A circular economy approach can enhance the EU’s domestic capacities in transition minerals (but it takes time)

Authors:

Andrei Diaconescu (doctoral researcher)

Emilia Taimi (doctoral researcher)

Sirja-Leena Penttinen (associate professor)

Jouko Nuottila (postdoctoral researcher)

What are transition minerals and what is all the fuss about them?

To start 2025 with a bang, the President of the United States, Donald Trump, expressed his interest over Greenland – an autonomous territory within the Kingdom of Denmark – sending shock waves through the European Union (EU). President Trump’s interest in Greenland is primarily considered to relate to national security and the geopolitical importance of the territory in the Arctic, but also to resource acquisition: as ice melts due to global warming, resources become more accessible (Paddison 2025). Greenland possesses vast natural resources, including rare earth minerals and other transition minerals critical to powering the digital and green energy transitions. In February 2025, President Trump linked the continuation of the US war support for Ukraine to a ‘transactional approach’, proposing a supply of critical and rare earth minerals such as lithium, uranium, and titanium from Ukraine’s bedrock to the US in return (Méheut 2025).

The recent turmoil surrounding Greenland and Ukraine highlights the crucial importance of transition minerals to nations. These minerals, often referred to as critical minerals in countries reliant on their supply, encompass a broad range of essential materials used in various high-tech and clean energy applications (International Energy Agency 2021). They are vital for the shift from fossil fuels to greener alternatives. For instance, the mainstreaming battery technology used in electric vehicles (EVs), the lithium-ion, requires a variety of minerals, including lithium, cobalt, nickel, graphite, manganese, and rare earths. With the adoption of ambitious global decarbonization agendas, EVs have emerged as the predominant ‘green’ technology in the transport sector. Consequently, the demand for these minerals is skyrocketing (International Energy Agency 2024). In addition to clean tech, these minerals are central to the national defense and aerospace industries, which further explains countries’ sensitivities and strategic rivalries concerning these minerals.

The problem with transition minerals is that some have them, others don’t. The current known and deployed reserves of key minerals are found in specific regions: lithium in Australia, Chile, Bolivia, and Argentina; nickel in Indonesia and Russia; cobalt in the Democratic Republic of Congo; and (natural) graphite in China, the latter also having significant dominance in the ore refining capacity. The geographical concentration of each node in the transition mineral supply chain has highlighted supply chain concerns, particularly among major consuming countries. As supply chain disruptions can have significant economic, political, and security implications, many jurisdictions have adopted a wide range of measures to increase supply chain resilience (Penttinen and Burlinghaus 2025).

In response to the increasing demand and the need to mitigate dependency arising from the geological concentration, new reserves are actively being explored – including the exploration for resources in space, the deep-sea bed and the Arctic region. In addition to discovering new resources, active measures have been adopted to integrate the circular economy approach to key transition minerals in the EU, which provides a secondary supply route for these materials critical for decarbonization technologies. This approach enhances the EU’s domestic capacities and, consequently, its security of supply.

What is meant by the circular economy of transition minerals?

In simple terms, the circular economy of transition minerals involves reusing and recycling products that contain these valuable raw materials, as well as the minerals themselves. In practice this requires a novel perspective towards the end-of-life of primary products (Commission 2020). This circular way of thinking and moving away from the linear take-make-waste mentality provides both challenges and possibilities for business and regulation. As virgin transition minerals are scattered globally, and their extraction creates geopolitical, environmental and societal strains, a circular approach has gained increasing attention. When reliance on virgin materials is diminished through a circular economy, it also mitigates risks related to price volatility and security of supply (United Nations 2024; Elobeid 2022).

In the battery context, a circular economy approach refers to a system where end-of-life batteries, their components, and materials are reused, repurposed, or recycled into new batteries. EV batteries, for example, can get a new life in stationary energy storage systems (Rufino Junior et al. 2024). The EU has adopted a new Batteries Regulation specifically addressing battery circularity (Regulation 2023). The main objective of the Regulation is to ensure that used batteries are collected, reused and recycled efficiently in the EU. This will be achieved through gradually tightening targets from 2025 onwards. For example, the recycling efficiency of lithium-based batteries should be 65 % by the end of 2025, increasing to 70 % by the end of 2030. Similarly, targets for the recovery of materials have been set, ranging from 50% for lithium to 90% for cobalt, nickel, copper and lead. 

The shift towards the circular economy for batteries is impeded by the pragmatic reality that initiating their second lifecycle requires a significant amount of time. As the transition from combustion fuel engines to electric vehicles using batteries is still ongoing, the products need first to go through their primary use before material for reuse and recycling can be provided.

Digital traceability tools to facilitate the uptake of the circular economy

To facilitate the circular economy of end-of-life batteries, the EU has enacted the ‘battery passport’, initially introduced by the Global Battery Alliance. The battery passport is an electronic record that enables traceability for the reuse and recycling of the raw materials used in batteries (Council 2023). The battery passport will apply to certain types of batteries placed on the market or put into service as of February 2027, namely to EV batteries, light means of transport batteries such as electric bikes and scooters, and industrial batteries with a capacity greater than 2kWh (Article 77 and preamble para. 15 of the Regulation 2023).

The battery passport enables informed decision-making based on reliable information to stakeholders in the entire supply chain (Global Battery Alliance 2024). The battery passport will contain information such as the battery’s capacity, chemistry and composition, critical raw materials present in the battery, hazardous substances and carbon footprint of battery production’s process, to be accessed digitally through a quick response (QR) code (Regulation 2023).

