Guarding Your AI Advancements: The Art of Contractual Agreements in the AI Era

by | Jul 3, 2023 | AI, Business, Contracts, Featured, Law

Guarding Your AI Advancements: The Art of Contractual Agreements in the AI Era


When incorporating AI into your business services, it is essential to have appropriate contractual agreements in place. These agreements help establish the rights, responsibilities, and expectations of all parties involved in the development, deployment, and use of AI technologies. Here are key considerations for contractual agreements related to AI:


1. Ownership of AI Technologies:

Clearly define the ownership of AI technologies developed or utilized in the provision of your services. Specify whether you retain ownership or if ownership transfers to a vendor or partner. Address the ownership of algorithms, models, data, and any improvements or modifications made during the course of the agreement.


2. Data Usage and Confidentiality:

Outline the rights and obligations regarding the usage and handling of data involved in the AI processes. Specify the purposes for which the data can be used, any restrictions on data sharing, and measures to ensure data confidentiality and security. Include provisions for data protection and compliance with applicable data privacy regulations.


3. Intellectual Property Rights:

Determine how intellectual property rights related to AI will be handled. If the AI technologies involve patented inventions or copyrighted materials, address the licensing or assignment of those rights. Ensure that the agreement protects your own intellectual property and avoids any infringement on the rights of others.


4. Performance and Service Level Expectations:

Clearly state the expected performance levels and service quality regarding the AI-driven services. Define the metrics, benchmarks, and criteria for evaluating the performance of the AI technologies. Include provisions for remedies or penalties in case of underperformance or failure to meet the agreed-upon service levels.


5. Indemnification and Liability:

Allocate responsibility for any damages or losses caused by the AI technologies. Include indemnification clauses to protect your business from claims arising from the use of AI. Determine the limits of liability and establish mechanisms for resolving disputes, including arbitration or mediation procedures.


6. Compliance with Laws and Regulations:

Ensure that the contractual agreement explicitly requires compliance with applicable laws and regulations, including those related to data privacy, intellectual property, consumer protection, and industry-specific regulations. Specify the responsibility for monitoring and ensuring compliance, as well as any required certifications or audits.


7. Termination and Transition:

Define the circumstances and procedures for terminating the agreement and transitioning the AI technologies, data, and services to another party or vendor if necessary. Address data transfer, confidentiality, and any post-termination obligations, such as data destruction or return.


8. Change Management and Updates:

Anticipate the need for future updates or modifications to the AI technologies or services. Define procedures for managing changes, including testing, validation, and deployment of updates. Consider provisions for handling unforeseen events, such as technology advancements or changes in regulatory requirements.


It is essential to engage legal experts specializing in AI and technology law to draft or review your contractual agreements. They can help ensure that the agreements adequately protect your interests, address legal requirements, and minimize potential risks associated with AI implementation.

NIK ERMAN NIK ROSELI Commercial Lawyer

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