Imagine waking up to find a video circulating online that features someone who looks and sounds exactly like you, saying things you’d never say. Your reputation might plummet if this doppelganger said some unsavory things, and you may lose friends and possibly even employment. This scenario is no longer just a distant nightmare of the imagination but a real possibility with the advent of AI technology. We have witnessed this groundbreaking technology with Meta’s unveiling of interactive chatbots modeled after renowned celebrities such as Tom Brady, MrBeast, and Snoop Dogg. These AI-driven personas, allowing fans to engage in simulated conversations with their favorite stars, represent a monumental step in digital interaction. However, they also usher in a plethora of legal and ethical challenges, particularly concerning the protection of one’s digital persona and rights of publicity as seen in the swath of deepfakes of Taylor Swift and other influencers. Are you ready for the AI wave? Are your data and publicity rights protected?
AI has stepped into the world of hyper-realistic digital personas, capable of impersonating real individuals through deepfakes, voice synthesis, and virtual avatars. This technological leap, although impressive, unveils a pandora’s box of legal and ethical challenges. Protecting one’s likeness and rights of publicity against unauthorized AI impersonation has become the next battleground for private citizens and influencers alike.
This development has increased the risk of impersonation and fraud, targeting influencers’ likenesses directly. Deepfake technology, for instance, can create realistic personas which may be used maliciously. One example that comes to mind is the time PopSugar Inc. faced a lawsuit for the unauthorized use of influencers’ likenesses. PopSugar allegedly created profiles of prominent social media influencers and copied their photos from Instagram without permission, leading to a class action lawsuit. On the other end of the spectrum, the recent incident involving sexually explicit deepfake images of Taylor Swift, serves as a glaring reminder of this growing problem. This isn’t just a concern for celebrities and influencers but signals a broader threat to the privacy and rights of everyday individuals as well. Understanding and safeguarding one’s rights of publicity has never been more critical.
With the rapid advancement of AI technologies, such as the development of Sora by OpenAI, capable of generating high-definition videos from text prompts, the potential for creating hyper-realistic and unauthorized content is no longer a future concern but a present reality. The allure of AI personas is undeniable. Yet, they come with a set of challenges that cannot be overlooked.
Consider a scenario where an enthusiast manipulates Tom Brady’s AI chatbot to voice a controversial statement or endorse a product that the real Tom Brady would never say or approve. Worse still, envision the AI being maneuvered to make Brady utter something self-deprecating, thereby damaging his meticulously curated image. These aren’t mere hypotheticals but tangible challenges accompanying the arrival of AI personas.
Many have sought to get ahead of the curve and capitalize on their publicity rights with AI. Some influencers have contracted away their rights to their likeness for AI simulation, possibly in exchange for lucrative deals. However, while licensing one’s likeness for AI-driven applications can open up new avenues of revenue and fan engagement, it’s a path fraught with potential pitfalls. Every endorsement, interaction, or statement made by the AI persona can make waves in the real world, impacting the celebrity’s brand and reputation. It’s a delicate balance between monetization and control over one’s image. When it comes to licensed AI personas, the rights to use an influencer’s likeness, personality, and branding are officially granted to a business or individual, generally for promotional endeavors. This licensing provides legal permissions for creating and using these digital personas.
Central to this is the licensing agreement that governs the use of one’s publicity rights. Licensing agreements clearly outline the limits on how AI personas can be used, ensuring your rights are protected. For instance, Tom Brady’s licensing agreement would ideally identify the products the AI can endorse, the statements it’s permitted to make, and the contexts it can operate within. Meta has just recently introduced interactive chatbots modeled after real celebrities and influencers like MrBeast and Snoop Dogg, enabling users to engage in simulated conversations with these personalities. This initiative reflects a broader trend of leveraging AI to create digital replicas or simulations of influencers and celebrities, which could potentially raise concerns regarding consent, likeness rights, and the authenticity of interactions in the digital sphere.
The expansion of AI into creating hyper-realistic digital personas, capable of mimicking real individuals through deepfakes, voice synthesis, and virtual avatars, has unleashed a surge of legal and ethical challenges. Especially for those whose very likeness is the embodiment of their brand, protecting one’s rights of publicity against unauthorized AI impersonation is key.
The intersection of AI technology and publicity rights is complex, but it doesn’t have to be intimidating. With the right knowledge and legal support, you can navigate this landscape confidently. For instance, a legal counsel would meticulously draft clauses preventing the AI from engaging in derogatory, misleading, or harmful contexts. They’d also ensure the AI doesn’t make endorsements or statements misaligned with the celebrity’s brand. The lawyer’s goal is to ensure that the AI persona, while being a source of revenue and engagement, doesn’t devolve into a defamatory tool.
In this rapidly evolving digital sphere, staying ahead of legal and technological advancements is invaluable. Building a protective legal framework, through consultations with legal professionals and crafting contracts specifying rights concerning AI-generated content, is not only wise but necessary to thrive in the upcoming AI age. An effective battle plan consists of regularly monitoring your digital identity and employing technological solutions to detect unauthorized use of your likeness. If your likeness is used without permission, take immediate legal action, including sending cease and desist letters and filing lawsuits for unauthorized use of likeness and rights of publicity.
Don’t let AI catch you unprepared. Don’t navigate the complex world of AI and publicity rights alone. Contact us today for a consultation. We can provide you with a personalized consultation that helps you identify your legal risks and areas of potential opportunity. As experts in AI and entertainment law, we can be your partners in ensuring your publicity rights are protected against the unforeseen challenges of AI. Let us help you harness the power of AI without compromising your legal rights.
In the digital age, artificial intelligence (AI) has become a game changer for content creators and social media influencers. AI tools offer unprecedented assistance in content creation, from automated editing to graphic design, and push the boundaries of creativity. Yet, as with all technological advancements, there’s a legal side to consider. This article explores the intricate world of AI and copyright, providing insights and guidance from a top AI Attorney for those at the forefront of digital content creation.
AI-powered tools, from automated editing software to graphic design apps, are fast becoming indispensable for many creators thanks to their endless potential. The surge in AI-driven content creation has prompted the U.S. Copyright Office to revisit the issue of whether AI-generated works are copyrightable. Historically, for a work to be copyrightable, it needs the touch of human authorship and creativity. The U.S. Copyright Office has maintained this stance, emphasizing that creations made solely by AI are not copyrightable. A recent decision found that AI-generated comic book images were deemed ineligible for protection. Yet, they recognized that the human-curated organization and arrangement of these images did meet the standard for copyright protection. The waters get murkier when humans and AI collaborate. A human’s guidance or creative decision-making can make an AI work eligible for copyright protection.