The QR code will provide public access to information about the battery’s material composition and chemistry, with sensitive commercial details like performance and durability restricted to those with legitimate interest (Article 77(2)(a, c) and Annex XIII, point 1 and 4 of the Regulation 2023). It will also disclose the percentage of recycled content used in a battery, strengthening the circular economy by enabling the evaluation of a battery’s residual value or remaining lifetime, facilitating its further use (preamble 124 of the Regulation 2023). The passport will also include information on responsible sourcing through environmental, social and governance due diligence (Annex XIII 1(d) of the Regulation 2023), aiding in the management and collection of waste batteries and preventing the inappropriate disposal of harmful substances and enforce caps on hazardous materials as enshrined in the Batteries Regulation. 

Opportunities for Finland

In recent years, Finland’s wind power production capacity has consistently set new records almost annually. Although the expansion of renewable energy production capacity, particularly wind energy, has contributed to maintaining relatively low electricity prices in Finland – positioning it as the EU Member State with the second lowest electricity prices – price volatility remains significant (Finnish Energy Industries).

To address the challenges posed by the high volatility of wind energy production, one viable solution involves the implementation of various energy storage systems. These systems can temporarily store electricity during peak production periods (Jarbratt et al. 2023). Energy storage facilities help to balance the grid while reducing price fluctuations.

While there are several energy storage technologies, one of the most promising is using second-hand EV batteries for stationary energy storage systems (Allen 2022), preferably located close to the production site. While an EV battery must be replaced in its original installation after the maximum recharge capacity has decreased under a predefined limit (capacity loss will happen after certain amount of charge cycles), the replaced batteries can have prolonged use of many years for secondary, less intensive, use cases such as providing energy storage capacity.

Finland is in a good position to become one of the technology leaders in battery-related circular economy applications. Finnish research institutes have pioneering research activities in areas such as battery chemistry and the implementation of the battery passport (discussed above). Finnish companies and start-ups are also actively investing in new business opportunities related to the battery ecosystem. However, the advent of new technologies also introduces uncertainties. For example, access to second-hand batteries might be limited (Laakso 2024), and the regulation of liabilities associated with their deployment might be problematic (Ouro-Nimini 2023; Rufino Junior et al. 2024).

A circular economy approach can enhance the EU’s capabilities in securing not only domestic raw materials but also strategic products, such as batteries, by promoting reuse. Additionally, digital traceability tools facilitate this process by providing crucial information on various metrics of used raw materials and products. However, a circular economy approach requires time to be effectively integrated into the value chain – the critical question amidst ongoing (geo)political upheavals and a warming climate is, however, do we have enough time?

***

The authors’ ongoing research at the University of Lapland and the Law, Technology and Sustainability Transitions Research Group (LOST) centers on transition minerals, EV batteries’ supply chain, and the implementation of a circular economy approach. Under the 2IMATCH consortium, funded by the Strategic Research Council of Finland, the research undertaken at the University of Lapland examines the new regulations and policies adopted in the EU to ensure resilience of transition minerals’ supply chain in the context of evolving (energy) geopolitics. The BATRACE project, funded by the Research Council of Finland, focuses on the EV battery supply chain. It examines emerging national, regional and international regulatory frameworks and aims to identify the best practices for developing a transnational framework that supports the security and sustainability of the battery supply chain. The AKILIT project, funded by the European Union’s Regional Development Fund, focuses on new circular value chains, business models, technologies, and regulations related to the reuse and recycling of batteries. Together with local companies and innovation accelerators, the project aims to develop the circular economy of batteries in Northern Finland and identify the best business opportunities from the perspective of regional growth, employment, and green transition.

Sources:

Allen 2022. ‘Finnish startup Cactos raises €2.5 million to tackle the energy crisis with second-life Tesla batteries’ (November 29, 2022, EU-Startups); https://www.eu-startups.com/2022/11/finnish-startup-cactos-raises-e2-5-million-to-tackle-the-energy-crisis-with-second-life-tesla-batteries/

Commission 2020. Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions, A new Circular Economy Action Plan For a cleaner and more competitive Europe, COM(2020)98 final.

Council 2023. Council of the European Union, ‘Towards a sustainable, circular, European battery supply chain’ (December 8, 2023) <https://www.consilium.europa.eu/en/infographics/battery-supply-chain/>.

Elobeid 2022. ‘How the circular economy can help us stay within planetary boundaries’. (August, 31, 2022, Ellen MacArthur Foundation); https://www.ellenmacarthurfoundation.org/articles/how-the-circular-economy-can-help-us-stay-within-planetary-boundaries

Finnish Energy Industries. Compiled data and statistics available at https://energia.fi/en/statistics/statistics-on-electricity/

Global Battery Alliance 2024. GBA Battery Passport. An Overview. https://www.globalbattery.org/media/publications/gba-batterypassport-2024-v1-web.pdf

International Energy Agency (IEA) 2021. ‘The role of critical minerals in clean energy transitions: Critical Minerals’ (IEA Publications 2021).

International Energy Agency 2024. Global Critical Minerals Outlook 2024 (IEA Publications 2024).

Jarbratt et al. 2023. ‘Enabling renewable energy with battery energy storage systems’ (August 2, 2023, McKinsey & Company); https://www.mckinsey.com/industries/automotive-and-assembly/our-insights/enabling-renewable-energy-with-battery-energy-storage-systems

Laakso 2024. ‘Grid energy storage has a multitude of uses’ (April 10, 2024, Fingrid Magazine); https://www.fingridlehti.fi/en/grid-energy-storage-has-a-multitude-of-uses/

Méheut 2025. ‘Trump Urges Trading Ukraine’s Rare Earth Minerals for More U.S. Aid’ (February 3, 2025, The New York Times), <https://www.nytimes.com/2025/02/03/world/europe/trump-ukraine-rare-earth-minerals.html>

Ouro-Nimini 2023. ‘Rapport: Trade Rules for a Circular Economy’ (February 6, 2023, Kommerskollegium); https://www.kommerskollegium.se/analyser-och-seminarier/publikationer/rapporter/2023/trade-rules-for-a-circular-economy/

Paddison 2025. ‘Trump wants to buy Greenland again. Here’s why he’s so interested in the world’s largest island’ (January 8, 2025, CNN); https://edition.cnn.com/2025/01/07/climate/trump-greenland-climate/index.html

Penttinen and Burlinghaus 2024. ‘Mitigating sustainability and security risks of critical mineral supply chains in the green energy transition’. 24:1 Utilities Law Review.

