Data Ownership in the New World of AI

Data ownership is an ongoing debate that influences control over business assets and the creation of competitive moats. Businesses need to stay vigilant and adapt to the emerging trends.

Greetings everyone! I'm excited to dive into our latest discussion on data ownership and usage rights for businesses. I appreciate your patience with the less frequent updates as I navigate a busy end-of-year schedule. Currently, I'm gearing up for a series of conferences and business meetings in Saudi Arabia and the Gulf scheduled in March 2024, and I've also recently taken on a large AI strategy and infrastructure project. In preparation, I'm immersing myself in learning Arabic and developing skills in cloud infrastructure and AI tools. While my posts might be sporadic in the coming months, I'll be sure to share insights and reflections. Thank you for your continued support!

شكرا لدعمكم ,زين اعن تك

Central to the ongoing debate in various industries is the control over business data assets and the creation of competitive moats. Consumers often find themselves with limited options for protection, necessitating legislative intervention in certain sectors. While some industries may see standard-setting by industry bodies, others attract legislative action due to heightened political scrutiny. Consequently, businesses need to stay vigilant and adapt to the emerging trends in their respective industries so they can skate to where the puck is heading. Managing control over data pipelines demands a nuanced approach, blending a gentle touch with strategic incentivization. For businesses that retain control in their industry, this presents a significant advantage. However, for those in industries where control is shifting away, it's prudent not to resist the tide unless a business holds substantial market influence. Striking this balance requires traditional business acumen, where building moats, refining offerings, and devising strategies align with the changing industry dynamics.

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B2B Data Relationships Defined by Contracts, Not Government Regulations

The Privacy Acts of New Zealand and Australia governing the handling of personal data in New Zealand. It focuses on the privacy principles related to the collection, use, and disclosure of personal information. The Act doesn't explicitly define 'data ownership'. Instead, it provides a framework for how personal data should be managed and protected, with a strong emphasis on privacy rights and responsibilities.

In both NZ and AU, while there are comprehensive laws and guidelines about the privacy and security of personal data, 'data ownership', especially in the context of non-personal or operational data often found in industrial or IoT settings, is not explicitly defined. This lack of clear delineation means that data ownership is determined by contractual agreements between parties.

Lack of Contractual Definition Creates Risk

For Industrial IoT (IIoT) systems, where the focus is primarily on non-personal data, the question of data ownership can be quite different from consumer IoT contexts.

Many companies, sell proprietary IoT devices equipped with proprietary control systems. Not having contracts to explicitly define data ownership terms for the IoT assets, and the data generated by them creates significant risks:

1. IP and Data Ownership Disputes: Ambiguity in contracts regarding the ownership of data collected via proprietary systems could lead to legal challenges.

2. Compliance with Privacy Laws: Handling data without explicit consent and clear terms might result in breaches of privacy laws.

3. Customer Relationships: Uncertainty or disputes over data rights could affect customer trust and business relationships.

Who has a claim to data in various scenarios?

This can be a multifaceted and complex issue, with different entities having claims based on their roles and contributions:

Data Ownership vs. Control: While one party may physically possess the data, this does not automatically confer ownership (or title) rights. Possession allows for control over the data, but ownership (or title) pertains to legal rights over it. Usage rights, which follow the data through copying and transmission, can blur the lines between possession, control, and ownership.

Asset Owner's Claims

The owner of the asset (such as a building or vehicle) from which the data is generated may have a legitimate claim to owning the data. This perspective is grounded in the principle that the data, being a by-product of the owned asset's operation or usage, inherently belongs to the asset's owner. For instance, a company owning a fleet of vehicles might claim ownership of data generated by those vehicles, even if the data is collected and initially processed by a device provider. The argument here is that the value derived from the asset (and hence the data it generates) should accrue to the asset's owner, not merely to the entity that collects or processes the data. This claim can be particularly strong if the asset owner is also responsible for maintaining the operational environment in which the data is generated.

Argument for Data Ownership by Hardware Providers

There's a viewpoint that the entity investing in aggregating, processing, and making data usable owns the data. For instance, in the case of a smart thermostat, the homeowner may not own the data regarding their usage of the device. Instead, it's the company that aggregates and processes this data (e.g., a home automation company) that owns it, especially if there's significant investment involved. The value derived from this data, like market intelligence or product differentiation, further supports this notion of ownership.