A notable case from this year involves computer scientist Stephen Thaler. Thaler sought copyright for an art piece produced by his AI system, “Creativity Machine.” The U.S. District Court, however, ruled against him, underscoring the necessity of human authorship for copyrightability. Thaler has recently appealed this decision, hoping to find a different outcome in the higher courts. This case, among others, showcases the ongoing legal dilemmas surrounding AI and copyright, especially as more artists and creators integrate AI into the artistic process. Such decisions highlight the evolving nature of copyright law in the face of AI advancements. In light of this trend, the Copyright Office is currently undergoing its investigation, requesting public comments to determine the extent AI can be involved without eliminating the work’s copyrightability.
Before diving deeper into the implications of using AI, it’s crucial to understand how AI systems access, process, and store data. AI models, especially machine learning models, are trained on vast datasets. These datasets can include anything from text and images to more complex data like music or videos. When you use an AI tool, primarily a cloud-based tool, your data might be uploaded to the tool’s servers, processed, and potentially stored or used to improve the tool’s algorithms.
Using AI means potentially giving it access to your copyrighted works. While this can enhance the tool’s output quality, it also raises concerns about whether your content gets added to the AI’s training database. If it does, your work could inadvertently be used to train future iterations of the AI, leading to potential copyright infringements.
When working with AI, especially third-party tools, it’s vital to ensure data restrictions are in place. Always read the terms of service and data usage policies. Some tools might claim rights to use your data for various purposes, including refining their algorithms or even for promotional activities. For this reason, ensure that you’re comfortable with these terms or seek alternatives that offer more stringent data protection.
For creators, it’s beneficial to develop an assessment plan to determine which works can be offered up to AI without fear of infringement:
Another major issue of the use of AI in creating content is the impact it may have on works done for hire. Collaborating with AI tools or with contractors who utilize AI brings forth its own set of challenges. The objective might be to obtain a creative work with full ownership rights, but the reality could be minimal rights to no rights due to the predominant AI-generated content. Given the lack of protection surrounding AI-generated content and the uncertainty of whether editors and creators may use AI, it’s paramount to establish clear contractual terms. When hiring editors or engaging in collaborations, ensure that:
Influencers should seek to protect themselves and their rights by outlining the rights and responsibilities of both parties in a clear written agreement, providing clarity and protection from how AI may be used.
In this ever-evolving landscape, staying proactive is the key:
Don’t leave yourself exposed to legal risks. Get in touch with us today. Let us guide you through the complexities of AI, copyright law, and contract agreements. We’ll help you navigate the legal landscape with confidence and peace of mind. Let’s work together to safeguard your interests and support your continued innovation and growth. Don’t wait until it’s too late, act now and ensure you and your creative works are legally protected. Click here to schedule your free consultation.
The intersection of AI and copyright law is a dynamic and complex domain. As content creators and influencers, it’s crucial to navigate this space with both creativity and caution. Don’t venture into this realm unprepared. Equip yourself with the right knowledge and legal support.
Our firm specializes in AI and copyright law. We understand the unique challenges in your field, and our expertise is focused on providing personalized legal advice, conducting risk assessments, and helping draft and revise contract agreements for content creators. Our goal is to help content creators establish a solid legal foundation, enabling them to navigate the evolving legal landscape with confidence. We’re committed to ensuring that as you harness the power of AI for content creation, your rights and creations remain protected. We’re here to guide you every step of the way.
Open-source software development isn’t a new kid on the block, but its importance has skyrocketed with the emergence of game-changing technologies like blockchain and AI. As more and more projects in these fields adopt open-source licensing, the legal complexities tied to these licenses are becoming increasingly relevant, with dual licensing being a case in point.
Very few lawyers understand software licensing, and even fewer open-source licensing. Our attorneys have been at the forefront of open source project representation since 2008. We have represented some of the most significant open source projects as well as startups. Our technology lawyers understand blockchain technology and artificial intelligence, representing companies and projects in new and emerging fields.
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Choosing the suitable licensing model at the inception of an open-source project is not just a legal formality; it’s a strategic imperative. Unlike traditional proprietary software, SaaS or PaaS business models where license terms can often be renegotiated or amended in subsequent contract cycles, open-source licensing is far less forgiving of afterthoughts. Once code has been released under a particular open-source license, changing that license can be a Herculean task fraught with legal complexities and community backlash.
The challenges are significant. First, you may need to secure permissions from every contributor to the project, a logistical issue for larger, more collaborative initiatives. Second, altering the license could alienate a project’s community, leading to forks or abandonment. Third, a change in licensing can have downstream effects on derivative works and integrations, potentially leading to legal disputes or claims of copyright or patent infringement. Therefore, every open source project must evaluate its license choices and consult legal experts before making your code publicly available.
While the intricacies of open-source licenses can be complex, they generally fall into two broad categories: permissive licenses like the MIT License and copyleft licenses like the GNU General Public License (GPL). Permissive licenses offer more freedom for reuse and are generally business-friendly, while copyleft licenses require any derivative work to be open-sourced under the same license.
Given the complexities and high stakes involved, consulting with legal experts specializing in open-source licensing is imperative. Our team of open-source attorneys is well-equipped to guide you through the landscape of open-source licenses, identify legal risks, and ensure you make an informed decision that aligns with your legal obligations and strategic objectives.
Dual licensing is a clever workaround for a classic problem in the open-source world. It’s designed for businesses that are usually cautious about incorporating open-source elements into their proprietary work. The reason for this caution is often the “copyleft” requirements in licenses like the GPL, which could force companies to make their code public if mixed with open-source code, putting their intellectual property at risk.
But here’s where dual licensing comes in handy. It lets businesses use and adapt an open-source project—typically under a stringent license like the AGPL—without disclosing their tweaks to the world. This protects the business interests and resonates with what the open-source community has advocated: more corporate participation. More corporate resources can mean faster development and broader adoption of open-source projects.
How do you have an honest conversation with someone where you say “yes, I will need the work you did for free, to be assigned over to me, so that I can make money on it”?
