Artificial intelligence (AI) has important society-wide implications, but it also significantly impacts the private sector, including business litigation. From data privacy to trade secrets, discrimination issues when AI is used for hiring purposes, intellectual property disputes, and beyond, this breakthrough technology plays an increasingly important role.
In particular, generative AI is at the forefront of the discussion.
A Brief Explanation of Generative AI
Generative AI is precisely as it sounds in that it generates different types of content ranging from data to images, text, audio, and more. Nuanced user interfaces are the foundation of generative AI. Each unique AI model generates new outputs with the use of language prompts.
Using machine learning to generate AI-made creative outputs similar to those produced by humans will shape life, the private sphere, and business litigation moving forward
AI and Discrimination
Envision a situation where a business uses an AI-powered chatbot to interact with job applicants. The same company might also use AI to sort and analyze:
- Cover letters
- Candidate interview performances
Prompts and inputs developed by AI engineers and those using the technology shape how it operates. It is possible for such technology to lead to skewed results that favor certain candidates.
There is the potential for shunned candidates to argue that AI was used to discriminate against them based on their ethnicity, race, age, gender, or another characteristic protected by law.
It is also possible for AI to fail to understand candidates’ accents and dialects when conducting interview analysis. Therefore, it is in the interest of every business owner and hiring manager to proactively address potential biases in algorithms.
Legal Liability for AI Decisions
Using generative AI technology can potentially pose a legal hurdle in the form of company liability. Generative AI has advanced to the point that its output is now used to shape decision-making or even make decisions on behalf of an enterprise.
In some instances, generative AI acts autonomously, presenting a potentially thorny legal landscape for business owners to maneuver. Autonomous AI decisions are problematic in that they can lead to harmful outcomes for business partners, clients, employees, and other related parties.
The question is: Is the business using generative AI technology legally liable for such harm? Indeed, there is the potential for such a business to be found negligent. Negligence is a legal term used by lawyers and judges when referring to a party’s failure to fulfill its duty of care to others.
The prospect of a negligence lawsuit that has the potential to devastate a business financially should prompt all business owners and managers to use generative AI with care. When in doubt, err on the side of caution by temporarily halting AI autonomy, choosing to rely on human critical thinking for decision-making instead of blindly proceeding with decisions shaped by the strict parameters of inherently limited AI input data and prompts.
AI and Data Privacy
Data privacy is often overlooked in the context of generative AI as businesses feverishly race toward output that captures market share. A significant amount of data is necessary for AI to function as designed. Data is fed into computing systems for analytical processing. Algorithms run the data for generative output.
Every business should go to great lengths to ensure the information it collects complies with all regulations and laws at both the state and federal levels. A business that collects data from employees, job candidates, clients, and other parties must be careful about how it gathers, uses, and safeguards that information.
Businesses must obtain consent to gather, use, and/or share collected data. It is also worth noting that all data used as AI inputs loses its confidentiality and protection as the AI’s terms of service immediately influence it at the point of input. Some such input might also be revealed to third parties interested in generative AI output.
AI and Tort Liability
The use of generative AI can potentially spur business litigation hurdles in the form of tort liability lawsuits. It is possible for allegedly biased, negligent, or otherwise flawed generative AI results to negatively impact end users or other parties.
If such harm occurs, the matter might be taken to court in the form of a tort liability lawsuit. If the plaintiff emerges as the victor in this form of business litigation, the business that used generative AI might be found liable for ensuing damages. As a result, it is in the interest of every business to double-check the accuracy and reliability of its generative AI systems.
AI and Intellectual Property
Intellectual property is central to AI technology because computers have advanced to the point where they can generate creations independently:
- Works of art
- Informative written content
- Authorship in various forms
A business that uses generative AI for such creative purposes must perform its due diligence by obtaining the legally required licenses and rights for using and selling such creations. Moreover, it is in the business’s legal interest, to tell the truth about the artificial intelligence entity that generated such forms of artwork, authorship, etc.
AI and Trade Secrets
Businesses that allow employees, volunteers, or others to input sensitive or valuable data into AI systems are much more likely to face business litigation at some point in the future. Information that constitutes a trade secret should not be used as a generative AI input, compose any portion of a generative AI prompt, or be used in the context of AI in any other manner.
Make it clear that all privileged data, confidential data, trade secrets, and other information not to be revealed to third parties is to remain protected. In the context of intellectual property and technology law, “protection” can potentially mean that it is not used for AI purposes.
AI and Founder Disputes
Disputes will inevitably arise in the course of business. The worst-case scenario is for data fed into AI systems or generative AI output derived from those systems to be used against a company. Disputes between co-founders are one of the most common causes of startup failure. Clearly establish how the enterprise will use AI at the outset of its formation, and the chances of ensuing business litigation that pits one founder against another will be significantly reduced.
Business owners and entrepreneurs should be aware of the potential for a co-founder to feel slighted after generative AI output is used in an undesirable manner or a manner that is perceived to be unfair. Such intellectual property-based legal arguments pit one co-founder against another, with battle lines drawn over the use and ownership of AI-generated value.
Even a dispute over agreements detailing how the profits of AI-generated content are distributed has the potential to lead to business litigation. Moreover, every business agreement should detail exactly how generative AI output is distributed/owned in the event a co-founder exits the enterprise.
AI and International Disputes
Globalism has paved a path toward international business relationships with companies, governments, and other organizations worldwide. However, business litigation will inevitably arise if the data collected is not gathered and used in full accordance with international privacy laws.
Generative AI used in a manner that violates the regulations established by the government where a business partner or client is located also has the potential to spur financially damaging business litigation. When in doubt, consult with a business litigation attorney to ensure the collection and use of data is in full compliance with the international privacy laws and regulations of all governments where clients, partners, and other relevant parties are located.
For example, Asia views AI in a different legal light than the European Union, the United States, and other continents, nations, and their respective governing bodies. Japan, China, and additional Asian countries have gone to great lengths to regulate how AI is used.
Companies doing business with Chinese entities should be aware that the totalitarian nation’s federal government has created a nationwide development plan for AI. The c nation’s AI plan strictly governs how AI is used and developed. Moreover, Japan and other countries have created AI morality councils to oversee the use of AI in the spirit of utilitarianism.
Stay tuned, as there is the potential for a full-fledged, worldwide generative AI framework to be established at some point in the future.
Grellas Shah Is on Your Side
Our business litigation specialists represent a wide range of clients, including Fortune 500 companies and startups in the early stages of development. Whether you are an entrepreneur, investor, or work for a multinational corporation, our business litigation attorneys are here to guide your intellectual property, technology, or commercial conflict toward a just outcome.
You can reach our legal team by calling 408 255 6310 or by completing our contact form. Our office is conveniently located at 20400 Stevens Creek Blvd, Suite 280, in Cupertino, CA, 95014.