Entering the contractual realm of generative AI presents challenges, especially concerning intellectual property and confidentiality. This guideline overviews the key contractual considerations for generative AI tools. It is a practical guide for businesses dealing with generative AI agreements. Please note that the guidelines outlined here may be adjusted according to local legislation.
Overview of Generative AI Agreements
Generative AI agreements regulate the use of AI tools and lay out the rights and obligations of the user and the provider. These contracts are vital to protecting your company's interests, confidential information, and intellectual property.
There are generally two types of agreements that govern the use of generative AI tools:
Online terms of service or terms of use: These are the standard agreements that accompany most tools. However, they are often less favorable to the user and tend to favor the provider.
Negotiated agreements: These are bespoke contracts tailored to the user's specific needs. They often offer more favorable terms, including more protection for your company's intellectual property and confidential information.
Some providers offer an "enterprise" or "business" version of their tool, which typically comes with more customer-friendly terms. Although they come with additional fees, they may provide valuable contractual protections against some of the risks associated with using generative AI.
Be aware that some providers offer plugins or APIs that may be subject to different terms than the base version of the tool. These solutions can enable seamless integration of the AI tool with your company's technology, but it's essential to understand the specific terms that apply.
Rights in Prompts
Most terms of use state that the end user owns the prompt. However, it is crucial to read the fine print, as the provider may still have broad rights to use and distribute the prompt. Even if you own the prompts, the provider may have the right to use, prepare derivative works based on, and distribute them. In some cases, unless you have opted out or signed up for a business account, the provider may also have the right to use the prompts as training data.
Submitting confidential or valuable proprietary data in prompts can indirectly benefit other tool users, including competitors, or expose the data to other users. Implementing a generative AI use policy can help set guardrails on how your company's information is used in prompts. Ensure that your employees and contractors are aware of this policy.
Rights in Outputs
Like prompts, terms of use often state that the end user owns the outputs. However, the provider may still have crucial rights to distribute or publish the outputs to other users or use them as training data.
Read the terms carefully to understand the provider's rights to use and distribute the outputs you generate. If it's problematic for your company, check if the provider offers private enterprise or business accounts or opt-out mechanisms.
If you anticipate generating valuable outputs, carefully evaluate the provider's rights to use those outputs. Consider opting for a private enterprise or business account, or reconsider your use cases.
Confidentiality
Many terms of use do not subject the provider to confidentiality obligations regarding prompts or outputs. This can expose your company to the risk of disclosure. Providing third-party confidential information or personal data in prompts can put you in breach of nondisclosure obligations, privacy laws, or contracts.
Consider a private enterprise or business account with different terms or modulate your use of the tool to avoid disclosing sensitive information. Implementing a thorough generative AI use policy can help manage risks.
Indemnities
Some providers, especially for enterprise or business accounts, will indemnify for claims arising from infringement of third-party intellectual property. Many terms of use contain broad indemnity obligations on end users, covering claims arising from their use of the tool, applications they develop, and violations of the terms or laws.
Your company's use of generative AI may result in broad indemnification obligations but limited or no indemnification recourse against the provider.
Exclusions and Limitations of Liability
Many providers disclaim liability for indirect, incidental, and consequential damages, and some disclaim or cap liability for direct damages. End users typically do not receive significant exclusions and limitations of liability. Your company may be subject to broad liability with little protection from the provider. If possible, negotiate a more customer-favorable approach with the provider. Providers that offer an enterprise or business account option may agree to a higher liability cap.
The information provided is not legal, tax, investment, or accounting advice and should not be used as such. It is for discussion purposes only. Seek guidance from your own legal counsel and advisors on any matters. The views presented are those of the author and not any other individual or organization. Some parts of the text may be automatically generated. The author of this material makes no guarantees or warranties about the accuracy or completeness of the information.
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