RoBlaBlog – Thoughts on dual licensing and contrib agreements (Posted on 2010-02-27 by robla)
While dual licensing has its detractors, there’s no denying its effectiveness in reconciling the differing needs of various parties involved. By allowing businesses to contribute to open-source initiatives without giving up their proprietary edge, dual licensing creates a win-win scenario for everyone in the ecosystem.
Dual licensing, while offering a flexible framework for both open-source communities and commercial entities, is not without its legal pitfalls. One of the most pressing concerns is the potential for license incompatibility. For instance, if a project is dual-licensed under a permissive license like MIT and a copyleft license like GPL, contributors, and users must be acutely aware of the obligations and restrictions each license imposes. Failing to comply with the terms of either license could result in legal repercussions, including copyright infringement claims.
Another significant legal issue is the matter of contributor agreements. In a dual-licensed project, contributors must often sign a Contributor License Agreement (CLA) (see examples below) that explicitly outlines the terms under which their contributions can be used. Usually, this is an irrevocable license or assignment of copyright and patent rights to the project managers. This is particularly important for projects that may later change one of the dual licenses or add a commercial one. Without a comprehensive CLA, the project could face legal challenges from contributors who disagree with the license change, leading to project forks, litigation, or even the dissolution of the project.
Contributor License Agreements (CLAs) are still controversial but are becoming more accepted and standard. CLAs are the legal backbone of any dual-licensed open-source project. These agreements define the terms under which contributions are made to the project, safeguarding against future legal complications. Key terms that should be included in a CLA often encompass the scope of the license granted to the project, address moral rights, select a license or assignment approach to contributions, address any warranties or disclaimers, and provide a path for dispute resolution.
One critical term is the explicit acknowledgment that the contributor permits the project to re-license their contributions under different licenses in the future. This is particularly vital for dual-licensed projects that may need to adapt their licensing strategy to accommodate evolving legal or commercial landscapes. Without such a provision, the project could face legal hurdles if it decides to change one of its licenses.
Failure to have a robust CLA can lead to various legal issues, ranging from intellectual property disputes to potential litigation. In the worst-case scenario, disagreements over licensing could result in Open Source project forks or even the dissolution of the project, thereby undermining the collaborative spirit that is the psychological and emotional premise of some open-source communities.
Before we delve into sample Contributor License Agreements (CLAs), it’s crucial to underscore that the templates and forms below are intended solely for educational purposes. They are designed to give you a foundational understanding of the critical terms and conditions commonly found in CLAs, thereby enabling more informed discussions with your open source attorneys. Before adopting any CLA template or example for your project, consulting with an attorney specializing in open-source licensing is imperative.
Open-source licensing is a complex legal field with nuances that can significantly impact the future of your project’s future. A one-size-fits-all approach rarely suffices; minor oversights can lead to substantial legal complications. Here are some sample CLAs.
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In recent years, the digital landscape has become a battleground for privacy rights, with Meta Pixel at the epicenter of numerous legal disputes. Companies using Meta Pixel and similar tracking technologies increasingly face legal scrutiny. This surge is not limited to Meta alone; it extends to any organization that employs these technologies for data collection and targeted advertising. A pixel tool is a small piece of code embedded into the HTML of a website designed to measure user interactions and provide online advertising. Pixel tools are often made available to website owners by third parties, who can access and analyze the data collected on behalf of website owners. Those tools can subject users to serious legal liability and the number of threat letters being sent by opportunistic attorneys continues to explode. Unfortunately, the number of class actions being filed against thrid-parties using this sort of technology also continues to increase.
If your company has recently received a cease-and-desist letter or any form of legal threat related to using Meta Pixel or similar technology, this article should help you start to understand next steps. The attorneys at Traverse aim to provide you with a comprehensive understanding of the potential liabilities you could face, the defenses you might employ, and the critical role of an experienced lawyer handling Meta Pixel claims.
The legal environment surrounding Meta Pixel and similar tracking technologies is complex and rapidly evolving. Over the past year, dozens of class-action lawsuits have been filed, targeting not just Meta but also companies that utilize Meta Pixel for data collection. These lawsuits often cite violations of decades-old laws, such as the Video Privacy Protection Act (VPPA) of 1988 and federal and state wiretapping laws.
Many of the threat letters are coming from law firms such as the Swigart Law Group.
Understanding the laws being cited in these lawsuits is crucial for any company facing legal threats. The VPPA, for instance, prohibits the unauthorized disclosure of personally identifiable information related to video consumption. Wiretapping laws, both federal and state, make it illegal to intercept or eavesdrop on private communications without consent. These laws were originally designed for different eras and technologies but are now being applied to modern data collection methods.
Several cases have already made it past the motion to dismiss stage, signaling that courts are willing to entertain these claims. For example, in Ambrose v. Boston Globe Media Partners LLC, the court allowed the case to proceed, stating that the plaintiff had stated a viable claim under the VPPA. On the other hand, some cases have been dismissed, often based on the specific nature of the data being collected and whether it falls under the legal definitions of “personally identifiable information.”
Companies using Meta Pixel and similar technologies should be aware of the two primary types of claims being made against them: content-dependent and content-agnostic claims. Content-dependent claims involve the unauthorized sharing of sensitive data, such as healthcare information, which could lead to violations of consumer protection statutes or HIPAA. Content-agnostic claims, on the other hand, focus on the mere act of data collection and allege violations of wiretapping laws, irrespective of the nature of the data collected.
Several companies have already faced the legal ramifications of using tracking technologies. For instance, a case against Advocate Aurora Health, Inc. alleges violations of the Electronic Communications Privacy Act among other claims. The case has been transferred to the Eastern District of Wisconsin and is yet to be seen whether it survives the motion to dismiss. These lawsuits can result in hefty fines, reputational damage, and operational disruptions, making it imperative for companies to understand their potential liability.
It’s crucial to note that the legal scrutiny is not limited to Meta Pixel alone. Other technologies like session-replay software and chatbot functionality are also under the legal microscope. Companies using these technologies are equally at risk and should be prepared for potential litigation. Other technologies similar to Meta Pixel are also creating risks for users of those technologies:
One of the most potent defenses against these types of lawsuits is user consent. Courts have shown a willingness to dismiss cases where companies can demonstrate that they obtained explicit or even implied consent from users before collecting data. However, the manner in which consent is obtained—be it through a pop-up banner, terms of service, or privacy policy—can significantly impact the strength of this defense.