1. Investment in Proprietary Technology: Hardware provider invests significantly in developing proprietary hardware and control systems. This investment goes beyond the physical devices; it encompasses the innovation and intellectual effort in creating systems that can generate, collect, and process data in unique and valuable ways.

2. Data Processing and Enhancement: The value of raw data from IoT devices is often limited until it is processed and transformed. Hardware providers proprietary systems not only collect data but also enhance it, turning it into actionable insights. This process of transformation, where data is given context and meaning, adds significant value.

3. Monetization and Cost Recovery: Hardware provider uses the data to develop new products and optimize services, this monetization strategy is a way to recover the investments made in technology development. The ability to monetize this data is crucial for sustaining and advancing technological capabilities.

Tesla’s Data Control and Ownership: Learnings for Hardware Providers

It's instructive to look at industry leaders like Tesla for benchmark practices. Tesla's approach to data control and ownership, particularly with their electric vehicles and energy products, offers valuable insights into effective strategies that can be applied in other sectors, including industrial IoT.

“Tesla, like all other automakers, has a policy that spells out what it can and cannot do with the data it gets from customers’ vehicles, including location information. This states that while the company does not sell customer and vehicle data, it can share that data with service providers, business partners, affiliates, some authorized third parties, and government entities according to the law.” WHO ACTUALLY OWNS TESLA’S DATA? IEEE Spectrum

Contractual Agreements

Tesla’s terms of service and user agreements clearly outline data ownership and usage rights. This includes how vehicle data is collected, used, and shared, and the rights reserved by Tesla. Like Tesla, Hardware providers contracts should explicitly define data ownership in B2B Contracts and SLAs. This clarity is vital for managing expectations and legal compliance, especially in multifaceted industrial ecosystems.

Nature of Data

Tesla uses operational data from its vehicles to improve performance, safety, and customer experience. This data is treated as proprietary and is crucial for continuous product development. In IIoT, operational data like machine performance or environmental conditions would be considered proprietary. If generated by unique systems or algorithms, this could justify exclusive ownership or rights, mirroring Tesla's approach.

Data Usage and Sharing

Tesla shares data across its network for broader benefits, like autopilot improvement and safety enhancements, while maintaining control over how this data is used. A similar model can be applied for Hardware provider, where data sharing amongst stakeholders (manufacturers, suppliers, customers) is balanced with ownership rights.

Tesla’s Privacy Notice

Tesla’s privacy notice details how customer data is handled. It provides customers with a clear understanding of their data rights and Tesla’s obligations. Transparency in data handling, coupled with explicit consent mechanisms, is vital in IIoT. This not only builds trust but ensures compliance with privacy laws.

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Forcing Data Sharing with Legislation

There is a push for forced data sharing in the automotive sector, epitomized by the evolving debate over the ownership and accessibility of vehicle-generated data. A pivotal moment came in 2015 when the U.S. Congress established that data in a vehicle's event data recorders belong to the vehicle owner, acknowledging their rights over certain data types. Yet, this development merely scratches the surface of a larger, unresolved issue: who owns the myriad data produced by today's connected vehicles? This question, central to the right-to-repair movement, is not just about ownership or privacy; it significantly affects the competitive dynamics in the automotive service industry. When manufacturers like Tesla and Rivian have direct access to vehicle data, it potentially biases the market in favor of their service networks, challenging independent repair shops. This scenario has stirred up considerable debate and has led to legislative initiatives like the REPAIR Act, aiming to democratize access to vehicle data and level the playing field for all service providers.

Drivers Own Safety Event Data Records

The evolving landscape of data ownership, particularly in the context of connected vehicles, has become a focal point in recent discussions. A notable milestone occurred in 2015 when Congress legislated that the data stored in a vehicle's event data recorders is the property of the vehicle owner.