Regulation 2023. Regulation (EU) 2023/1542 of the European Parliament and of the Council of 12 July 2023 concerning batteries and waste batteries, amending Directive 2008/98/EC and Regulation (EU) 2019/1020 and repealing Directive 2006/66/EC.

Rufino Junior et al. 2024. ‘Towards Battery Digital Passport: Reviewing Regulations and Standards for Second-Life Batteries’ 10 Batteries (2024).

United Nations 2024. Critical Transitions: Circularity, equity and responsibility in the quest for energy transition minerals. Nairobi. https://doi.org/10.59117/20.500.11822/46623.

Images

Unsplash. https://unsplash.com/.

Different shades of the right to repair: A comparative overview

Authors:

Beata Mäihäniemi (PhD, Docent in Law and Digitalisation, University Lecturer)

Dhanay Cadillo Chandler (PhD, Docent in Intellectual Property law, University Researcher)

Emmanuel Salami (PhD)

Rosa Maria Ballardini (PhD, Title of Docent in Intellectual Property law, Professor)

Beata Mäihäniemi

Dhanay Cadillo Chandler 

Emmanuel Salami

Rosa Maria Ballardini

1. The right to repair - a right or a movement?

With many modern products, such as iPhone screens, being very fragile and therefore breakable (Attitudes towards the impact of digitalisation on daily lives), and with more than two billion tonnes of municipal solid waste generated worldwide each year (Statista 2024), repair could significantly minimise the amount of waste we throw away. Repair is much cheaper and easier to implement than, for example, remanufacturing or recycling (Roskladka et al 2023).

However, third party repairs can also affect the safety of end users and lead to liability for manufacturers in the event of injury caused by an improperly repaired product (The Right to Repair: Recent Developments in the USA). Similarly, unauthorised repairs can lead to an increase in intellectual property infringements (Pihlajarinne and Ballardini, 2021), particularly in the case of high-tech and complex products, such as smartphones. However, the availability and affordability of spare parts and the provision of the necessary information to carry out repairs efficiently can reduce IPR infringements. While this could benefit manufacturers, it also benefits the environment and reduces waste by extending the life of affected products.

Repair can be understood in many ways, such as:

1. the obligation of a producer to repair a product bought by a consumer while it is still under warranty
2. repair after the warranty has expired
3. the technical ability of a consumer to repair the product himself.

It is therefore incumbent on producers to remove barriers that might prevent repairing of their products. These include inadequate information, product design that prevents repair or lack of spare parts (De Vries and Abrahamson 2022).

A tailored review and regulatory approach to the so-called 'right to repair' (R2R) can benefit multiple stakeholders and the environment.  We therefore aim to highlight a global regulatory approach to the right to repair through a comparative perspective of legal approaches in Europe, the US and two selected developing countries, namely Chile and Nigeria. This comparison is illustrative to show the many different faces of the right to repair, whether it exists as a social movement or a legal construct, whether it is addressed in the context of other broader laws or as a separately regulated legal right, and to highlight where the focus and rationale of such a 'right' actually lies.

2. The right to repair in the EU and the US 

In Europe, the right to repair is much more than just a right to get your product working; it has a deeper, transformative meaning and brings not only legal but potentially also social and geopolitical changes. It broadly supports environmental concerns and promotes the transition to sustainability. The Brundtland Report of 1987 provides guiding principles for sustainable development and sees the roots of the environmental crisis in both the economic underdevelopment of the South and the over-consumption of the North (Brundtland Report 1987). The right to repair could also be seen as an action to promote degrowth, i.e. 

a performative fiction, used to mean the need to break with the cycle of productivity; it is not originally a concept, much less a symmetrical opposite of growth. It is a political watchword, a provocation, that principally aims to help restore a sense of limits. Degrowth does not look for recessions or negative growth; the word should not be taken literally.(Latouche 2020). 

The European initiative on the right to repair is largely based on the  Directive on repair of goods, which was adopted on 13 June 2024 and entered into force on 30 July 2024. Member States must transpose it into national law and apply it from 31 July 2026. It focuses on the following points:

1. Manufacturers must repair a product at a reasonable price and within a reasonable time after the legal warranty period;
2. Access to spare parts, tools and repair information for consumers;
3. Incentives to opt for repair, such as repair vouchers and funds;
4. Online platforms to help consumers find local repair services and shops selling refurbished goods (Right to repair: Making repair easier and more appealing to consumers).

Moreover, the right to repair is also regulated at European level in several other areas of law (e.g. consumer law, intellectual property law, eco-design law and data sharing law), which regulated such a right before the introduction of the Directive on the right to repair.

In the US, the competition case arose with agricultural equipment manufacturer John Deere, which is the subject of a class action lawsuit over the right to repair. The arguments in the case are based on an attempt to monopolise the agricultural equipment market by denying farmers and small workshops access to software and repair tools (The Right to Repair: Recent Developments in the USA, see also Court Seeks Hearing in Deere R2R Case). Despite the compromise reached between John Deere and the American Farm Bureau Federation, in which the company agreed to allow farmers and small repair shops to repair its machinery in the absence of specific legislation, the case is still pending in federal courts (ibid.). 

