Managing Risks and IP Rights in AI Contracts

As artificial intelligence (AI) solutions become increasingly prevalent in modern enterprises, it is vital to manage the risks associated with their implementation and ensure the proper allocation of intellectual property (IP) rights in AI contracts.

This article will provide insights into managing risks and IP rights in AI contracts to help protect your interests and ensure a successful AI project.

Request A Consultation

Clearly identify AI artifacts

Begin by clearly identifying the artifacts constituting IP rights in AI projects. These include input data, output data, AI models, algorithms, AI tools/platforms, and AI hardware. By understanding the various components involved in an AI solution, you can better allocate IP rights and responsibilities.

Determine ownership

For each AI artifact, determine the ownership and allocate it in the contract. This may involve specifying that the customer owns input data and output data, while the vendor or a third party owns AI models, algorithms, AI tools/platforms, and AI hardware.

Define usage rights and restrictions

For each AI artifact, outline the rights and restrictions for its use. This may include granting the customer the right to use AI models, algorithms, tools/platforms, and hardware for specific purposes, while restricting the vendor from using the customer’s data for the benefit of competitors.

Address updates, improvements, and customizations

AI technology is constantly evolving, and the contract should address how updates, improvements, and customizations to AI artifacts will be handled. This may include provisions for incorporating new technologies, updating algorithms, or customizing AI models, as well as any changes to ownership, usage rights, or restrictions that may result from such updates or customizations.

Include AI-specific definitions

To facilitate clear communication and understanding between parties, include AI-specific definitions in the contract. These definitions should cover key terms such as machine learning, input data, output data, AI models, algorithms, AI tools/platforms, and AI hardware.

Address third-party IP risks

As with any technology contract, it is essential to address potential risks related to third-party IP claims. This may involve including indemnification provisions to protect the customer from claims that the AI solution infringes on third-party IP rights.

Ensure regulatory compliance

AI solutions may be subject to various regulations, such as data protection and privacy laws. The contract should address these regulatory requirements and allocate responsibilities for ensuring compliance.

Engage experienced legal counsel

Navigating the complexities of AI contracts can be challenging, and it is essential to engage experienced legal counsel to protect your rights and ensure that contracts are thoroughly negotiated.

Managing risks and IP rights in AI contracts is critical to protecting the interests of both parties involved. By clearly identifying AI artifacts, determining ownership, defining usage rights and restrictions, addressing updates and improvements, including AI-specific definitions, addressing third-party IP risks, ensuring regulatory compliance, and engaging experienced legal counsel, companies can successfully navigate the rapidly evolving world of AI technology and secure their interests.

Request A Consultation