Navigating AI Contracting: Key Insights and Practical Tips
AI Contracting: Insights and Tips
Helping in-house counsel
Hey there! In the fast-paced world of artificial intelligence (AI), understanding the ins and outs of AI contracting is super important for businesses looking to make the most of this technology. Here’s a friendly guide to help you navigate AI contracts successfully.
A. Key Factors in AI Development Contracts
Key Factors
Intellectual Property (IP): First things first, make sure you address who owns the AI models, outputs, and usage rights. Clear agreements on IP can prevent future headaches and ensure everyone knows their rights and responsibilities.
Development and Testing: It’s crucial to define how the AI will be developed and tested. This includes setting up methodologies, testing procedures, and acceptance criteria to ensure the AI system works as expected.
Data Management: Specify where the training data comes from, how the AI models will be managed, and how they’ll be retrained with new data. Good data management is key to keeping your AI accurate and reliable.
Algorithm Transparency: Make sure there are requirements for explaining how the AI makes decisions. Transparency builds trust and helps users understand the AI’s outputs.
Performance and Scalability: Set benchmarks and validation procedures to ensure the AI can scale and perform well under different conditions.
Regulatory Compliance: Stay on top of regulations like the EU’s AI Act. Compliance is crucial to avoid legal issues and ensure ethical AI use.
B. Key Factors in Service and License Agreements
Service Description: Clearly describe what the AI system does and how it uses data. This sets clear expectations and ensures everyone is on the same page.
Scope: Define the use rights and limitations. This helps prevent misuse and ensures the AI is used within agreed parameters.
IP and Data: Address ownership and restrictions on data use, making sure you comply with data protection regulations. This protects sensitive information and maintains data integrity.
Bias and Fairness: Include measures to address bias and provide audit rights. Ensuring fairness in AI systems is critical for ethical considerations and regulatory compliance.
Regulatory Compliance: Cover various regulatory areas, including IP, data, and AI-specific regulations. Comprehensive compliance ensures the AI adheres to all relevant laws and standards.
C. Practical Tips for AI Contracts
Multi-Disciplinary Teams: Involve not just lawyers but also reps from business units. This ensures all aspects of the AI system are considered and the contract meets everyone’s needs.
Vendor Management: Integrate vendor management and supply chain risk into your processes. This helps manage risks associated with third-party vendors and ensures the AI system’s reliability.
Change Management: Have clear procedures to avoid misunderstandings about tool approvals. Effective change management prevents disruptions and ensures smooth transitions.
Ongoing Monitoring: Implement audit and monitoring to manage AI use and risks. Continuous monitoring helps identify and address issues promptly, maintaining the AI system’s integrity.
Upskilling Teams: Make sure your team understands both the technical and legal aspects of AI. This builds internal expertise and ensures your organization can effectively manage AI systems.
D. Questions for Generative AI Products
When dealing with generative AI products, consider these questions:
Are we getting the rights we need?
Are we giving too wide a license back?
Can we restrict what the supplier does with our data?
Are we protected against third-party infringement claims?
These questions help ensure your organization’s interests are protected and the AI system is used ethically and legally.
E. Emphasising Regulatory Compliance
With the EU AI Act and the ongoing UK AI regulation conversation, keep in mind a few more areas / clauses in your contract:
Scoping Clauses: Clarifying whether the AI solution is subject to the EU AI Act and defining the roles of providers and deployers.
Use/Purpose Clauses: Specifying the intended use of the AI solution and prohibiting high-risk or prohibited uses.
Compliance Clauses: Ensuring that providers and deployers meet their obligations under the EU AI Act, including risk management, data governance, technical documentation, and transparency.
Termination and Suspension Events: Outlining conditions under which the contract can be suspended or terminated due to non-compliance with the EU AI Act.
and more…!
F. Wrapping it up!
As AI continues to evolve, it’s crucial to stay informed and proactive in managing AI contracts. In-house counsel have a lot on their plate already so being prepared to incorporate AI contracting thinking will greatly help. For more detailed guidance, consider consulting with RMOK.
“May your AI initiatives be compliant, your algorithms be ethical, and your legal tech stack be ever evolving!”
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