In addition, most of the US states have started working on their legislative proposals, with New York introducing the first right to repair electronics in the US, the "Digital Fair Repair Act" (ibid.), and California, which will require manufacturers to diagnose, service or repair products for a period of seven years if the price of the product is over $100, three years if the price is over $100, and three years if the price is under $100 (Right to Repair 2023 Legislation).

3. Experiences from Chile 

The R2R movement in Chile began as a social movement to raise people's awareness of consumption, with the main aim of reducing waste and recycling by encouraging people to repair items instead of disposing of them (Fundación Basura, 2020). Some non-profit organisations have emerged, but there is no formal law to support the movement. The repair, maintenance or upkeep of products is an issue dealt with at the level of consumer law, in the Chilean Consumer Protection Act of 1997 (CCPA). - (Ley N° 19. 496). Art. 19 from the CCPA establishes statutory rights for repair and replacement of goods under warranty. Thus, in principle, the right to repair in Chile seems to be more of a matter of contract and consumer law (Andrade 2022) than the actual meaning of the social R2R movement.

From the perspective of consumer and contract law, the right to repair as found in the CCPA is both a right and an obligation to the parties that defies any sustainable development rationale. R2R as a social movement, on the other hand, seems to have a completely different basis. In both cases, IPRs are not necessarily addressed. For example, the right to repair as conceived in the EU does not exist in Chile. Although it seems to salvage principles found in both the EU and the US, it remains at the level of a social movement. In 2022, Chile considered a new constitution that would have included a repairability label. The constitution was rejected, but the fight for the right to repair continues (The Right to Repair Movement is Everywhere).

4. Experiences from Nigeria 

The Nigerian legal framework has not yet codified the right to repair. However, there is an informal but vibrant repair industry for several products in the Nigerian market. These products include washing machines, laptops and smartphones, wristwatches, electronics such as radios and televisions, to name but a few. This is likely due to the lower cost of repairs compared to the cost of buying new products. A further boost to Nigeria's informal repair sector is an informal apprenticeship structure that supports the development of product repair skills. (Nigeria: A Right-to-Repair Superpower).

Though alien to Nigerian jurisprudence, the right to repair has attracted the attention of non-profit and public interest organisations in Nigeria who are campaigning for its recognition (see for instance, Policy Lab Africa,  Projects  Right to Repair). It is argued that some form of regulatory ingenuity with existing laws, such as the Federal Competition and Consumer Protection Act 2018 (FCCPA), could be helpful in introducing and regulating the right to repair without necessarily enacting a new law for this purpose. This is particularly important to minimise government costs by avoiding the need for new laws and government agencies. For example, under Section 114 of the FCCPA, "the right to product information in plain and intelligible language" could potentially be interpreted to include a right to information on the repair of the relevant products.

5. Conclusions 

In the jurisdictions briefly examined, the right to repair has two dimensions: the right as a legal right, as conceived in the EU and the US, contrasted with the right as a social movement in Chile and Nigeria. In countries where the right to repair is regulated by specific laws, or where the law is designed to deal with repairs, as in the EU and the US, the law may be based on different rationales, as the right emerged after the development of certain industrial sectors.  

From the bird's eye view of R2R, we can conclude that the need to address environmental challenges seems to be driving R2R as a social movement in countries such as Chile and Nigeria. In addition, from a legal perspective, R2R addresses contractual and competition law challenges. However, whether as a social movement, doctrine or law, R2R has the potential to fulfil both environmental sustainability and other societal values.

Transparency and sharing requirements for data in the EU - stimulating or killing innovations?

Authors: Rosa Ballardini & Rob van den Hoven van Genderen

Research group: Law, Technology and Design Thinking

1. Introduction

Rosa Ballardini

The European data Strategy[1] is directed at the creation of a European single open market for the use of all categories of data to enhance a competitive edge as well as give users and data-subjects access to such data. This gives the opportunity to put into active use also unused data, for e.g. data generated by Artifical Intelligence (AI) or other technologies.

 The strategy is supported by a legal framework to make this possible. The problem is that while an open and transparent data society sounds positive, it can cause problems as well. If all data, personal as well as non personal, should be available for third parties, the chance of intruding on privacy and trade secrets, as well as intellectual property rights and security can also increase. Moreover, the incentive for investments and creating new products, services or other inventions could be seriously diminished.

 2. An EU Strategy for Data

Rob van den Hoven van Genderen

Acknowledging the opportunities but also the high risks and challenges related to the use and processing of data, the European Union has launched in 2020 a European data strategy[2] harnessing existing barriers and creating a single European market for data, while fully respecting EU policies on fundamental rights such as privacy, data protection as well as competition. A driving principle of the data strategy relates to creating an appropriate balance between protection, regulation and innovation to allow data to flow freely within the EU and across sectors, in accordance with the ‘free movement of data’, which is one of the five pillars of the European internal market. 

To achieve the ambition of the EU data strategy, various regulatory actions have already been taken, and more legislative initiatives are underway. The Data Governance Act[3] and the upcoming Data Act[4] (that are often jointly referred to as the ‘Data Acts’) are the most recent pieces of law released as part of the European strategy for data. The Data Governance Act which entered into force in 2022, aims to facilitate the voluntary sharing of data by individuals and businesses and harmonises conditions for the use of certain public sector data.