A well-crafted privacy policy can serve as a robust legal shield. It should clearly outline what data is being collected, how it’s being used, and with whom it’s being shared. Courts often scrutinize the language and clarity of privacy policies when determining whether a company has violated privacy laws. Therefore, it’s crucial to work with legal experts to ensure your privacy policy is both comprehensive and understandable.
Several cases offer valuable insights into what defenses have been successful. For example, in Martin v. Meredith Corp., the court dismissed the case on the grounds that the data sent did not qualify as “personally identifiable information” (PII) under the VPPA. Understanding the nuances of these cases can help you tailor your own legal strategy effectively.
In the complex and evolving landscape of privacy litigation, having an experienced law firm by your side is not just advisable—it’s essential. Legal experts can provide invaluable guidance on assessing your company’s risk profile, preparing robust defenses, and even proactively preventing litigation through compliance audits and policy reviews.
Your legal team can conduct a thorough risk assessment to identify potential vulnerabilities in your data collection and storage practices. This proactive step can help you understand the legal implications of your current operations and make necessary adjustments before facing a lawsuit.
Even with the best preventive measures, the risk of litigation is ever-present. An experienced law firm can help you prepare a strong litigation strategy, from filing motions to dismiss to negotiating settlements or fighting the case in court. Their expertise can be the difference between a costly legal battle and a favorable resolution.
If you’ve received a cease-and-desist letter or are concerned about potential legal threats, there are immediate steps you can take to mitigate risks. First, review your current data collection practices and ensure they align with state and federal laws. Update your privacy policies and terms of service to clearly outline your data collection and usage practices.
Regular legal audits can help you stay ahead of the curve. These audits, ideally conducted in collaboration with your legal counsel, can identify potential areas of risk and recommend corrective actions. They can also help you adapt to new legal developments, ensuring that you’re always in compliance.
Your privacy policy should not be a static document but a living one that evolves with your business practices and the legal landscape. Regularly updating it in consultation with legal experts can go a long way in protecting you from potential lawsuits.
The legal landscape surrounding Meta Pixel and similar tracking technologies is far from static. With new lawsuits being filed and laws being enacted, companies must remain vigilant and proactive in their approach to data privacy. Ignoring or underestimating the legal risks can result in severe consequences, both financially and reputationally.
In this complex environment, being reactive is not an option. Companies must take immediate steps to assess their risk, consult with experienced legal counsel, and implement robust risk mitigation strategies. The cost of inaction is simply too high.
Let’s begin by understanding what copyright is. Copyright is a form of intellectual property law that protects original works of authorship, including literary, dramatic, musical, and specific intellectual works. In the context of AI, this could range from the data you’re using to train your models to the output your AI generates. (See Traverse Legal’s Copyright page.)
Now, you might wonder how copyright intersects with artificial intelligence. The answer is more complex than you might think. For instance, if your AI scrapes data from various sources for analysis, you must consider whether that data is copyrighted. Similarly, if your AI is involved in text or image recognition, the content it interacts with may also be subject to copyright laws.
How your AI interacts with data can have significant legal implications. Ignorance is not a defense in the eyes of the law, so it’s crucial to be proactive in understanding these issues.
There is a lot of confusion surrounding applying copyright law to artificial intelligence and machine learning tools. The US Copyright Office recently requested input on these issues as it tries to formulate its policies around AI-generated content.
One of the most prevalent misconceptions is that it is free to use if something is publicly available online. This is a dangerous assumption that could lead to legal repercussions. Just because data or content is easily accessible does not mean it is free from copyright protections. (Learn more about how Traverse lawyers are protecting AI companies here).
Another common misunderstanding is the belief that copyright issues are automatically avoided if your AI system generates a piece of content. This is not necessarily the case. The data used to train the AI, the algorithms employed, and even the output could potentially infringe on existing copyrights.”
Disposing of these myths is essential because operating under these assumptions can expose your startup to significant legal risks. Being well-informed is the first step in mitigating these risks.
Fair Use is a doctrine in copyright law that allows limited use of copyrighted material without requiring permission from the rights holders. It is essential to understand the boundaries of Fair Use, especially regarding AI. For example, using copyrighted data for research might be considered Fair Use, but commercializing that data likely is not.
Another area that requires attention is the distinction between Open Source and Copyrighted Material. Open Source material may seem safe and easy, but it has its licenses and restrictions. On the other hand, using copyrighted material without proper authorization can lead to legal complications.
Understanding these gray areas is crucial for AI startups. It’s not just about avoiding legal pitfalls; it is also about making informed decisions that can impact the growth and credibility of your business.
One aspect that often gets overlooked is how to protect the intellectual property generated by your AI. Copyrighting the output of your AI can be a complex process, but it’s essential for safeguarding your startup’s assets. The first step is to identify what can be copyrighted, including data sets, algorithms, or even the generated content.
Licenses also play a pivotal role in this context. There are various types of licenses, ranging from permissive to restrictive, and choosing the right one can have long-term implications for your startup. For instance, a permissive license like MIT allows others to do almost anything they want with your project, whereas a more restrictive license like GPL requires any derivative work to be open-sourced.
Proactively protecting your work is a legal necessity and a strategic move that can add value to your startup. (continued after the video below)
One of the most eye-opening cases in recent times is the lawsuit filed by Sarah Silverman and other authors against OpenAI and Meta. This case serves as a cautionary tale for several reasons:
The lawsuit alleges that the AI models were trained on copyrighted books acquired from shadow libraries. This highlights the importance of ensuring that your training data is sourced legally. The authors did not permit their works to be used, emphasizing the need for informed consent when using copyrighted material.
The lawsuit isn’t just about copyright infringement; it also includes charges of negligence and unjust enrichment, showing that the legal consequences can be multifaceted and severe. This case underscores the complexities and risks of navigating copyright issues as an AI startup. It is not just about understanding the law; it’s about implementing practices to safeguard your startup from similar pitfalls.
Given copyright’s complexities and potential pitfalls, AI startups must take proactive measures. Here are some actionable steps to consider:
Navigating the maze of copyright laws may seem daunting, but it’s essential to running a thriving AI startup. By understanding the basics, dispelling common myths, and learning from real-world cases, you can take steps to protect your startup from legal pitfalls. Remember, it’s about avoiding lawsuits and building a sustainable and ethical business.
