Artificial Intelligence is  the principal driver of emerging technologies in manufacturing, finance, health care, media, education, transportation, and customer service. While enterprise-scale businesses have successfully integrated Big Data, robotics and IoT into their operations and workflows, generative AI is rapidly helping shape the future of commerce and indeed of humanity. But not without legal and reputational perils.

But what business risks does AI pose, and how can they best be managed?

The law is in a state of flux but here are some general pointers. You should look to your attorney for more definitive advice as it relates to your own business and the specific risks AI may pose for you.

Let’s start with intellectual property. Copyright law, as it relates to AI-generated content, is evolving. For now, business owners should assume that copyright protection is only available for works of human authorship. They should require that human authors contribute substantially to the creation of any content developed for the business.  It follows that any employee or independent contractor who develops content for the business that includes embedded AI work product should warrant that she has all the rights necessary to license or assign her work to the company and should also hold the company harmless from any liability that might arise from third-party infringement claims.

Then there are privacy and data security risks. AI generates new data from inputted data, without differentiating among public data, confidential information and personally identifiable information (“PII”). And, of course,  PII is heavily regulated by law. For that reason, businesses shouldn’t allow employees or independent contractors to input PII into an AI application without observing rigorously policed safeguards, Nor should they be allowed to input confidential, proprietary, or sensitive information or privileged content of any kind into an AI application.

The possibility of discrimination and bias presents further concerns.  President Biden has sounded an alarm that AI carries with it the risk of perpetuating discrimination: “Artificial Intelligence systems deployed irresponsibly have reproduced and intensified existing inequities, caused new types of harmful discrimination, and exacerbated online and physical harms.” So, for example, an AI-generated resume review can infect a business’s hiring process with pre-existing, discriminatory data, exposing the business to legal liability under Title VII of the federal Civil Rights Act and companion state employment laws. It’s clear that human reviewers need to regularly analyze and test for discrimination.

More broadly, algorithmic bias -- reflecting underlying human assumptions -- may have other adverse implications for the business. So, humans should always review AI processes and outputs for bias.

Tort and reputational liability are also on the line. AI-generated content is not always accurate, potentially impacting the reputation of the business that publishes it. If a false statement adversely bears on a person’s reputation, the statement could expose the business to liability for defamation. Once again, human vetting is the best strategy to mitigate risk. Businesses should also consider incorporating a prominent disclaimer in any AI-generated content signaling that “the content was produced with the assistance of Artificial Intelligence” and, to satisfy ethical requirements recently established by some international AI laws, that “the author has reviewed and takes full responsibility for the content of this publication.”

Where insurance fits it.  As the law evolves, it become increasingly critical for legal counsel to periodically review the business’s directors’ and officers’ liability, errors and omissions and cyber insurance policies to confirm that the business is reasonably protected against potential claims arising from its use of AI.

If you would like to explore state-of-the-art strategies to mitigate your business’s AI-related risks, please reach out in confidence to Marc Lane at 312/372-1040 or mlane@marcjlane.com.