoT devices exclusive de facto control over the generated IoT data, its proposals for solving it are by far not sufficient: (1) The proposed user rights mechanism suffers from manifold serious problems which will make it weak and largely ineffective (insufficient scope of data, lacking technical interoperability, high transaction costs, esp. through the need for a negotiated con-tract with FRAND conditions, unclarity regarding data markets). (2) Also the option that the users can get more control over the use of the IoT data through the requirement that the data holders can only use the IoT data on the basis of a contract with the users, will not work due to unsolved serious market failure problems in B2C situations, i.e. that all the rights to use the IoT data will end up with the data holders (and leave the consumers with only these weak user rights). The main reason for this negative assessment of the DA is its too large emphasis on the protection of the exclusive de facto control position of the data holders, although it is very doubtful whether in the case of IoT devices, whose price can cover the costs of data generation, any general incentive problem for investing in data generating IoT devices exist. Therefore, a far-reaching rebalancing in favor of easier and more data sharing and user empowerment is necessary, especially for enabling more innovation in the data economy.


Keywords: Data Act, Internet of things, data access, data sharing, data governance

JEL Classification: K11, K21, K24, L86, 034

Suggested Citation

Kerber, Wolfgang, Governance of IoT Data: Why the EU Data Act will not Fulfill Its Objectives (Second Version) (July 18, 2022). Available (revised) at: GRUR International, ikac107, https://doi.org/10.1093/grurint/ikac107 (open access). , Available at SSRN: https://ssrn.com/abstract=4080436 or http://dx.doi.org/10.2139/ssrn.4080436

Wolfgang Kerber (Contact Author)

University of Marburg - School of Business & Economics ( email )

Am Plan 2
Marburg, D-35037
Germany
+49 6421 2823921 (Phone)

HOME PAGE: http://www.uni-marburg.de/en/fb02/research-groups/economics/wipol/prof-wolfgang-kerber

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