As we stand on the precipice of the AI Revolution, artificial intelligence (AI) is emerging as a powerful transformative force. AI offers the potential to reshape industries and redefine how we work, live, and interact. Yet, with this well-promoted potential, comes an equally significant responsibility. AI governance policies set forth the framework of principles, policies, and procedures that guide its use. Governance policies are no longer a theoretical concept discussed in academic circles, but a business imperative for c-suite executives, founders, managers, and board of directors that carries substantial implications for companies across the globe. [IBM sponsored webinars on AI governance and policy development]
AI governance is not merely about compliance or risk management. It is about ensuring that AI is used ethically, responsibly, securely, and in a manner that engenders trust. It is about creating a culture where transparency, accountability, data privacy, and inclusivity are not just buzzwords, but integral components of every AI initiative and implementation. [Brookings Institute Articles on AI Governance]
Without a robust AI governance structure, companies risk legal and regulatory repercussions and reputational damage that could create legal liability, and undermine customer trust. In this article, we will examine why AI governance matters. We will explore the potential liabilities for companies that neglect good AI policy, and discuss how a proactive approach to AI governance can mitigate these risks.
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In the rapidly evolving landscape of AI, establishing a robust governance structure is not just beneficial—it’s essential. Whether you are developing AI or using AI within your organization, you must perform due diligence, provide guidance and meet your fiduciary duty to the company. A well-defined AI governance structure is the backbone of an organization’s AI strategy, providing a roadmap for AI deployment and usage.
A comprehensive AI governance structure should outline the roles and responsibilities of various stakeholders to senior management and board members, fostering a culture of accountability. Moreover, it establishes mechanisms for monitoring and auditing AI systems, usage, and transparency.
The potential for legal liabilities escalates as AI systems become increasingly integrated into business operations. Companies that fail to establish a comprehensive AI governance structure and usage policies may face legal challenges. These challenges are not confined to the development phase of AI systems but extend significantly into their usage.
Using AI can give rise to many legal issues, from data privacy breaches and discrimination claims to intellectual property disputes and regulatory non-compliance. For instance, an AI system that processes personal data without adequate safeguards could violate privacy laws, resulting in fines and reputational damage. Similarly, an AI application that inadvertently produces biased outcomes could lead to allegations of discrimination, exposing the company to legal action. Without a robust AI governance structure, companies may lack the necessary oversight and control mechanisms to prevent such issues, leaving them vulnerable to legal liabilities. Therefore, it is crucial for organizations to proactively address these risks by establishing a comprehensive AI governance framework that guides the responsible use of AI.
While offering numerous benefits, AI in business operations also introduces a new landscape of potential liabilities. Understanding these risks is crucial for organizations seeking to leverage AI responsibly and effectively. The liabilities arising from AI use are multifaceted, encompassing not only legal and regulatory risks but also ethical and reputational ones. Here is a partial list of potential lawsuits and liabilities from using AI without proper safeguards.
The role of AI governance in mitigating legal risks cannot be overstated. As organizations increasingly rely on AI for critical decision-making and operational processes, the potential for legal liabilities escalates. However, a robust AI governance framework can effectively manage and mitigate these risks.
AI governance provides a structured approach to managing the complexities of AI use. It sets the standards for AI system deployment, operation, and monitoring, ensuring that AI initiatives align with legal norms and ethical guidelines. It establishes mechanisms for data management, privacy protection, and algorithmic transparency, reducing the risk of legal issues such as data breaches or discrimination claims. Moreover, it fosters a culture of accountability, ensuring that any issues are promptly identified and addressed. By providing clear guidelines on the responsible use of AI, governance frameworks play a crucial role in minimizing legal risks and fostering stakeholder trust. Therefore, organizations should prioritize the establishment of a comprehensive AI governance framework as a component of their AI strategy.
Implementing these policies requires careful planning, ongoing monitoring, and a commitment to continuous improvement.
Your AI policies and governance structure should cover all AI usage and development aspects, including IP, data privacy, and security issues. Here is a partial list of drafting considerations.
Comprehensiveness: AI governance policies should cover all aspects of AI use within the organization. This includes data management, algorithmic transparency, privacy protection, and accountability mechanisms. The policies should be detailed and precise, leaving no room for ambiguity.
Flexibility: Given the rapidly evolving nature of AI, governance policies should be adaptable. They should be reviewed and updated regularly to ensure they remain relevant and effective in managing the risks associated with AI use.
Education and Training: Educating all employees about the organization’s AI governance policies is crucial. This ensures a shared understanding and commitment to responsible AI use. Training programs should be implemented to keep staff updated on the latest developments and best practices in AI governance.
Transparency: The implementation of AI governance policies should be transparent. Regular reports detailing AI performance, risks, and ethical considerations should be produced. This fosters trust among stakeholders and demonstrates the organization’s commitment to responsible AI use.
Accountability: Clear lines of accountability should be established within the AI governance structure. This includes defining the roles and responsibilities of all stakeholders involved in AI initiatives, from data scientists and AI developers to senior management and board members.
Risk Management: AI governance policies should include robust risk management strategies. This involves identifying potential legal, ethical, and operational risks associated with AI use, and implementing measures to mitigate these risks.
Organizations must consider these considerations and implement effective AI governance policies. As a founder, executive, manager, or board member, your goal is to guide the responsible use of AI, mitigate legal risks, and foster trust among stakeholders.
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Regulatory frameworks will likely become more comprehensive, necessitating organizations to adapt their governance policies accordingly. The ethical use of AI will gain even more prominence, requiring a collaborative approach among ethicists, legal experts, and technologists. Transparency will be paramount, with stakeholders demanding greater visibility into AI decision-making processes. This will call for advancements in explainable AI and robust auditing mechanisms.
Moreover, risk management will be at the forefront, with organizations needing to develop sophisticated strategies to manage potential legal, ethical, and operational risks. The future will also see a greater emphasis on human-AI collaboration, requiring policies that balance the benefits of AI with the need for human oversight. Lastly, as AI becomes more prevalent, there will be a growing need for AI literacy across all levels of an organization. These policies will encompass the technical aspects, as well as the legal, ethical, and societal implications of AI use. These trends highlight the dynamic nature of AI governance and the need for organizations to stay ahead of the curve.
Is your AI company protected against the primary legal risks and the legal risks unique to artificial intelligence? An attorney specializing in AI company representation can help you identify and reduce legal risks which could put you out of business. Some current lawsuits, class actions, and regulatory actions are discussed below. But the floodgates of liability are just beginning to open.