The Data Act, was approved by the European Parliament on 9th November 2023 and is expected to enter into force in autumn 2025 (except from Article 3(1), the transition period of which is one year longer). It is a horizontal Regulation that covers different regulatory aspects related to (personal and non-personal) data collected by connected products and related services (in the B2B, B2C and B2G contexts). The Data Act will complement the Data Governance Act by better harnessing the potential of data sharing, providing further opportunities for the reuse of data by tackling both the problem that most data remain either unused and that its value is concentrated in the hands of relatively few large companies. In addition to data sharing obligations and access rights, the Data Act contains rules on switching between data processing services and international transfers of non-personal data. 

The ‘Data Acts’, however, do not exist in a vacuum. Instead, they strategically complement the already existing EU legal framework for data governance. This comprises inter alia the General Data Protection Regulation (GDPR)[5], the Free Flow of Non-Personal Data Regulation[6], the Open Data Directive[7], as well as the Database Directive[8], and the Platform to Business Regulation[9]. For instance, the 'Data Acts’ are consistent with existing rules in the GDPR on the processing of personal data and protecting the private life and the confidentiality of communications, as well as any data stored in and accessed from terminal equipment.[10] The ‘Data Acts’ further complement these privacy-focused provisions, particularly with regards to personal and non-personal data generated by a user’s product connected to a publicly available electronic communications network.

Especially, the forthcoming Data Act builds further on the Free Flow of Non-Personal Data Regulation in this regard. In fact, the Free Flow of Non-Personal Data Regulation aims at removing obstacles to the free movement of non-personal data between different EU countries and IT systems in Europe by ensuring that every organisation should be able to store and process data anywhere in the EU, and ensuring availability of data for regulatory control. It also introduces codes of conduct to facilitate switching data between cloud services to tackle the problem of ‘vendor lock-in’. The Data Act builds on all this, helping even more citizens and businesses to switch cloud providers and port data.

Moreover, the Data Act also tackles some of the long-lasting controversies existing in the context of the Database (DB) Directive. The DB Directive protects databases that have been created as a result of a ‘substantial investment’, even when the database itself is not ‘original’ in the sense of qualifying for copyright protection. A long-standing and highly debated issue here relates to whether databases containing data that are eg. machine-generated, would be entitled to protection under the dictate of the DB Directive.[11] The draft Data Act expressly provides that, in order not to hinder the exercise of the right of users to access and share data with third parties "the sui generis right provided for in Article 7 of Directive 96/9/EC does not apply to databases containing data obtained from or generated by the use of a product or a related service” (Art. 35 of the draft Data Act).

Moreover, the Data Act provides that although, as a rule, trade secrets must be protected, they may be disclosed if the data holder and the user “take all necessary measures prior to the disclosure” to preserve confidentiality (Art 5 of the Data Act). However, access may be refused only if the data holder, which is a “trade secret holder”, can demonstrate, and duly substantiate, that they are “highly likely to suffer serious economic damage” from the disclosure, on a case-by-case basis (Art. 4(3b) of the draft Data Act). So proof will lay with the data-holder who will bear all costs. Finally, the ‘Data Acts’ complement also both the Platform to Business Regulation, which imposed transparency obligations, requiring platforms to describe for business users the data generated from the provision of the service, and the Open Data Directive, which defines minimum standards for re-using data held by the public sector and of publicly funded research data made publicly available through repositories.[12]

As previously mentioned, there are also other forthcoming regulations that will impact the current (personal and non-personal) data governance rules, primarily the proposed Digital Markets Act[13], which requires certain providers of core platform services identified as ‘gatekeepers’ to provide more effective portability of data generated through business and end users’ activities. Also the so-called ‘Digital Services Act package'[14], comprising the Digital Services Act (DSA)[15], and the Digital Market Act (DMA)[16], which prohibit especially so-called “dark patterns” will be relevant, and so will the so called ‘Artificial Intelligence Act (AI Act)’, which is an abbreviation of the proposal for a regulation of the European Parliament and of the Council on harmonized rules on Artificial Intelligence[17], which is particularly relevant in the context of data regulation in relation to AI technologies.

3. The Dark Side of a Policy about “Sharing Just for the Sake of Sharing”

While securing a sustainable data governance framework for data sharing is absolutely essential for the well-functioning of the data economy and for incentivising innovations such as those related to AI, this way promoting progress and wellbeing, an open and transparent data society can also raise certain risks and dangers. First, when data, whether personal or non personal, is made available to any third parties, the chance of intruding on privacy and trade secrets, as well as intellectual property rights and security also increases. At the same time, enforcing data sharing in a way that is not balancing the interests of the dataholder that has invested effort and finances to develop and produce products and/or services and is forced to give entrance to e.g. trade secrets in a not necessarily proportional manner might also long-term disincentivize investments in creating new products and services.

Although an open and transparent data society sounds positive, it can cause problems as well. If all data, personal as well as non personal should be available for third parties, being it private, public, commercial as well as governmental institutions, the chance of intruding on privacy will increase. For example, from the point of view of privacy-related concerns, sensitive data are covered by several of the existing and forthcoming data sharing and data governance provisions in the EU, particularly the ones related to privacy and data protection like the GDPR. This is so because due to the increasing possibility to identify natural persons by AI technology, almost all data become personal data.

This is specifically mentioned as “factors specific to the physical, physiological, genetic, mental, economic, cultural or social identity of that natural person” (art 2.1 GDPR). Even more, the applicability of data protection on these kinds of data, as mentioned in article 2.14 GDPR, so-called “biometric data”, means personal data resulting from specific technical processing relating to the physical, physiological or behavioural characteristics of a natural person, which allow or confirm the unique identification of that natural person, such as facial images or dactyloscopic data. These kinds of sensitive data are, according to Article 9-bis, forbidden to be processed except with the consent of subjects, or other legitimate reasons listed in the article (e.g.  securing the data subject’s vital interest or reasons of national (security) interest). Also sharing is processing and will be subjected to this provision.

