Quick Summary (TL;DR):

Under the EU Data Act (Regulation EU 2023/2854), FRAND stands for Fair, Reasonable, and Non-Discriminatory conditions. It is the mandatory statutory framework, primarily Articles 8, 9, and 13.

FRAND governs how Data Holders must make smart devices and connected product data available to Data Recipients when requested by a user.

FRAND prohibits exploitative contracts. It also caps compensation costs for SMEs and stops market incumbents from discriminating against competitors seeking data access.

Key Takeaways

• Statutory Mandate: FRAND rules apply whenever a Data Holder is legally obligated under Chapter III of the Data Act to share connected product or related service data with a B2B Data Recipient.
• Fairness (Article 8 & 13): Unilaterally imposed terms that grossly deviate from good commercial practice or severely restrict data usage are legally non-binding (includes a “Blacklist” and “Greylist” of clauses).
• Reasonable Compensation (Article 9): Data Holders may charge fees to cover formatting, extraction, and storage costs, plus a reasonable profit margin—unless the recipient is an SME, in which case fees are strictly capped at direct cost recovery.
• Non-Discrimination (Article 8(3)): Data Holders cannot offer preferential terms or lower pricing to favored partners or internal subsidiaries over comparable third-party recipients without objective, quantifiable justification.

What Does FRAND Mean in the EU Data Act?

In traditional intellectual property (IP) and standard-essential patent (SEP) litigation, FRAND ensures that patent holders license essential technology on balanced terms.

In the EU Data Act, FRAND adapts this doctrine to data access and governance.

The goal is to break data monopolies created by manufacturers of IoT devices and smart appliances.

They would be forced to share data with third-party repair shops, analytics firms, and software vendors on a level field.

The Three Pillars of FRAND

1. Fair (Contractual Integrity)

A data-sharing term is Fair if it preserves commercial balance between parties. Under Article 13, any contractual term related to data access, usage, or liability that is unilaterally imposed by one enterprise on another and that grossly deviates from good commercial practice is null and void. FRAND.

If a term was supplied by one party and the other could not influence its content despite negotiating, the burden of proof rests on the provider to prove it was not unilaterally imposed.

2. Reasonable (Compensation & Technical Terms)

A data-sharing agreement is Reasonable if access conditions do not create artificial economic or technical barriers. This applies directly to:

• Compensation structure: Fees must be transparent and tied to actual technical costs.
• Technical provision: Data must be delivered in usable, standard formats without artificial delay or degraded quality.

3. Non-Discriminatory (Equal Market Access)

Under Article 8(3), a Data Holder must apply equivalent terms to equivalent categories of Data Recipients.

• If a Data Holder licenses vehicle telemetry data to a partner for €X/GB, it cannot charge an independent repair network €10X/GB for the exact same dataset without objective, auditable technical justifications.
• Data Holders cannot grant their own downstream subsidiaries superior data formats, faster API delivery speeds, or lower pricing models over third-party competitors.

Reasonable Compensation Rules: Enterprise vs. SME (Article 9)

Data Holders are generally entitled to charge a fee for making data available under B2B legal obligations, but Article 9 strictly regulates how compensation is calculated.

To protect startups and smaller enterprises, the Data Act establishes a two-tiered compensation structure:

Comparison of Article 9 Compensation Obligations

Provision Parameter	Standard Enterprise Recipient	SME / Non-Profit Research Recipient
Direct Operating Costs (Formatting, APIs, Storage)	Allowed: Can recover direct costs incurred in extraction and delivery.	Allowed: Capped strictly at necessary direct costs incurred.
Data Collection / Hardware Investments	Allowed: Can amortize upfront investments made in generating or collecting data.	Excluded: Cannot charge upfront software or hardware setup costs.
Profit Margin Allowed?	Yes: May include a reasonable commercial profit margin.	NO: Profit margin is strictly prohibited.
Cost Transparency Obligation	Must provide detailed breakdown of calculation basis upon request.	Must provide detailed breakdown of calculation basis upon request.