If you are an AI developer, service company, or app, I want you to be aware of something critical to your success or failure. Every new and emerging technology has an early period where anything goes. The regulatory agencies have not caught up to the technology. The lawyers have not started filing lawsuits yet. After all the initial hype wears off, we always see a drastic uptick in regulatory action and litigation filed by law firms against any new successful technology. We saw this in the blockchain. We saw this in software as a service. We will soon see this with artificial intelligence.
Several lawsuits and regulatory actions have been filed against the more significant AI players, including OpenAI. While smaller AI companies and startups can hide in the shadow now, they should not expect this grace period to last. Every AI startup must work with experienced AI attorneys to identify and reduce risks across their contracts, corporate structures, employees, contractors, and vendors. Ensure your website agreements and software as a service (SaaS) agreements are reviewed by lawyers who understand AI is critical. There is also the issue of trademark infringement, copyright infringement, defamation, data privacy, and other legal issues.
This CNBC article reveals that OpenAI, the mastermind behind ChatGPT, is now in the Federal Trade Commission‘s (FTC) crosshairs. The FTC is digging deep, questioning whether OpenAI has overstepped the boundaries of consumer protection laws. The focus is whether OpenAI has been playing fast and loose with privacy or data security practices, or if it has been engaging in practices that could harm consumers, including damaging their reputation.
This investigation is part of a more substantial, complex puzzle – understanding the far-reaching implications of artificial intelligence, particularly generative AI, which feeds on colossal datasets to learn. The FTC and other agencies are flexing their legal muscles, reminding everyone they have the authority to chase down any harm birthed by AI.
The FTC’s Civil Investigative Demand (CID) is demanding answers from OpenAI. They want a list of third parties with access to its large language models, the names of their top ten customers or licensors, and an explanation of how they handle consumer information. The CID also asks for a detailed account of how OpenAI sources information to train their models, evaluate risk, and monitor and handle potentially misleading or damaging statements about individuals.
This investigation is a glaring sign of the intensifying regulatory scrutiny that AI companies face now. For AI companies, this is a wake-up call. They need to ensure their data privacy and security practices are rock-solid and that their operations are as transparent as glass. It’s also a reminder that they need to have their fingers on the pulse of the legal landscape and potential liabilities, especially as regulators are becoming more assertive in their oversight of this rapidly evolving technology.
To reduce risk, AI companies should consider conducting thorough audits of their data practices, implementing iron-clad data governance policies, and fostering open dialogues with regulators. They should also think about pouring resources into research and development to enhance the safety and alignment of their AI systems and be brutally honest about the limitations of their technology.
The CNBC article highlights the escalating legal showdowns in the wild frontier of generative AI. As AI technology evolves and proliferates, it’s sparking a wildfire of copyright infringement lawsuits. The heart of the matter is this: AI, with tools like OpenAI’s DALL-E and ChatGPT leading the charge, can whip up creative content – art, music, writing – that’s causing a stir among creators who fear their copyrighted work is being stolen without their say-so.
The legal battlefield is already teeming with action. Getty Images has thrown the gauntlet against Stability AI, accusing the company of swiping 12 million images without asking or paying a dime. Stability AI, DeviantArt, and Midjourney are also caught in the crossfire of a lawsuit that argues their use of AI tramples on the rights of millions of artists. Prisma Labs, the brains behind the Lensa app, is staring down a lawsuit alleging it unlawfully nabbed users’ biometric data. TikTok recently waved the white flag and settled a lawsuit with voice actress Bev Standing, who argued the company used her voice without her green light for its text-to-speech feature.
The article also points out a growing divide. While tech companies are singing the praises of generative AI, media companies and creators are sounding the alarm about their copyrighted work being hijacked. The legal skirmishes are heating up, and experts are betting their bottom dollar that more are on the horizon.
Regarding dodging risk, AI companies need to open their eyes to the potential legal fallout of their technology. They need to ensure they’re using large language models and text-to-image generators in a way that respects data protection laws. They should also think about cutting a check to human creators if their intellectual property is used in the development of AI-generative models, following in the footsteps of Shutterstock.
The article highlights the importance of AI companies staying on top of the shifting legal landscape and potential liabilities. As the use of AI continues to skyrocket, AI companies must understand and respect copyright laws and data protection regulations to sidestep potential legal landmines.
The reality is, AI is regulated. Here are just a few examples:
Unfair and deceptive trade practices laws apply to AI. At the FTC, section 5 jurisdiction extends to companies making, selling, or using AI.8 If a company makes a deceptive claim using (or about) AI, that company can be held accountable. If a company injures consumers in a way that satisfies our test for unfairness when using or releasing AI, that company can be held accountable.
Civil rights laws apply to AI. If you’re a creditor, look to the Equal Credit Opportunity Act. If you’re an employer, consider Title VII of the Civil Rights Act. If you’re a housing provider, look to the Fair Housing Act.
Tort and product liability laws apply to AI. There is no AI carve-out to product liability statutes, nor is there an AI carve-out to common law causes of action.
We’ve been representing new and emerging technology companies since 1992 when the new and emerging technology was the internet. We understand cloud, blockchain, and AI technologies, which allows us to provide expert representation to AI startups, software-as-a-service companies, platform-as-a-service companies, and emerging-growth artificial intelligence companies. Feel free to contact one of our AI lawyers to learn more. AI Attorney, Enrico Schaefer.
The AI industry is witnessing an era of unprecedented growth, presenting a plethora of opportunities for groundbreaking innovation. But as technology advances, so must the legal framework that surrounds it. AI website agreements – terms of use and privacy agreements – play an instrumental role in this context, tackling many complex issues, including data privacy, informed consent, data security, and intellectual property management. Hiring a lawyer who understands AI is critical because artificial intelligence technology creates special issues which most tech companies do not have to address.
This article delves into the challenges, underscores the value of detailed website agreements, and emphasizes the need for experienced legal counsel for AI companies. Together, these elements shield AI companies from potential liabilities and ensure regulatory compliance.
As AI companies proliferate, they face the imperative task of developing and implementing robust website agreements designed for AI companies. This includes AI as a service company, website apps, plug-ins, and browser extensions built with OpenAI’s API. Key website agreements typically include custom-drafted terms of use and custom privacy policies prepared after fully assessing your ai business model and risk tolerance. Along with effective attorneys who represent AI technology companies, these agreements act as a protective shield, securing AI firms from potential liability and ensuring adherence to the relevant laws and regulations.