“Event data recorder (EDR) means a device or function in a vehicle that records the vehicle's dynamic time-series data during the time period just prior to a crash event (e.g., vehicle speed vs. time) or during a crash event (e.g., delta–V vs. time), intended for retrieval after the crash event. For the purposes of this definition, the event data do not include audio and video data.” 563.5 of title 49, Code of Federal Regulations

This decision marked a significant acknowledgment of the owner's rights over certain types of vehicular data. Despite this, the broader issue of who owns all of the data generated by today's connected cars is still a matter of contention.

At the heart of this debate is the question of whether data should be considered a form of property, and if so, who should hold these property rights. The logical assumption might be that the vehicle owner, as the user and creator of this data, should possess these rights. However, manufacturers often maintain effective control over this data through a combination of contractual terms and digital locks.

Setting aside the complex issue of ownership, the crucial point in the right-to-repair debate hinges on ensuring that vehicle owners have guaranteed access to the data generated by their vehicles. This aspect is central to understanding and navigating the intricate web of data ownership in the era of connected cars.

Repair Data Sways Servicing Choices

Access to vehicle data is not just a matter of ownership or privacy; it also directly impacts the competitive landscape in the automotive service industry. When carmakers have live access to the data generated by their vehicles, it positions them to potentially preference their own service providers or dealerships. This scenario can create an uneven playing field where independent repair shops might not have the same level of access to the data they need to provide efficient and competitive services.

‘governments will be keen to prevent a monopolistic situation and consumers will not want to be locked into something with no choice’. Australian Automotive Aftermarket Association executive director Stuart Charity

The REPAIR Act

Right to Equitable and Professional Auto Industry Repair Act” or the “REPAIR Act

The "Right to Equitable and Professional Auto Industry Repair Act," sponsored by Rep. Neal P. Dunn, was introduced on February 9, 2023, and is currently under the purview of the House Energy and Commerce Committee. Aimed at reforming the automotive repair industry, this act has undergone several committee meetings, with the most recent action being its forwarding to the full committee by a voice vote on November 2, 2023. The provision outlines a prohibition on motor vehicle manufacturers from withholding data, critical repair information, and tools. It mandates that:

1. Prohibition of Withholding Data and Tools: Motor vehicle manufacturers are prohibited from using technological or legal barriers to restrict access to:

   • Vehicle-generated data by the vehicle owner or their designee.

   • Critical repair information and tools needed by the vehicle owner, their designee, or entities like aftermarket parts manufacturers, motor vehicle equipment manufacturers, remanufacturers, or repair facilities.

   • The use of chosen vehicle towing or service providers by the vehicle owner or their designee.

   • The production or offering of compatible aftermarket parts by relevant manufacturers and repair facilities.

2. Requirement to Provide Data to Owners: Manufacturers are required to:

   • Provide unrestricted access (free of fees, licenses, or decryption devices) to vehicle-generated data for vehicle owners or their designees from the enactment date of the Act.

   • If using wireless technology or telematics systems, make available vehicle-generated data directly and wirelessly to the vehicle owner and their designees through a standardized access platform, starting no later than one year after the final rule publication.

   • Provide unrestricted access to critical repair information and tools at a fair, reasonable, and nondiscriminatory cost, effective from the enactment date.

This provision aims to ensure that vehicle owners and repair entities have fair and unimpeded access to necessary vehicle data and repair resources, fostering a more competitive and consumer-friendly automotive repair market.

Implications of REPAIR Act

The introduction of the REPAIR Act, could have several implications for Tesla's business model, particularly concerning its data control and service moat. The REPAIR Act represents a significant shift in the automotive industry’s data control landscape. For Tesla, it poses challenges to its current service model and data exclusivity but also opens opportunities for innovation and new partnerships.

Broader Access to Vehicle-Generated Data

The REPAIR Act mandates motor vehicle manufacturers to provide unrestricted access to vehicle-generated data to vehicle owners or their designees. This could significantly diminish Tesla's exclusive control over the data generated by its vehicles. The act seems to go beyond just facilitating repairs and maintenance, potentially opening up all vehicle-generated data for broader use, which could be seen as overly broad by manufacturers like Tesla.

Impact on Tesla's Service Moat

Tesla's business model includes a significant service moat, partly built on exclusive access to vehicle data. The REPAIR Act could erode this advantage by allowing third-party repair services access to the same data, intensifying competition in servicing and repairs. The ability for vehicle owners to choose service providers might lead to a more competitive market, potentially affecting Tesla’s service revenues and customer retention.