Key Rule (Article 9(7)): A Data Holder must provide the Data Recipient—upon request—with a clear breakdown showing how the fee was calculated. This allows recipients to audit whether the fee reflects actual costs or illegal profit margins.

Unfair Contract Terms: The Article 13 “Blacklist” and “Greylist”

To enforce fairness in B2B data licensing, Article 13 outlines explicit categories of terms that are legally non-binding when unilaterally imposed.

Article 13 Unfair Terms Classification

Category	Legal Status	Examples of Prohibited Contract Terms
Blacklisted Clauses (Article 13(4))	Always Void: Automatically illegal and non-binding.	• Exclusions of liability for intentional acts or gross negligence. • Giving the Data Holder exclusive right to interpret the contract or determine data conformity. • Completely excluding legal remedies available to the recipient.
Greylisted Clauses (Article 13(5))	Presumed Unfair: Invalid unless the Data Holder proves specific justification.	• Allowing the Data Holder to change prices or core data quality terms without a valid reason. • Substantially restricting the recipient’s ability to use or exploit the data. • Allowing short-notice termination without financial remedy or alternative access. • Using recipient data in ways that significantly harm their commercial trade secrets.

How Are FRAND Disputes Resolved? (Article 10)

When a Data Holder and a Data Recipient fail to agree on FRAND terms or reasonable compensation, they do not have to immediately go to court. Article 10 mandates the creation of Certified Dispute Settlement Bodies across EU Member States.

• Dispute Submission: Either party can refer a disagreement over compensation or contract terms to an officially certified dispute settlement body.
• Non-Binding Mediation: The decision is usually non-binding unless the parties agreed to binding arbitration beforehand.
• Court Access: Engaging with a dispute settlement body does not affect either party’s legal right to take the matter to a national authority or competent court.

Practical FRAND Compliance Checklist

If your organization acts as a Data Holder (e.g., IoT equipment manufacturer, connected hardware vendor, platform operator) or a Data Recipient:

1. Audit existing B2B data agreements: Review data access contracts concluded after September 12, 2025, to eliminate blacklisted or greylisted terms under Article 13.
2. Build an auditable costing model: Document direct costs associated with formatting, technical extraction, storage, and API dissemination to comply with Article 9(7) transparency checks.
3. Segregate SME pricing structures: Implement automated system toggles to eliminate profit margins and overhead charges when verifying that a recipient qualifies as an SME.
4. Establish objective differentiating criteria: If charging different prices to different corporate entities, document explicit technical justifications (e.g., API volume, latency requirements, security overhead) to avoid non-discrimination claims under Article 8(3).

Frequently Asked Questions (FAQ)

What is the primary purpose of FRAND in the EU Data Act?

The primary purpose of FRAND is to ensure that B2B data sharing under legal obligations occurs under balanced, transparent, and non-exploitative conditions. It prevents large hardware manufacturers or data holders from locking out third-party businesses or using prohibitive pricing to block market competition.

Who bears the burden of proof when determining if a contract term is unfair?

The party that supplied the contested contract term (typically the Data Holder) bears the legal burden of proving that the term was not unilaterally imposed or that a greylisted term is commercially justified.

Can a Data Holder make a profit when sharing data under FRAND?

Yes, but only when dealing with large enterprise recipients. When sharing data with SMEs or non-profit research organizations, compensation is capped at the direct costs of making the data available (no profit margin allowed).

Does FRAND apply to voluntary B2B data sharing?

No. The specific FRAND rules under Chapter III (Articles 8, 9, and 12) apply when a Data Holder has a statutory obligation under the Data Act or other EU laws to make data available to a recipient. Purely voluntary B2B data agreements fall outside Chapter III, though they remain subject to general unfair terms checks under Article 13 if unilaterally imposed.

How does the Data Act define an SME for compensation caps?

An SME is defined under EU Recommendation 2003/361/EC as an enterprise employing fewer than 250 persons with an annual turnover not exceeding €50 million and/or an annual balance sheet total not exceeding €43 million. Linked or partner enterprises that do not qualify as SMEs are included when assessing eligibility.