Moreover, Article 22 GDPR states that: “The data subject shall have the right not to be subject to a decision based solely on automated processing, including profiling, which produces legal effects concerning him or her or similarly significantly affects him or her”. These requirements could certainly complicate the transparency and sharing requirements of the Data Act. Referring to the Data Act, some of the data as emotional, biometric and medical data, is not allowed to be processed at all by AI as is stated in Article 5 of the accepted last version of the AI act (June 2023).

Moreover, from the perspective of legal instruments to incentivise innovations in data industries, the new mandatory access to data requirement, is a challenge to say the least. As we know, IPR are not very good to protect data as such nor datasets.[18] One of the few exceptions is the sui generis database protection for datasets, that however does not have a glorious reputation either. Therefore, the most used way to secure protection of non- personal data is via contracts and trade secrets.

The Data Act forces companies to provide users (both natural and legal persons) with access to the data generated by their connected Internet of Things (IoT) devices, also including cases when trade secrets are involved. In order words, manufacturers and other data holders of connected products will have to open user data for free to users and under fair, reasonable and non-discriminatory (FRAND) terms to third parties in the EU as well as other third parties outside the EU, however, not subject to the FRAND terms. Indeed, one of the key issues of the Data Act has been the protection of trade secrets and intellectual property rights included within such user data.

Especially, it is questionable whether a concept such as FRAND, that has been successfully used in the context of technical standards where pre-existing essential patent rights to be shared are actually clear, can work in a context of data sharing where no clearly pre-defined IPRs are present before sharing. Questions as to what is a fair and reasonable compensation/price for e.g. will certainly be difficult to determine in such unclear circumstances.

Ensuring transparency regarding the data to be generated and facilitating access for the user is of utmost importance for many reasons, including also to enhance possibilities to access key information relevant to repair items and thereby (in this way) promoting the circular economy. However, one can question whether this is the right way to achieve the goal of stimulating the data economy and increase the functioning of the single market. Indeed, obligations and limitations regarding the use of the shared data are imposed in order to protect the data holder’s interests.

For example, users and third parties are forbidden from using the data received to develop products competing with that from which the data originate. Also, trade secrets may only be disclosed if specific measures to preserve confidentiality are taken and, where the data is to be made available to third parties, if it is strictly necessary to fulfill the purpose agreed with the user. But who will decide on the proportionality, and how can this be done?

4. Conclusion

From all this, what can be concluded is that the EU data strategy seems to have some (disturbing) counterweight in other parts of the EU regulatory framework, especially in relation to important aspects such as privacy as well as IPR and trade secrecy. Although the Data Act prioritizes the GDPR when personal data are involved, risks of intruding on privacy of individuals will obviously increase by this widely open data sharing policy.

In addition, the strong push towards sharing data possibly including those covered by trade secrecy might indeed have the effect of disincentivizing innovation in Europe, while offering even bigger opportunities here to other markets, especially the USA and China. Certainly, the interpretation as to rules and the exceptions included in the DA will require several decision rounds, likely increasing lawyering work while not necessarily increasing legal certainty. Indeed, it will be interesting to see what weight is the heaviest in this balancing act.

At this stage, we cannot but wonder, even if transparency is a good principle in a data driven society, does it still stand if it endangers trade secrets, privacy and security, as well as decreasing legal certainty?

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^{[1] See: https://commission.europa.eu/strategy-and-policy/priorities-2019-2024/europe-fit-digital-age/european-data-strategy_en}

^{[2] Ibid.}

^{[3] https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32022R0868.}

^{[4]  https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:52022PC0068; accepted by EP on 9th of November, into force 2025}

^{[5]  https://eur-lex.europa.eu/eli/reg/2016/679/oj.}

^{[6] https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32018R1807.}

^{[7] https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=celex%3A32019L1024.}

^{[8] https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=celex%3A31996L0009.}

^{[9]  https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=celex%3A32019R1150.}

^{[10] In accordance to the ePrivacy Directive: https://eur-lex.europa.eu/legal-content/EN/ALL/?uri=CELEX%3A32002L0058.}

^{[11] See e.g. Pihlajarinne, T., & Ballardini, R. M. (2019). Owning Data via Intellectual Property Rights: Reality or Chimera? In R. M. Ballardini, P. Kuommamäki, & O. Pitkänen (Eds.), Regulating Industrial Internet through IPR, Data Protection and Competition Law Kluwer Law International.}

^{[12] For a comprehensive overview on issues related to non-personal data governance Olga BATURA, Axel WION, Sofia Noelle GONZALEZ, J. Scott MARCUS, Ilsa GODLOVITCH, Lukas WIEWIORRA, Peter KROON, Serpil TAS and Nico STEFFEN, “The emergence of non-personal data markets“, Policy Department for Economic, Scientific and Quality of Life Policies Directorate-General for Internal Policies. Available at:  https://www.europarl.europa.eu/RegData/etudes/STUD/2023/740098/IPOL_STU(2023)740098_EN.pdf.}

^{[13] https://digital-markets-act.ec.europa.eu/index_en.}

^{[14] See https://digital-strategy.ec.europa.eu/en/policies/digital-services-act-package (accessed 4 August 2023).}

^{[15] Regulation (EU) 2022/2065 of the European Parliament and of the Council of 19 October 2022 on a Single Market For Digital Services and amending Directive 2000/31/EC (Digital Services Act) (Text with EEA relevance).}

^{[16] Regulation (EU) 2022/1925 of the European Parliament and of the Council of 14 September 2022 on contestable and fair markets in the digital sector and amending Directives (EU) 2019/1937 and (EU) 2020/1828 (Digital Markets Act) (Text with EEA relevance).}

^{[17] Proposal for a Regulation of the European Parliament and of the Council laying down harmonised rules on artificial intelligence (artificial intelligence act) and amending certain union legislative acts COM/2021/206 final, https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=celex%3A52021PC0206.}

^{[18] See e.g. Pihlajarinne, T., & Ballardini, R. M. (2019). Owning Data via Intellectual Property Rights: Reality or Chimera? In R. M. Ballardini, P. Kuommamäki, & O. Pitkänen (Eds.), Regulating Industrial Internet through IPR, Data Protection and Competition Law Kluwer Law International}

Fan-Powered Royalties (FPR) for Artists in the Age of Online Music Platforms: A Leading Edge or Another ‘Meh.’?

