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AI in business: What are the intellectual property, copyright and GDPR implications?

View profile for Hem Gujadhur
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AI in business: What are the intellectual property, copyright and GDPR implications?

If there’s been one major technological advancement in 2023, it’s the emergence of AI and AI generated content.

Many people and businesses have adopted AI into their working life, whether that involves using a language model such as ‘ChatGPT’ or Google’s ‘Bard’, image generation tools such as ‘DALL-E’ and ‘MidJourney’ or AI search assistants like the one incorporated in Bing’s engine.

Whatever the case, AI has certainly been helpful to many of us; allowing us to improve our workflows. But what are the legal implications of using AI in your business?

Is AI copyright protected? Can it violate GDPR? What does it mean for intellectual property?

In her latest article, Corporate & Commercial Paralegal Hem Gujadhur answers all these questions and more; outlining the potential risks involved in using AI for your business.

How can generative AI help small businesses?

AI can be integrated into a small business in a number of ways:

  • through new opportunities to deliver innovative new services,
  • enhanced decision-making capabilities,
  • performance analysis and improvements; and
  • advanced training techniques.

As entrepreneurs continue to explore how to adapt the technology to use in their own industry, AI looks set to improve efficiency and allow for a new generation of products and services.

This new age of radical innovation has potential to create product and service efficiencies that could be scaled up and rolled out across entire sectors. An exciting prospect.

Business owners may also be looking internally at how AI could be used to re-shape their own business models or enhance the effectiveness of internal processes such as recruitment or training.

Related: What do you need to know when setting up a business?

How to use AI in your business

If you are considering incorporating an AI model into your business these are a few of our recommendations…

You should review the areas of your business where AI could be used and where its impact would be most effective, this is likely to be in an area of data driven or repetitive tasks.

You can then decide whether you have the expertise in-house or if you need external consultants.

If you do need a consultant, make sure to have a strong contract with them that details the scope of the project, the key deliverables, time frames, how sensitive data should be handled and how the intellectual property will be used.

Alternatively, if the project is handled in house, ensure that any restrictions regarding confidentiality are made clear to employees.

Lastly, it is key that you assess and mitigate any risks and consider whether the outcomes of the AI project should be protected as an industry secret.

Is AI content copyrighted?

AI raises questions of copyright because, unlike in the past when technology was seen as a tool that assists the creative process, AI completes the creative process without human intervention.

Under UK Law the default position is that copyright belongs to the creator, the creator of a computer-generated work is generally considered to be the ‘the person by whom the arrangements necessary for the creation of the works are undertaken’ (section 9(3) Copyright, Designs & Patents Act). However, this in itself is ambiguous.

Users of AI tools can check the terms of any licences that the program makes available. These may state that the intellectual property of anything created by the AI belongs to the platform, or, alternatively, may assign IP rights to the user.

Likewise, users will need to ensure that any data (text, imagery, code etc) uploaded to any AI platform is copyright and restriction free, otherwise they may be in breach of third-party licences.

Related: What is intellectual property and how to protect it?

Can AI violate copyright?

You may be wondering who takes responsibility for copyright infringement that arises from AI generated material, and what copyright owners can do about it.

Well, we are yet to see any case law tackle these issues; but the terms of an AI platform will likely state that the user will be responsible for issues arising from copyrighted material they have uploaded and face any following legal costs.

AI platform users should review the copyright status of any material that they upload and evaluate the terms of use of the platform to identify the potential legal and financial risks involved.

All business owners should also train employees on how to incorporate AI in their role and any restrictions to prevent any breach of copyright.

Related: What do you need in your Terms and Conditions?

Can AI have intellectual property rights?

The question of a computer having rights is an interesting one and brings about illusions of a ‘brave new world’.

What is not in doubt however, is that content generated by AI for companies will create intellectual property and trade secrets which will require protection.

Companies should ensure that their contracts with contractors, consultants and employees are robust and that content ownership has been allocated at the start of any project.