Challenges in Data Monetization and Innovation

By broadening data access, the act could impact Tesla's ability to monetize vehicle data uniquely. However, it could also foster innovation, as wider access to data might lead to new services and products in the automotive ecosystem, including Tesla's potential participation in these new markets.

Cybersecurity and Data Privacy Considerations

The bill allows for cryptographic protections for vehicle data and systems, which aligns with Tesla’s strong focus on cybersecurity. The requirement for notifications when vehicle data is accessed addresses privacy concerns, but it also adds a layer of transparency that Tesla will need to integrate into its systems.

Potential for Increased Collaboration

The act could encourage collaboration between Tesla and third-party service providers and parts manufacturers. This could lead to more diverse and possibly more economical repair and maintenance options for consumers. Tesla might leverage this to establish partnerships or certification programs for third-party services, maintaining quality control while complying with the new regulations.

Tesla and Rivian Trying to Undermine the REPAIR Act

Leading American electric vehicle manufacturers Tesla and Rivian are supporting a pact between carmakers and automotive repair organizations, which is being criticized as an attempt to undermine legislation aimed at making car repairs more accessible. The automotive industry has been in conflict with service groups and right-to-repair advocates over access to telematic data, essential for repairing modern, computerized cars. Advocates argue that increased access to this data would lower repair costs and extend vehicle longevity, crucial for electric vehicles (EVs) due to the environmental impact of manufacturing their batteries.

The proposed REPAIR Act in Congress seeks to give car owners and their chosen mechanics access to telematic data. However, the auto industry, benefiting financially from this data, argues that manufacturers should control it to ensure vehicle safety. An automotive industry trade group, the Alliance for Automotive Innovation, announced an agreement on data sharing with repair groups, which Tesla and Rivian supported. Major repair industry organizations, however, were not consulted on this agreement and have criticized it for not effectively improving car repairability.

Previously, agreements, like the 2002 pact with the Automotive Service Association and a 2014 memorandum of understanding following Massachusetts' right-to-repair law, aimed to give independent mechanics access to vehicle diagnostic and repair information. However, these agreements did not include telematics, leading to current challenges with access to real-time vehicle data.

Critics argue that the new agreement doesn't significantly change telematic data access and may exempt Tesla and Rivian from sharing any data due to their direct-to-customer business model. The voluntary nature of the agreement further weakens its impact, lacking enforcement mechanisms. This situation has led to calls for stronger legislation to guarantee access to repair data and ensure fair competition in the automotive repair industry.

The Massachusetts Data Access Law and the REPAIR Act under consideration in Congress — which would also require manufacturers to give vehicle owners direct, over-the-air access to telematic repair data via a standard platform — would carry the force of law. By contrast, “there’s no distinction about what happens if this MOU is violated,” Hanvey said. Grist

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Data Sharing Across Industries

The introduction of the REPAIR Act in the automotive sector, particularly its implications for data sharing and access, presents a stark contrast to the current landscape in the Industrial IoT industry. Here's a comparison of how this bill, if it becomes law, might differently impact these two industries:

Automotive Industry (Under REPAIR Act)

1. Mandatory Data Sharing: The REPAIR Act would require auto manufacturers like Tesla to provide unrestricted access to vehicle-generated data, not only for repairs but also potentially for wider applications.

2. Increased Competition in Servicing: With easier access to vehicle data, independent repair shops and third-party service providers could compete more effectively with auto manufacturers' service centers, potentially reducing the latter's service revenues.

3. Consumer Empowerment: Vehicle owners gain more control and choice over who services their vehicles, leading to potentially lower costs and increased service quality due to market competition.

4. Collaboration and Innovation: The opening up of vehicle data could spur innovation and new service offerings from third parties, potentially leading to collaborations with auto manufacturers.

5. Cybersecurity and Privacy: Auto manufacturers would need to balance open data access with robust cybersecurity measures and transparency in data usage.

Industrial IoT

1. Data Ownership and Access: Currently, data ownership and access in Industrial IoT is primarily governed by contractual agreements rather than broad legislative mandates. Manufacturers often maintain tighter control over their systems' data.

