Data ownership – future or delusion?
General ideas and the different proposals in German legal literature for regulating the ownership of data
20 September 2019
The possible emergence of ownership rights to data is currently the focus of many discussions surrounding the digital economy. As digitalisation progresses, the question of who owns data is becoming more and more important
In this respect, it is worth considering the following questions:
- Does ownership of data operate in the same way as ownership of physical objects or other intangible assets?
- Is there a need for ownership of data?
- Could the ownership of data produce any negative effects?
Economic importance of data
As a result of increasing networking activities (caused, for instance, by the Internet of Things), the amount of data generated is constantly rising. According to a study of the International Data Corporation, the worldwide data volume is expected to grow exponentially from 33 zettabytes (one zettabyte being 1021 bytes or 1 trillion gigabytes) in 2018 to 175 zettabytes in 2025. Moreover, by 2025 the share of real-time data as a percentage of overall data volume is expected to rise to 30% from a current share of only 5%. On average, each person is expect to interact with data in some form, whether privately or professionally, every 18 seconds.
Data has become a key asset and one of the top priorities of many companies. In online marketing, entire business models are based on data collection and analysis. It is not surprising then that German Chancellor Angela Merkel describes data as "the raw material of the 21st century" and the EU Commission has stated that data should be seen as a valuable production factor and as an economic good.
In view of the growing economic importance of data, whether or not ownership rights should be recognised or created by new legal regulations is currently the subject of intense debate.
Rights to data
The first ideas on the subject of data ownership were first raised decades ago. However, there is still no consensus on how data ownership should operate or whether it should exist at all. Due to data's "intangibility", property rights to data do not exist in the current German or EU legal systems. However, it is acknowledged that objects containing information, e.g. hard disks or computer chips, can be subject to ownership rights and their respective owners may assert their rights to these objects. They cannot, however, prevent others from reading, using, reproducing or publishing information on the basis of these property rights once such third parties have gained access to the data, i.e. once they have had a chance to decompile the information from the physical object (provided that the data is not protected by contractual confidentiality obligations or as a trade secret).
Further, among existing intellectual property rights, there is currently no other right which could be utilised to overcome the lack of a right to data. Copyright only protects the creation itself and not the underlying data or ideas. In its entirety, databases can at most be protected as an ancillary copyright in the form of a collection of data in accordance with Section 87a et seq. German Copyright Act (UrhG). Even the German Trade Secrets Act (GeschGehG), which came into force in April 2019, does not confer ownership rights to data as such and all such protection is lost if the data becomes publicly available. In the EU General Data Protection Regulation (GDPR), the legislator has taken comprehensive measures for the protection of personal data and has generally prohibited the processing of personal data, as far as no legal permission is available (Article 6, GDPR). However, the regulations of the GDPR do not provide any property rights to data.
Current proposals for data ownership rights
There are different proposals in German legal literature for regulating the ownership of data:
This approach would involve classifying the ownership of data in accordance with the category of data involved. According to this approach, the type of data would determine whether the data are owned by an individual or by a company. For instance, if data is company‑related (e.g. machine data etc.) that data would be owned by the company rather than by the individual to which the data relates.
Property law approach
The ownership of data could be classified by how and where the data are stored. This approach provides an element of 'tangibility'. However, as data's main value is in its portability and companies are increasingly turn to cloud systems to store their data, this approach may fail to deal adequately with data as an asset class.
An alternative approach is to grant data ownership in favour of the producer of the data. This model also produces uncertainty, for instance, would the "producer of the data" be: (i) individuals to which the data relates, (ii) the compiler of the data, or (iii) someone else?
Beneficial owner approach
A study commissioned by the German Federal Government suggests a different approach, which provides for the allocation of data to a "beneficial owner". According to this approach, the ownership of data would be determined by considering, among other things, the "merit" of data generation, production costs and further costs for the storage of the data. However, given the exponential growth in the production or storage of data as detailed above, this approach would likely give rise to many disputes between different parties who have borne costs in relation to the data.
Even though the above-described approaches are being discussed among scholars, there are no concrete current legislative efforts in Germany to introduce a right to data ownership.
The question of data ownership touches on the relationship between the protection of privacy and informational self-determination on the one hand and freedom of thought, communication, science, economic competition and technological innovation on the other. In order to protect both types of interests data, has so far not been subject to any proprietary right.
Generally, governments grant exclusive property rights as an incentive to invest, and, in return, expect benefits for the general public that result from the resulting technological progress (e.g. fostering technical progress through patented inventions). In this respect, data ownership could create new investment incentives by encouraging the collection and use of data. Further advantages of data ownership could be the better economic allocation of data and a more convenient usability of the data.
However, the "owner" of data is usually not interested in protecting the data as such, but rather seeks for protection of the information which is represented by the data or the knowledge obtained from that information. Exclusivity rights to data could therefore, indirectly, create monopoly positions over information, and this lack of cooperation could intensify the growth and duplicate data collection as parties could not make use of each entities' data.
The collection and control of vast amounts of data is generally accompanied by a fear of the curtailing of freedom of opinion, information and the press. Given that new technologies require a free flow of information, it is arguable that the ownership of data could indirectly lead to a stagnation of technological development.
Irrespective of the legal policy concerns, some argue that the allocation of data ownership appears to be practically difficult to implement. For example, the question arises of how data ownership and the acquisition of data should be demonstrated to third parties and how a transfer of ownership of data affects ownership rights existing with respect to the media/object containing the respective data.
The current legal provisions relating to the trading and transmission of data demonstrate that an allocation of data or a data ownership right may not be required. In fact, for a large share of the problems surrounding the allocation of data, a solution is already available: contractual agreements.
Contractual agreements between parties regarding the rights to use data – in most cases – offer more practical and relevant solutions. They can be designed flexibly and are thus suitable for a wide range of commercial needs. Accordingly, and due to the fact that the legislative discussion regarding data ownership is currently on hold, the real challenge lies in creative contract drafting.
Therefore, when data is involved it is absolutely essential to enter into discussions and draft contracts covering: how data is made available, for what purpose the data may be used, how such use is remunerated, how accumulated data is to be treated and also when data must be deleted. All these aspects are key for successful data-related contract drafting and require communication to ensure contractual provisions work legally and commercially.
Key Take-away Points
- Property rights to data do not exist in the current German and EU legal systems.
- Whether or not, in view of the growing economic importance of data, ownership rights should be recognised or should be created by new legal regulations, is currently the subject of intense debate.
- Irrespective of the legal policy concerns, the allocation of data ownership appears to be practically difficult to implement.
- Contractual agreements between parties regarding the rights to use data offer appropriate and practicable solutions.