Artificial intelligence is quickly becoming part of everyday business. Companies are using AI to draft documents, analyze data, communicate with customers, create content, and automate internal processes. But there is a legal side to AI that businesses cannot afford to overlook.
Before your company starts using an AI platform or enters into an agreement with an AI vendor, you should understand exactly what you are agreeing to. A well-drafted AI contract can help protect your business from disputes involving confidential information, intellectual property, data privacy, and liability.
What Should an AI Contract Include?
AI agreements should be tailored to how your business actually uses the technology. At a minimum, businesses should consider addressing several important issues.
Who Owns AI-Generated Content?
One of the first questions businesses should ask is, “Who owns the work created using AI?”
Depending on the platform and the agreement governing its use, there may be questions about ownership of prompts, outputs, training materials, software, or other intellectual property.
Your AI contract should clearly establish what your business owns and what rights the AI provider retains.
Can You Put Confidential Business Information Into AI?
This is a major concern for businesses using artificial intelligence. Employees may be tempted to enter customer information, financial records, proprietary business information, contracts, or other confidential material into an AI system. But what happens to that information after it is entered?
An AI contract should address data ownership, confidentiality, storage, and whether information may be used to train or improve the AI system. Businesses should not assume that information entered into an AI platform automatically remains private.
Who Is Responsible If AI Makes a Mistake?
AI systems can produce inaccurate information. They can generate incorrect financial analysis, misleading content, flawed recommendations, or inaccurate legal or business information.
That raises an important contractual question, “Who bears responsibility when the AI gets something wrong?” AI agreements should address warranties, limitations of liability, indemnification, and the responsibilities of both parties when the technology produces an error or causes damage.
How Should AI Contracts Address Data Privacy?
Businesses handling personal information should also consider their privacy obligations when implementing AI.
An AI contract should explain how personal and sensitive information is collected, processed, stored, transferred, and deleted. Depending on the business and the information involved, additional privacy requirements may apply. This becomes particularly important when an AI vendor is processing customer or employee information on behalf of your company.
What Happens If the AI Vendor Changes Its Terms?
AI technology changes quickly. Vendors may change their pricing, functionality, data practices, or terms of service. Your contract should address what happens when those changes occur.
It may also be important to establish termination rights, data-return obligations, and what happens to your information when the relationship ends.
Why Businesses Should Review AI Contracts Before Using AI
AI can create enormous opportunities for businesses, but moving quickly does not mean moving without legal safeguards. A carefully structured AI contract can help clarify ownership, protect confidential information, allocate risk, and establish expectations before a problem develops.
At Ayala Law, we help businesses navigate contracts and legal issues surrounding their operations and emerging technologies.
If your company is entering into an agreement with an AI provider or developing its own AI-related services, please don’t hesitate to contact one of our experienced attorneys at 305-570-2208.
You can also contact our team directly at: arianna@ayalalawpa.com
Schedule a case evaluation online here.
[The opinions in this blog are not intended to be legal advice. You should consult with an attorney about the particulars of your case].
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