Artificial intelligence (AI), machine learning algorithms, and other emerging technologies impact nearly every business and industry. The rapid deployment of Generative AI (GenAI) is reshaping how organizations do business while also creating uncertainties and complexities across industries. Awareness is key and a proactive approach is essential.
As a business assesses AI’s implications for its organization and industry, there are several key legal issues to keep in mind.
- Intellectual Property: For many businesses, licensing third-party AI tools will be the right choice, but others may choose to create their own proprietary AI tools (and potentially license them to others). Whether licensing an AI tool from a third party or creating a proprietary AI tool, businesses should ensure contractual rights, obligations, and protections are properly documented, including with respect to the use and ownership of data inputs and outputs and the proper allocation of risk. Moreover, use of GenAI tools raises unique and potentially risky intellectual property issues that should be considered and mitigated prior to using such tools.
- Employment. Many businesses use AI applications to conduct preemployment screening, employee monitoring, and assessing employee performance. Such use must be compliant with state and local laws, or businesses run the risk of enforcement activity or litigation. Businesses must carefully consider policies and procedures related to AI usage for both internal and external uses. Businesses should pay close attention to ensure that AI tools don’t run afoul of employment laws, including those related to anti-discrimination.
- Training. AI, GenAI, and other emerging technologies are evolving rapidly, and employees across the business should be trained on proper use, apprised of potential pitfalls, and be made aware of best practices. Training should cover legal rights and obligations, as well as tips for how to use prompts to yield the best results.
- Cybersecurity and Data Privacy. Businesses should take an integrated approach to ensure compliance with cybersecurity and data privacy regulations, and protect confidential business information and personal information in the use of AI. Businesses must stay vigilant in maintaining existing data protection practices while deploying and leveraging this new technology. Businesses should closely examine technology and privacy policies and procedures to determine what updates are needed to cover the use of AI by the business itself or through its vendors and service providers.
- Litigation. Businesses should evaluate their agreements with vendors and other business partners related to limitations of liability, warranties, indemnities, and representations related to AI applications or overall use of AI. These are among the most hotly contested provisions in any business contract. Businesses should also assess their ability to preserve data within AI applications for potential use in discovery.
- Oversight of AI Use. AI governance requires strategies to both mitigate risk and seize opportunities. Businesses should consider creating an AI task force or other risk mitigation committee to assess the use of AI within the business and report to management or the board. The committee may seek input from relevant business areas such as IT, human resources, legal, and compliance. Creating such an oversight body may help the business evaluate risks from using or not using AI, create proper training programs to implement AI applications, ensure ethical use of AI, and document the evaluation and oversight of AI-related issues to ensure alignment between the use of AI and the business’ goals.
- Monitoring. The AI world is changing quickly, and it can be difficult for any one person to keep up to speed with the changing recommendations, regulations, and best practices. Businesses should consider ways to leverage resources — including external resources — to monitor developments and determine how they impact the business.
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