In addition to standard IP ownership clauses, contracts should contain a full change control mechanism to ensure that any additional projects, inspired by (but outside the scope of) the original project are also captured by confidentiality rules.  

Related: What makes a strong business contract?

Does AI violate intellectual property rights?

Responsibility for intellectual property infringement will be traced back to an individual, a firm or a company.

Users of AI need to ensure that their contracts and policies provide an appropriate mechanism for distributing the responsibilities and risks. For example, contracts with AI platforms, third-party data providers and insurance providers (and limitations in their policies) will all need to be considered.

In additional to intellectual property rights, users should be alert to the rights of individuals and should ensure that responsibility is contractually allocated to ensure that the AI model does not infringe the personal rights of others.

All training, validation, testing and data sets should be controlled appropriately and so should any management practices concerning design choices, data collection, data processing and cleansing, formation of assumptions and examination of possible biases.

It’s important that the contract has provision to deal with how the parties will respond with changes in the law that take effect after the project has commenced.

Does GDPR apply to AI?

One of the advantages of AI is its ability to use algorithms to analyse large data sets and streamline decision making.

This can include personal data, so users should be careful to ensure that the existing GDPR principles are followed to correctly:

  • Ensure the security and protection of personal data;
  • Manage any automated decision making as it affects individuals;
  • Consider the storage of personal data and offshoring of servers or use of cloud-based computing;
  • Ensure that contractual terms are in place with all relevant third parties to ensure the security of personal data;
  • Maintain accurate privacy policies to ensure that data subjects are fully informed as to how their data is being used and processed.

Can AI be a threat to data privacy?

Cyber security is the highest risk facing most small companies and individuals today. Any use of AI which exposes personal data to breach should be identified and mitigated.

Criminals will certainly look to use AI to exploit any vulnerability and obtain data which could enable them to carry out data breaches, thefts and frauds (both large scale and small scale).

To maintain data security, contracts should include:

  • Security controls when working with third parties such a passwords or encryption which should be excluded from reliefs of the force majeure clause to prevent suppliers abandoning standards following a catastrophic event;
  • Notifications of any changes such as a sub-contractor proposing the offshoring of data and/ or assets or any change of control/ ownership of a sub-contractor;
  • Regular review and audits to ensure compliance with applicable laws and security standards;
  • Protection of data on termination

What are the risks of AI to companies?

The main risk of use of public AI platforms is the accuracy of the output and accountability for errors. Many professionals have highlighted technical errors in the output of AI programs and if those errors lead to negligence of a professional, the responsibility will lie with the professional not the program.

Where those errors impact business critical systems or processes the scope for loss will be much greater and controls should be built into the processes and programs adopting AI.

The second real risk is cost failing to meet benefit. The risk of AI failing to deliver cost savings may prevent smaller businesses from taking the risk of adopting AI or investing the appropriate levels of resources into the project.

Another risk is that as the technology is new, there is currently a skills gap of employees and consultants who are able to utilise the technology and embed this into systems and code to harness the potential of the technology.

Specialist Advice for Business Owners

Hem Gujadhur, Corporate, Commercial and Intellectual Property Paralegal says: “There are of course, other risks which lend themselves more to science fiction novels and mainstream media headlines.”

Our advice to small business owners looking to adopt AI is to focus on the real practical and contractual risks of your own projects because the likelihood is that those risks are far more relevant to you than the more obscure threat of robots taking over the planet!”

AI in business: Speak to a lawyer

At Frettens, our specialist Corporate, Commercial and Intellectual Property team, who were recently recommended in the Legal 500, can advise you and your business on what you may need to consider when it comes to using AI.

In addition, we can help with a variety of other issues concerning starting a business, acquisitions and mergers, selling a business and much, much more.

We would be happy to discuss your individual circumstances with you and provide tailored advice over a free initial appointment.

You can call us on 01202 499255 or fill out the form at the top of this page to get in touch.

The content of this article, blog or video is not intended as specific legal advice. For tailored assistance, please contact a member of our team.