Firms developing new tech can avail of exemption from data privacy rules

The government has proposed that companies developing innovative technologies for public good can avail of exemption from the proposed data privacy rules for a limited period.

As part of the draft Data Protection Bill, 2019, cleared by the Union Cabinet last week, the Centre has proposed the creation of a “regulatory sandbox” to ensure that the privacy law doesn’t curtail the ability of companies, especially start-ups innovating around emerging technologies, in the initial phases.

Sandbox refers to a testing environment that enables isolated execution of new software or programme before its mass roll-out.

“The authority shall, for the purposes of encouraging innovation in artificial intelligence (AI), machine learning (ML) or any other emerging technology in public interest, create a sandbox,” the draft Bill read.

“Any data fiduciary whose privacy by design policy is certified by the Authority under Sub-section (3) of Section 22 shall be eligible to apply, in such manner as may be specified by regulations, for inclusion in the sandbox created under Sub-section (1),” it added.

With the sandbox provision, the government has balanced out promoting innovation while furthering individual privacy and state interest, said Arun Prabhu, partner at law firm Cyril Amarchand Mangaldas. 

“Companies developing innovative technology in areas, such as AI/ML and big data may be well placed to avail of this sandbox.” 

According to provisions in the Bill, the sandbox will be managed by the data protection authority, which will decide on such requests. Companies can apply for inclusion in the sandbox by furnishing details of their innovative use of technology and its benefits. Upon inclusion, qualified entities will be excluded from collection, storage and purpose limitation under the Bill, thereby significantly expanding the usage of the data that are available with them.

The exemption will be for a period of 12 months, but can be renewed twice, taking the maximum possible exemption period to 36 months.