Principles for a Data Economy Is Approved

Principles for a Data Economy Is Approved

PHILADELPHIA – At today’s 2021 Annual Meeting, members of The American Law Institute (ALI) voted to approve Tentative Draft No. 2 of ALI-ELI Principles for a Data Economy. 

Launched in January 2018 by the ALI Council, this project is a joint undertaking with the European Law Institute (ELI), which, much like the ALI, is a membership-based, independent nonprofit organization with the mission of providing guidance on legal developments.

The project has two Reporters, one from each organization. The ELI Reporter, Christiane C. Wendehorst, is Professor of Private Law at the University of Vienna. She is also a founding member of the ELI and became the ELI’s President in September 2017. The ALI Reporter, Neil B. Cohen, is the Jeffrey D. Forchelli Professor of Law at Brooklyn Law School and the longstanding Research Director of the Permanent Editorial Board for the Uniform Commercial Code, the ALI’s joint venture with the Uniform Law Commission. To help coordinate the work of the two institutions, there also are two co-chairs: ELI Co-Chair Lord John Thomas of Cwmgiedd, who until recently served as Lord Chief Justice of England and Wales; and ALI Co-Chair Steven O. Weise, a Proskauer partner and member of the ALI Council.

The law governing trades in commerce in the United States and in Europe has historically focused on trade in items that are either real property, goods, or intangible assets such as shares, receivables, intellectual property rights, licenses, etc. With the emergence of the data economy, however, tradeable items often cannot readily be classified as such goods or rights, and they are arguably not services. They are often simply ‘data.’

“As we all know, the modern economy is no longer just about goods or services, and other traditional commodities, to which our law has long adapted. The modern economy is, to a large extent, about data: collecting data, trading in data, analyzing data, and creating value with the help of data,” said Reporter Wendehorst. “So, our project looks specifically into how data transactions work and which terms should be governing them by default. We equally look into what kind of rights people have where data is created with their contribution.”

Both in the U.S. and in Europe, uncertainty as to the applicable rules and doctrines to govern the data economy is beginning to trouble stakeholders (such as data-driven industries; micro, small and medium-sized enterprises; as well as consumers). This uncertainty undermines the predictability necessary for efficient transactions in data, may inhibit innovation and growth, and may lead to market failure and manifest unfairness, in particular for the weaker party in a commercial relationship.

“The data economy now is almost exclusively governed by legal doctrines that were developed for other purposes; one of our major tasks is to adapt those doctrines so that they can be applied appropriately to the data economy going forward,” said Reporter Cohen. “One of the purposes of this project is to think not only about what the rules are but what the rules could and should be. Unlike preparing a Restatement, for which a lot of the work involves looking back into the history of legal doctrines—how did we get here and how is the law developing? — this Principles project needs to look at the present and to the future without any real guarantee of what the future will look like, because it’s changing so quickly.”

This project proposes a set of principles that might be implemented in any kind of legal environment, and are designed to work in conjunction with any kind of data privacy/data protection law, intellectual property law, or trade secret law, without addressing or seeking to change any of the substantive rules of these bodies of law.

“We created a set of principles that works with whatever data protection, data privacy framework you are dealing with,” explained Professor Wendehorst. “One of the decisions we made at a very early stage in our project was to stay abreast of data privacy and intellectual property rights. And when you do that, you realize that the principles that are just about data transactions and data rights are very similar.”

“There is uncertainty, both in the United States and in Europe, concerning the legal rules that should apply to the data economy,” said ALI Director Richard L. Revesz. “I am very excited about the result of this transatlantic collaboration and proud that the type of work that we do is deemed valuable around the world.”

While the work was conducted jointly, each organization followed its respective approval processes. For the ALI, with the approval of this draft, the project Reporters are authorized to correct and update citations and other references, to make editorial and stylistic improvements, and to implement any remaining substantive changes agreed to during discussion with the ALI membership or by motions approved at the Annual Meeting. The ELI is scheduled to vote on this project later this year. We hope that a single draft will be approved on both sides of the Atlantic. But for any Principles for which agreement of this sort cannot be reached, there will be different ALI and ELI versions.

The approval of ALI-ELI Principles for a Data Economy at The American Law Institute’s 2021 Annual Meeting was made possible in part by a philanthropic grant from Carnegie Corporation of New York.

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