Below are some key issues that a comprehensive website agreement should cover:
Strict data privacy laws such as the EU’s General Data Protection Regulation (GDPR) and the California Consumer Privacy Act (CCPA) demand AI companies be fully transparent about their data collection, usage, and security practices. This process involves informing users and getting their consent before collecting and processing their data.
A well-drafted privacy policy provides:
AI companies must deal with the challenges posed by intellectual property (IP) within their website agreements. The uncertain legal landscape surrounding AI-generated content and user-generated content for data sets calls for caution to minimize the risk of infringement claims.
An effective terms of use agreement should include:
Given the complex legal landscape surrounding AI, it’s paramount for AI companies to engage seasoned legal counsel, ensuring their website agreements are comprehensive, up-to-date, and adhere to all applicable laws and regulations.
Working with expert legal counsel offers:
Engaging expert legal counsel ensures your website agreements for AI companies evolve with the changing legal landscape, helping maintain compliance and mitigate legal risks.
In the rapidly evolving world of AI, staying compliant means staying informed. Our firm is committed to staying on the cutting edge of legal developments about AI, GDPR, CCPA, data privacy, and intellectual property. We are also involved in ongoing professional development, ensuring we have the most current knowledge to provide you with the best possible advice. This constant engagement with the legal and AI community means we are well-equipped to advise you on the latest laws and regulations, and we can proactively update your website agreements as necessary.
Don’t leave your AI company exposed to legal risks. Get in touch with us today. Let us guide you through the complexities of website agreements, informed consent, data privacy, and intellectual property. We’ll help you navigate the legal landscape with confidence and peace of mind. Let’s work together to safeguard your interests and support your continued innovation and growth. Don’t wait until it’s too late, act now and ensure your AI company is legally protected. Click here to schedule your free consultation.
For AI companies, the legal landscape is complex and rapidly evolving. Staying ahead of the curve means being proactive. This includes drafting robust website agreements to cover data privacy, intellectual property, and informed consent issues. Experienced legal counsel can guide AI companies through this challenging terrain, providing tailored advice, conducting risk assessments, and ensuring compliance with relevant laws and regulations.
Our firm specializes in AI and technology law. We understand the unique challenges in your field, and our expertise is focused on providing personalized legal advice, conducting risk assessments, and helping draft and revise website agreements for AI companies. Our goal is to help AI companies establish a solid legal foundation, enabling them to navigate the evolving legal landscape with confidence. Don’t leave your AI company exposed to legal risks; reach out to us and learn how we can help safeguard your interests and support your continued innovation and growth.
Because of the rapid adoption of AI and especially OpenAI‘s chatGPT tools, companies are finding themselves on the wrong end of inadvertently disclosing proprietary information. ChatGPT so enamors employees that they engage with the free version or even chatGPT Plus without enabling data privacy options. You can watch this video about ensuring data privacy for AI usage on a corporate level. AI tools will find their way onto your employees’ computers and devices. Developing an artificial intelligence use policy and training on AI best practices will be critical for your company’s long-term success. An AI usage policy is step one for every organization whose employees use AI or want to develop AI solutions. Every company needs an AI use policy for its corporate governance and fiduciary obligations.
BONUS- We are Providing an AI AUP Example Template / Generative Artificial Intelligence Policy at the end of this article! [ai use policy, ai acceptable use policy, ai usage policy, artificial intelligence policy] Contact one of our AI lawyers today for specialized legal guidance on your company's AI policies and implementation of an approach that ensures your private and proprietary data remains secure and does not become part of an AI training model's LLM.
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In utilizing GPT models in the workplace, employees must understand the significance of the data they input into these systems. It’s important to avoid entering personal details, such as social security or credit card numbers, of themselves or clients. The same caution applies to proprietary information to maintain confidentiality. It’s also crucial to remember that data entered into GPT models might be stored and processed in ways that are beyond the company’s immediate oversight and could potentially be accessed by external entities. Therefore, it’s necessary to have training programs on data privacy, as well as systems for monitoring and auditing the use of GPT models. Employees are required to report any suspicions of data privacy violations. Non-compliance with these guidelines can lead to severe repercussions, including disciplinary measures and potential legal proceedings. By being aware of and prioritizing data privacy issues, employees can use GPT models responsibly, protecting sensitive data and the company’s reputation.
Third-party applications are being built on the OpenAI API, which may or may not have data privacy rules that are the same as OpenAI. All of this leads to one conclusion. Every company needs to have an AI usage policy for employees. This AI Usage policy can go into your employee handbook or be developed as a separate employee policy.
When drafting an AI-acceptable use policy or manual, you must ensure that no AI tools are used without the company’s knowledge and permission. The company must ensure that all employees use paid versions of chat GPT and select the correct data privacy options OpenAI offers. Companies can also use the OpenAI API secret key to enhance data privacy, control employee data usage, and monitor the usage of their employees. Employees need to be trained on chat GPT data security and privacy issues so they know how to navigate various tools out there. AI governance is a mandatory part of the overall governance policies, which must be implemented by company executives, founders, managers, and directors.
If your company’s employees are using AI tools but not developing them, the AI use policy can be streamlined to focus more on usage, ethical considerations, data handling, and security. As innovative lawyers with expertise in technology company representation and IP law, Traverse Legal understands the importance of incorporating a well-defined Acceptable Use Policy (AUP) for employee AI usage within an organization. We can help your company develop and implement AUP for AI use. Every company needs an AI use policy which a lawyer with expertise in artificial intelligence systems and machine learning reviews.
Reach out to our AI legal experts today. Get tailored advice on formulating AI policies that secure your company’s private data and prevent its incorporation into AI training models’ LLM.
An AUP is a set of guidelines and rules agreed upon between an employer and their employees that outlines how an organization’s technology resources can be used. Regarding AI usage, several critical areas need to be addressed in any AUP. Each company is different, and each AUP needs to address the company’s specific risk tolerance, implementation resources, and proprietary information.
Boilerplate AI policies are an excellent start to start discussions. However, customization and attorney review are critical. As AI usage evolves, the policy must also be updated. AI use policies are working documents that should grow with your company. Here are some essential items that every AUP for AI should address:
This employee AI policy emphasizes the user side of AI more, highlighting ethical application, data governance, and security. It’s still crucial to consult with various stakeholders and potential legal counsel to ensure the policy is comprehensive and compliant with all relevant laws and regulations.
See below for Sample AUP.
