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In-house counsel across all industries have indicated that they are prepared for the emergence of artificial intelligence (AI) tools and applications within the legal profession. A recent survey by LexisNexis found that more than two-thirds (67%) of in-house lawyers expect the law firms they work with will use cutting-edge technology, including generative AI, and 58% indicated that they expect their outside counsel to give them a choice regarding the use of generative AI tools.
Now in-house counsel are trying to look around the corner and anticipate the various ways in which AI will impact the legal matters they are charged with overseeing for their organizations.
A Lexis Practical Guidance practice note by Daniel Barsky, partner at Holland & Knight LLP, provides an overview of the key legal issues that businesses should consider in areas where AI technology is germane.
In Artificial Intelligence Key Legal Issues, Mr. Barsky identifies a number of corporate legal areas impacted by AI:
Most companies, even when developing their own AI technology, will license some AI from other sources. In-house counsel need to pay attention to the transaction terms that are unique to AI when it comes to representations and warranties, indemnification, limitation of liability, insurance, escrow and service level agreements.
AI has permeated consumer devices, especially Internet of Things (IoT) devices that communicate with each other through the internet. Specific AI-powered consumer products for in-house counsel to track for legal exposure are most prevalent in the healthcare, fitness, transportation, in-home appliances, agriculture and toys industries.
“No statutes currently address the injuries and loss that can be caused specifically by the use of AI,” writes Mr. Barsky. “As such, courts generally apply traditional legal theories to their use when determining who is at fault when an AI product causes injury, loss or damage.” He notes that this is an evolving area of the law to monitor and will be based around the legal theories of negligence, breach of warranty and strict liability.
The creation, sale, license and use of AI — along with its related technologies — presents a wide range of IP legal issues with respect to ownership and infringement. The three specific areas of the law through which IP rights attached to AI are protectable are patents, trade secrets and copyrights. For a discussion of copyright ability of generative AI in the U.S. and Europe, see Generative AIs Challenged by Copyright and Related Rights: A Comparative Approach in European and U.S. Law.
An AI system generally relies heavily on large volumes of data, much of which includes sensitive customer and user personal information. This raises important privacy and data security legal issues for in-house counsel. Extra precautions must be taken to ensure this information is protected from unauthorized use and disclosure, such as the proper use of encryption, password protections and safeguards around the collection of confidential information.
Pursuant to the U.S. Bankruptcy Code, a debtor in bankruptcy is entitled to assume, assign or reject executory contracts (subject to court approval). IP licenses, including AI licenses, are typically considered executory contracts as both the licensor and the licensee generally maintain significant ongoing obligations under the agreement’s terms. In-house counsel need to understand potential risks in the event of a bankruptcy proceeding involving a business partner.
“AI is now being used by many businesses to engage in potentially anticompetitive behavior in violation of applicable law,” writes Mr. Barsky. He notes, for example, that AI could be used to facilitate price-fixing arrangements with other AI systems. Furthermore, AI systems in and of themselves could potentially enter into anticompetitive agreements if they are used to test market conditions and conclude that collusion would be a successful means of maximizing profits.
AI is already widely used by employers for recruiting, screening, interviewing, hiring, onboarding and supervising employees. In-house counsel must be mindful that these processes remain subject to all applicable employment and anti-discrimination laws, so the use of AI tools brings inherent risks that must be managed. Additionally, AI-powered robots have been developed to perform repetitive tasks under human supervision, which also presents legal issues. For more information, see Artificial Intelligence in the Workplace: Best Practices.
In-house counsel must stay on top of emerging AI legislative and regulatory developments that will continue to shape their legal strategies in these eight areas. Lexis Practical Guidance has created the Artificial Intelligence Legislation Tracker to help legal professionals monitor all state, federal and notable municipal legislation related to the use of AI.
The tracker provides snapshot descriptions of each pending measure, key status updates and convenient one-click access to the full text of the entire proposed statute. It is the latest addition to the robust content from LexisNexis that is tailored to meet the needs of in-house counsel and is available now on Lexis+ General Counsel Suite.
To do more with less, today’s in-house counsel must have fast access to the information they need to shape legal strategy and adapt to changing circumstances. Lexis+ General Counsel Suite provides in-house counsel with a vast collection of legal resources, breaking business and legal news, and practical guidance content that includes practice notes, templates and checklists. It is an all-in-one information resource designed for the modern GC.
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