As AI continues to evolve, it’s becoming both a powerful tool for businesses and a potential legal risk. So it’s no surprise that many business owners and entrepreneurs have questions – especially about generative AI. Read on for key takeaways and practical steps to help protect you and your business.
Who owns the intellectual property created by employees using AI tools?
The ownership and “protectability” of intellectual property created with the use of AI tools is a complex and evolving issue. For example, the United States Copyright Office (USCO) appears to be focused on the degree of human input involved in content creation. The USCO recently issued AI-specific guidance and continues to evaluate how copyright law applies to AI-generated works, with a focus on human authorship.
When determining ownership of qualifying IP created by an employee or independent contractor, traditional IP ownership rules typically apply – such as the “work for hire” doctrine. Under this principle, if a worker creates IP as part of their job duties, the company – not the worker – generally owns that IP. However, there are limitations to this principle, making carefully crafted agreements between parties essential to avoid post-development disputes.
What are my privacy obligations?
An additional concern is that generative AI may inadvertently produce content that incorporates someone else’s IP, potentially creating liability for the end user. Due to the nature of the generative AI process, it “learns” from public databases and may not be aware that its knowledge contents protected material. Accordingly, the use of AI-generated content could lead to infringement claims, even if inadvertent.
A company’s privacy obligations when using AI will likely vary depending on the nature of its business. Many industries – particularly those in medicine, accounting, and law – are governed by strict ethical guidelines and professional obligations relating to privacy. Inputting protected or sensitive information into a generative AI platform may create significant risk, and many professional associations (such as the American Medical Association and American Bar Association) have issued industry-specific guidance and opinions.
On a broader scale, all businesses should be aware of the possibility that data entered into AI platforms could be leaked, and that it is likely impossible for AI systems to fully “unlearn” the information they receive. Some privacy risks may be mitigated by using proprietary enterprise AI systems, which offer greater control and protection but often at a significant financial cost.
Businesses should also be aware that state-level privacy laws across the U.S. are rapidly evolving and often vary significantly by jurisdiction. This patchwork of regulations can create compliance challenges, particularly when AI tools process personal data, making it essential for companies to stay informed and adapt their practices accordingly.
How Can I Minimize Risk Related to AI?
So, what does this mean for you and your business? What steps should you consider taking to leverage the benefits of AI, while minimizing risk? Given the rapid adoption of generative AI across industries and growing scrutiny by clients, customers, workers and the public, nearly all businesses should consider implementing specific policies governing its use. Typically, this involves internal policies included in employee handbooks, employment agreements, or independent contractor agreements.
Additionally, there is a growing consensus among practitioners that companies should disclose their use of AI to clients and customers, often via customer agreements. Conversely, businesses may also want to include contractual provisions in their vendor and service provider agreements that require transparency regarding AI use.
Generative AI is a powerful tool that may very well revolutionize how businesses and individuals operate in the coming months and years. But its promise is not without risk, and a “look before you leap” mindset may be advisable before adopting use of AI at scale.
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To learn more about how our attorneys can assist you with AI and its potential impact on your business, contact the Davis, Agnor, Rapaport & Skalny attorney with whom you typically work, or one in our Business Planning & Transactions Practice Group.