Artificial Intelligence (AI) tools, especially large language models, are transforming many aspects of legal work, including contract drafting. They can generate polished-looking text in seconds and even assist in assembling certain legal documents. But when it comes to complex, highly technical, or high-stakes contracts, particularly those involving intellectual property (IP), relying solely on AI is not just risky, it can have sweeping legal and financial consequences.
Here’s why skilled attorney review remains essential:
IP and Patent Agreements Involve Nuances
Patent licenses, joint development agreements (JDAs), nondisclosure and confidentiality agreements (NDAs), and IP assignments often involve complex ownership rights, field-of-use restrictions, grant-back clauses, improvement rights, and territorial limitations. These provisions reflect careful negotiation and a deep understanding of the underlying technology and business goals. AI may generate generic clauses, but these tools lacks the ability to assess and tailor language to a specific field, situation, or strategy. Further, AI cannot know what is most critical to the parties, or the personal dynamics that may be driving a transaction.
Key terms and provisions in these contracts must be carefully aligned with a company’s business model, R&D plans, and competitive landscape. For example, a narrow “field of use” clause might prevent a startup from expanding into a new market. A poorly defined “improvements” clause could mean the difference between owning a breakthrough or inadvertently handing it to a partner.
Even an apparently minor drafting mistake in an IP agreement can lead to unintended consequences, such as inadvertently transferring ownership of, or licensing, a valuable IP asset, failing to reserve rights to improvements, or exposing trade secrets. AI tools do not grasp the implications of such errors. Once the agreement is signed, those rights may be permanently lost or difficult to reclaim.
Patent Law Is Complex and Continuously Evolving
Patent licensing often intersects with antitrust laws, FRAND obligations, standards bodies, exhaustion doctrines, and post-sale restrictions. AI models are not consistently updated with this evolving legal landscape and may unknowingly insert outdated or unenforceable provisions, thus leaving one exposed to expensive litigation or regulatory scrutiny.
AI Can Hallucinate or Omit Critical Provisions
While AI can draft plausible-looking text, it sometimes omits critical terms (such as sublicensing rights or indemnity obligations) or fabricates language that sounds reasonable but is legally flawed. In IP agreements, such omissions or inaccuracies can destroy the value of the deal, or worse, create long-term risks for an IP portfolio.
Protection Confidential Information
Inputting confidential legal information, like a company’s trade secrets or specific business strategies, into a public-facing AI model can result in that data being inadvertently used to train the model, potentially exposing sensitive details to third parties. These security risks can be as significant as a “hallucinated” clause.
Courts and Counterparties Will Hold You Accountable
If a dispute arises, courts will not care whether an agreement was drafted by a lawyer, an AI tool, or a combination of both. Ultimately, only a trained, human attorney can provide the legal judgment and due diligence needed to ensure that an agreement truly protects a company’s IP and aligns with its business strategy.
Conclusion
The consequences of mismanaging critical IP terms in an agreement can be severe. Even a single minor oversight in a licensing agreement or IP assignment can undermine funding, block a strategic pivot, or even derail an acquisition. Accordingly, attorney involvement isn’t just helpful—it’s essential. A lawyer can spot risks AI would miss, ask the right questions, negotiate favorable terms, and ensure that the agreement aligns with the company’s technology, roadmap, and long-term goals.