2. Limited Third-Party Servicing Competition: Without legislative mandates similar to the REPAIR Act, the competition from third-party service providers is often limited by the proprietary nature of the systems and the data they generate.

3. Controlled Innovation: Manufacturers in the Industrial IoT space have greater control over the innovation and development of new services, as they maintain exclusive access to the data and systems.

4. Focused on B2B Relationships: The industry is largely B2B-focused, where negotiations and agreements are tailored to specific business needs, as opposed to the broader consumer-focused mandates seen in the REPAIR Act.

5. Security and Privacy by Design: The industry can implement data security and privacy measures tailored to specific business agreements and customer needs, without the need for broad regulatory compliance.

John Deere, Change is Coming but Delayed

John Deere in the US, signed a memorandum of understanding with the American Farm Bureau Federation (AFBF) to ensure farmers have the right to repair their own farm equipment, which sets a precedent that could influence trends in the Industrial IoT sector, including in countries like Australia.

Key Aspects of the John Deere Case:

• Self-Repair Rights for US Farmers: The agreement allows US farmers to repair John Deere tractors themselves, granting access to necessary tools and software.

• Collaboration for Access to Tools and Software: John Deere committed to working with the farm lobby to ensure access to diagnostic tools and software, enabling farmers to choose their repair methods.

• Protecting Intellectual Property and Safety: The agreement balances farmers' repair rights with the protection of John Deere's intellectual property and equipment safety considerations.

• Regular Evaluation and Engagement: John Deere agreed to meet with the AFBF biannually to assess progress and resolve issues, formalizing a process for ongoing dialogue.

• Access to Diagnostic and Repair Codes: The memorandum includes access to essential resources like operator manuals, service manuals, and diagnostic tools.

• Direct Purchase of Diagnostic Tools: Farmers can directly purchase diagnostic tools from John Deere and receive support in ordering parts.

Implications for the Industrial IoT Industry

• Trend Towards Self-Repair Rights: The John Deere case could catalyze a movement in the IIoT industry, where users may demand similar rights to repair and maintain their equipment.

• Legal and Regulatory Developments: Australia’s Productivity Commission’s recommendation to change right-to-repair laws indicates a global shift towards enhanced repair rights. This could lead to legislative changes affecting IIoT manufacturers.

• Balancing Innovation with Consumer Rights: As seen with John Deere, IIoT manufacturers might need to find a balance between protecting their intellectual property and innovation while accommodating consumers' repair rights.

• Potential for New Service Models: This shift could encourage IIoT companies to develop new service models, possibly involving partnerships with independent service providers or offering diagnostic tools and software directly to consumers.

• Increased Focus on User Empowerment: Just as the John Deere case empowers farmers, a similar trend in the IIoT sector could lead to more empowered end-users who have greater control over the maintenance and repair of their equipment.

While the MOU represents a step towards addressing the right-to-repair issues, it's important to critically evaluate its potential as a genuine solution or as a strategic move by John Deere to delay formal legislation and maintain a competitive advantage in the repair market. The John Deere agreement in the US signifies a significant shift in manufacturers' approach to repair rights, with potential repercussions in the IIoT industry.

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How OEMs’ can Ensure Access to Data

Central to the ongoing debate in various industries is the control over business data assets and the creation of competitive moats. Consumers often find themselves with limited options for protection, necessitating legislative intervention in certain sectors like automotive. While some industries may see standard-setting by industry bodies, others attract legislative action due to heightened political scrutiny, like farming. Consequently, businesses need to stay vigilant and adapt to the emerging trends in their respective industries so they can skate to where the puck is heading. Managing control over data pipelines demands a nuanced approach, blending a gentle touch with strategic incentivization. For businesses that retain control in their industry, this presents a significant advantage. However, for those in industries where control is shifting away, it's prudent not to resist the tide unless a business holds substantial market influence. Striking this balance requires traditional business acumen, where building moats, refining offerings, and devising strategies align with the changing industry dynamics.

To ensure ongoing access to data from sites where IoT devices are installed while keeping customers satisfied OEMs need to implement strategic measures. These strategies should balance customer autonomy and rights with the OEMs need for data access, analytics and monitoring. Here are some recommendations: