Implement your AI, mitigate against your AI legal risk

Welcome to the Wood Phillips blog on Intellectual Property and Artificial Intelligence law, managed by Jim W. Ko. It is in part a continuation of Jim's blog before joining Wood Phillips in February (for earlier entries, click here). We will publish a new blog article once or twice a month.

If your business owns no IP, you are replaceable by any of your competitors. And without implementing AI successfully, you will be replaced.

In the U.S., your business will be subject to greater regulatory scrutiny if it involves the use of AI in a “sensitive domain,” including financial systems, healthcare, housing, education, and employment issues (see visual guide below). Employee displacement, and even the displacement of entire professions, by generative AI will be perhaps the greatest societal issue of our times. As such, AI-related issues will inevitably comprise a disproportionate share of litigation in the coming years.

The use of AI gives rise to various types of AI legal risk, including:

1. IP infringement claims, including:

   1. claims against the output of your AI, e.g.:

      1. copyright infringement

      2. right of publicity (via deepfakes)

   2. claims against your application of AI, e.g.:

      1. patent infringement

      2. trade secret misappropriation
         

2. “algorithmic discrimination” claims, including for your use of any AI in automated employment decision tools
   

3. data privacy violations, including:

   1. lack of sufficient protection of data collected from your AI customers

   2. unauthorized sale of your AI customers’ data

   3. unauthorized data mining to train your AI models
      

4. fraudulent and negligent misrepresentation claims against the output of your generative AI, including:

   1. deepfakes

   2. AI “hallucinations”
      

5. misuse of your AI for terrorism (including bio and nuclear), cyberattacks, attacks on financial systems, etc.

Your primary defense against a claim directed against your business’s use of AI will be fundamentally an issue of compliance with and/or whether you have taken “reasonable measures” with respect to:

1. existing principles of IP and technology law,

2. existing applicable regulatory regimes, and most importantly

3. the AI-specific legal and regulatory regimes that various national and state governments will develop in the coming months and years.

Your business’s ability to set up effective company policies and negotiate the AI terms in your contracts in compliance with applicable laws and regulations—not just as they currently are but where they are headed—will define the scope of your potential liability for AI legal risk in the future.

Wood Phillips provides intellectual property and artificial intelligence audits for your business, assessing areas of potential improvement for your policies, procedures, and contracting on these issues. We provide counsel for all the ways that IP and AI issues can and will impact your business.

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U.S. Federal Regulation of AI: A Visual Guide