Author: Artha Dermawan (Doctoral Researcher)

Research group: Law, Technology and Design Thinking

Overture: “I Need Appropriate and Transparent Way of Payment”

‘So what better alternative is there

than an agreement between citizens themselves

reached under conditions that are fair for all?’

- John Rawls[1]

Artha Dermawan

Music streaming expenditure has skyrocketed globally as the current COVID-19 pandemic contributes to the shift from physical to digital music.[2] At the same time, many artists around the world have expressed their dissatisfaction with the remuneration they receive for the exploitation of their musical works in the on-demand music platforms.[3] They demand for an appropriate and transparent remuneration framework that enables artists to claim their financial share in the online music platforms industry.[4] One of the questions is why artists argue they do not receive enough remuneration, even though online music platforms claim to pay a huge sum of money to the record label.[5]

At the moment, all of the main streaming services use the pro rata mechanism to distribute the rights holders' shares and some studies show that the system still lack transparency in distributing remuneration to artists.[6] Article 18 of the European Union (EU) CDSM Directive mandates the Member States to ensure that artists are entitled to receive appropriate and proportionate remuneration.[7] Transparency is a critical aspect in order to implement the concept of appropriate remuneration. The EU recognised this by introducing Article 19 in the CDSM Directive. This article imposes a transparency obligation on the revenues generated by exploitation in order to ensure effective control by creators and performers over the adequacy of their remuneration. It states that authors and performers must be provided with up-to-date, relevant, and comprehensive information on the exploitation of their works and performances, including revenue generated and remuneration due, on a regular and at least annual basis.

However, the main question remains: How should profits from music streaming services be paid out to artists in an appropriate and transparent way? The discussion is never-ending because with the current pro-rata model, users also pay for music they don’t listen to. This article finds that the ‘Fan-Powered Royalties’ (hereinafter FPR) could be an alternative to the current pro-rata model. According to the study conducted by Midia Research on the impact of FPR to artists’ and based on an analysis of the earnings of the system's 118,000 artists, 56% of those artists "are better off under FPR than pro-rata."

Oh Yes, the 'Pro-Rata' Model is the Rotten Apple!

The subscription paid by the user in music streaming services is usually divided into three parts: “the streaming service keeps approximately 30 % of the money collected, and the rest is shared to the right holders of works (composers, musicians, arrangers, publishers) and the right holders of recordings (financial producers, performing artists).”[8] Spotify and Apple Music are one of the major music streaming services which uses the pro-rata model.[9] In order to calculate net revenue, Spotify and Apple Music will subtract the money they collected. This net revenue may include any payments, among other things, taxes, credit card processing fees, and billing, along with some other things like sales commissions.[10] All net revenue are pooled and distributed to the artists based on their percentage of the total songs. This also implies that users may be charged for songs they do not listen to.[11] In the light of “pro rata” payment methods, a study published by French public organization for the music industry (CNM) shows that the pro-rata model is no longer suitable to use in the era of online music.[12]

Is Fan-Powered Royalties (FPR) the New Rising Star or Another ‘Meh…’

On April 1, 2021, SoundCloud, a music streaming platform, introduced a new remuneration system called FPR.[13] The term ‘fan’ here refers to the user of this online music platform. Artists who independently upload their music to SoundCloud will be remunerated based on their fans' actual listening habits under FPR. The more fans who listen to a musician's music, the more money they make. This model benefits independent artists, whereas the pro-rata system benefits megastar artists.[14]

SoundCloud's new remuneration scheme pays remuneration based on the percentage of a fan's time spent listening to each artist. A fan's total monetary contribution to the artists they listen to is determined by a few factors such as how much the fan listens to that artist in comparison to their total listening time in a given month and how many advertisement has the fan seen.[15]

FPR has the potential to benefits independent artists with large fan bases who listen to their music frequently. So, if a fan only listens to an emerging artists from Helsinki or an early-stage techno from Berlin the majority or all of their subscription or advertising revenue will go to those artist.[16] On July 12, 2022, SoundCloud has commissioned Midia Research to publish a larger report on the impact of fan-powered royalties to artists.[17] As stipulated in the illustration below, according to the report, 56% of those artists "are better off under FPR than pro-rata."[18]

Illustration 1. Impact of Fan-Powered Royalties to Artists.

The study conducted by Midia Research is an important step toward a more in-depth understanding of FPR distribution model, and it should encourages more future research from the perspectives of both consumers and right holders. Will FPR potentially be an alternative solution to the pro-rata model in the context of appropriate and transparent remuneration to artists? This is a subject of discussion in the public eye and requires further research.

Conclusion: I subscribe and what I pay goes to the artists I have listened to!

There is no time to lose, in order to improve an appropriate and transparent way of remuneration payment, all music streaming services should re-consider their remuneration payment from ‘all profits are pooled on the basis of the share of total tracks’ to ‘pay the artists based on what each subscriber has listened to.’ SoundCloud’s new FPR might be an alternative, but a further study is needed, both from consumer and rightsholder perspective. We must enable people to be confident that ‘I subscribe and what I pay goes to the artists I have listened to.’[19]

The authors advocate for an open discussion about the appropriate and transparent payment model to promote above all niche music and independent artists around the world.

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[1] John Rawls, ‘Justice as Fairness: A Restatement,’ (Harvard University Press 2001) para 6.1. Found in Vanherpe, Jozefien. ‘Towards a fair balance in the digitized music industry - Setting the tone.’ (2022), at 133.

[2] Streaming platforms benefit from the pandemic because they implemented digital-based revenue models that are not susceptible to supply chain frictions. See Denk J, Burmester A, Kandziora M, Clement M, ‘The impact of COVID-19 on music consumption and music spending.’ (Plos One Collection, 2022).

[3] Recent economic studies reveal a shocking wage gap between artists and winners-take-all stars. See CREATE, ‘UK Authors’ earnings and contracts (2018): A survey of 50000 writers’, (2019). See, on similar topic, Report for the French Ministry of Culture, ‘L’auteur et l’acte de création’, (2020). See also, Tirto Indonesia, “Digital Music in Indonesia” (Tirto, March 11, 2016). Available at:  <https://tirto.id/menimbang-musik-digital-di-indonesia-bvv6.>, accessed December 5, 2022.

[4] Ibid, accessed December 5, 2022. 

[5] Ingham, ‘Taylor Swift thinks Spotify is a 'corporate machine.' You be the judge.’ (Music Business Worldwide, January 2019). Available at:  <http://www.musicbusinessworldwide.com/taylor-swift-thinks-Spotify-is-acorporate-machine-you-be-the-judge />, accessed December 5, 2022.

[6] Jari Muikku, ‘Pro Rata and User Centric Distribution Model: A Comparative Study,’ (Digital Media Finland, 2017), available at: <http://www.digitalmedia.fi/wp-content/uploads/2018/02/UC_report_final_171213.pdf> accessed December 5, 2022, at 14. See, a new study by marketing experts at Universität Hamburg and the Kühne Logistic University has now calculated the impact of pro-rata model.  Meyn, Janek, Michael Kandziora, Sönke Albers, and Michel Clement, ‘Consequences of Platforms’ Remuneration Models for Digital Content: Initial Evidence and a Research Agenda for Streaming Services’ (Journal of the Academy of Marketing Science, 2022). Available at: <https://www.uni-hamburg.de/en/newsroom/presse/2022/pm25.html.> accessed December 5, 2022.

[7] The notion of ‘appropriate and proportionate’ refer “to the actual or potential economic value of the licensed or transferred rights, taking into account the author’s or performer’s contribution to the overall work or other subject matter and all other circumstances of the case, such as market practices or the actual exploitation of the work.” Recital 73 EU CDSM Directive. See, Séverine Dusollier. ‘The 2019 Directive on Copyright in the Digital Single Market: Some progress, a few bad choices, and an overall failed ambition. ‘Common Market Law Review, Kluwer Law International, (2020), 57 (4), at 1021.

[8] Jari Muikku, supra note 7.

[9] Spotify Terms and Condition 2022, (Spotify, Inc., 2022). Available at:   <https://artists.spotify.com/guide/your-music> accessed December 5, 2022. See also, Rae, Andrew, Data Matters - ‘Spotify For Artists’, (The University of Glasgow, 2017).

[10] It is also essential to take into account that the performer's share of net revenue also determined by “stream share.” Spotify calculates "stream share" by tallying the total number of streams in a given month and determining the proportion of those streams in people listening to music owned or controlled by a particular performer.  See also Spotify Terms and Condition 2020, (Spotify, Inc., 2020). Available at:   <https://artists.spotify.com/guide/your-music> accessed December 5, 2022.

[11] Meyn, Janek, Michael Kandziora, Sönke Albers, and Michel Clement, supra note 7.

[12] This study is one of the first serious analysis on the consequences of a possible change in the remuneration of streaming listening from a “pro rata” model to a “user centric” model. Centre National de la Musique, ‘Le CNM évalue l’impact d’un changement éventuel de mode de rémunération par les plateformes de streaming’ (2021). Available at: <https://cnm.fr/le-cnm-evalue-limpact-dun-changement-eventuel-de-mode-de-remuneration-par-les-plateformes-de-streaming/> accessed December 5, 2022.

[13]. See Stuart Dredge, ‘SoundCloud goes user-centric with its fan-powered royalties,’ (2021), available at: <https://musically.com/2021/03/02/soundcloud-goes-user-centric-with-its-fan-powered-royalties/.> accessed December 5, 2022. See also, SoundCloud official website, available at: <https://soundcloud.com/pages/contact.> accessed December 5, 2022.

[14] SoundCloud Official Website, ‘Fan-powered Royalties FAQs,’ (2021) available at: <https://help.soundcloud.com/hc/en-us/articles/1260801306810.> accessed December 5,, 2022.

[15] Ibid.

[16] Ibid.

[17] Kriss Thakrar, Tatiana Cirisano and Perry Gresham, ‘Building a fan economy with Fan-Powered Royalties,’ (hereinafter Soundcloud and Midia Research Official Report), (2022). Available at: <https://midiaresearch.com/reports/building-a-fan-economy-with-fan-powered-royalties.> accessed December 5, 2022.

[18] Ibid.

[19] Didier Martin, ‘Music Streaming Must Switch to A Fair and Logical Payout Model’ (Outhere Music, 2021). Available at: <https://www.musicbusinessworldwide.com/the-streaming-music-industry-must-switch-to-a-fair-and-logical-payout-model-there-is-no-time-to-lose/> accessed December 5, 2022.