We Have AI AUP Solutions For Every Size of Company
Your workforce may already be harnessing the power of AI. However, are they in alignment with your business policies and safeguarding the privacy of your company and clients? It is imperative for every organization to have an attorney-approved Acceptable Use Policy (AUP) for AI utilization. But beyond policy, regular AI training, ChatGPT classes and certificaiton of AI-proficiency is vital to ensure safe and effective use of AI tools. Traverse Legal offers a premier, industry-leading solution tailored to your company’s unique needs. Our commitment is to bolster your AI usage while minimizing risk, thereby helping you navigate the complexities of modern technology safely and proficiently.
AI Attorney Enrico Schaefer
1-8 Employees
9-20 Employees
>20 Employees
We have developed an interactive template for an Employee Acceptable Use Policy for AI usage. With your ChatGPT account, you can conveniently interact with and modify this template to suit your organization’s needs.
Access the template using the following link: [Link to the Interactive Template]
Important Note: While the template provides a helpful starting point, we strongly recommend having your AI attorney review any policy before implementation. Every organization has unique requirements, and legal expertise ensures compliance with applicable laws and regulations.
Feel free to explore and customize the template according to your organization’s AI usage policies. It provides a solid foundation for addressing acceptable AI usage by employees.
Remember, a thorough review by your AI attorney will ensure that the policy aligns with your specific legal obligations. By working together, we can develop a robust Employee Acceptable Use Policy that promotes responsible and ethical AI utilization within your organization.”
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I’m a tech lawyer specializing in tech company representation. And yes, I also represent AI companies. I understand the technology. I don’t know many lawyers using AI more aggressively in their legal practice than I am today. I may be the only lawyer who has developed and launched innovative AI tools for our clients.
AI is coming for everyone. No one is safe, not even the lawyers. Some lawyers are going to be obsoleted by AI. The brightest lawyers will learn how to use the best AI tools and deliver better legal services to their clients in less time. AI will allow you to spend more time helping your clients build their businesses and make better strategic decisions. AI can allow lawyers to spend more time doing higher-level, more strategic work.
AI can and will 10X your legal abilities, but only if you know what tools to use and how to use them. I did a video recently about how lawyers can power up their AI game, and that video is linked in the description, and it blew up.
It turns out there are a lot of lawyers out there who want to learn more about AI and use AI in their practice today. I have a unique perspective and expertise, and I’m here to help you identify the right tools for your legal practice and to train you on those tools. Stick with me, and you will be in the top 1% of lawyers using AI to win for your clients and your law firm today. In the coming weeks, I will be sharing in-depth, step-by-step instructions on leveraging the best AI has to offer.
I am a GPT plus user. $20 a month. This helps me get privacy data privacy due to my use and gets me faster responses. You’re going to see it in a minute. We also use the API. That’s very important to maximize your privacy. To understand these settings, you can go here, data controls. You can clear your chat history, which will preclude them from using it as part of a training model. If you are concerned about inputting information into ChatGPT, go to this new tool here and say toggle this off; you do not want to save new chats or your history. You do not want to allow chat GPT to use your chat prompts and answers as part of training for power users to register with Openai.com and get an account with OpenAI. Learn how to Use ChatGPT today or your may be left behind.
The OpenAI account will allow you to get an API, which you will use for all the other tools we will be talking about. So you must have an OpenAI account. You must have a secret key. We will visit the API keys page to retrieve our secret key. You can get them quickly. You’re just going to pay for all tokens used through the API. It’s super cheap, almost nothing. This will allow you not only to plug into all these great tools. I’m going to show you your account settings here. You’re going to manage your account. You’re going to view your API keys. You’re going to invite team members. If you’re a company, you need a single login.
You will invite all the people on your team, employees or executives, to use the single account that’ll be paid for all the tokens paid for by the company. You want to control the use of the API keys. You want to ensure everyone in your company operates through the API for data privacy. Your members in your organization will have access to the API key. You’re going to set up your billing so that it can charge you and set up your payment method. You can get either through here, your API keys, or the sidebar. I will block this so you can’t see these secret keys. You want to keep these keys extremely secret. Do not let anyone else know what they are, all right? You can create a new secret key by clicking this button here and testing.
My favorite tool thus far is the ChatGPT sidebar for GPT Plus users, meaning you have to be a $ 20-a-month user of Chat GPT, which you do. Here is my plan. I’m already upgraded, but if you weren’t, you can manage your subscriptions and go ahead and put in your credit card.
If you are a ChatGPT Plus subscriber, you can download this sidebar. It will be an extension on your Chrome browser, and you will see it here. See where it is? Chat cheap sidebar. You want to pin that so that it’s always up here. Now, what can you do with the Chat GPT sidebar? The answer is lots of different things.
GPT Cybar has a new feature for PDF analysis, and Chat PDF is an all-in-one tool that allows AI to read and summarize documents. It can answer specific questions about the document, such as what orders were not complied with, and save attorneys significant time. This could be incredibly useful for attorneys, and Enrico, a technology attorney, provides training on the best AI tools for lawyers. He is helping to power up law practices by providing insight into the best AI tools available. Subscribers are encouraged to review previous videos and stay tuned for more reviews of AI tools in the coming months.
The influencing game of brand endorsements is one of many examples where technology goes faster than the government’s ability to regulate and enforce. It is hard to estimate the compliance level of influencers and celebrities with Part 255 of the FTC endorsement regulations. Celebrities and influencers who provide endorsements for a living are more likely to comply with Part 255. Brands are more likely to require disclosures in their influencing and endorsement contracts. Agencies that represent brands and celebrities are more likely to be aware of the regulatory requirements of the endorsement. I would argue that most endorsements occur outside the professional influencing environment and that over 98% of endorsements, as defined by the FTC, do not comply with the disclosure requirements. In the world of social media, everyone’s got an angle. Very few of those angles are disclosed, even if the person endorsing a product or service has a horse in the race.
The FTC is aware of this problem, which was recently highlighted in the FTX Meltdown, and the undisclosed material connections across crypto and NFT projects. While some may argue too little too late, the FTC has been engaged in rulemaking and has proposed updates to its Part 255 endorsement regulations.
The Federal Trade Commission (FTC) will likely modify Part 255 regarding using endorsements and testimonials in advertising in 2023. The revisions accentuate the necessity of disclosing material connections between endorsers and advertisers and the need for clear and conspicuous disclosure. These long overdue updates also necessitate endorsers to provide honest opinions and for the endorser to possess the qualifications and expertise they claim to have. These updates emphasize and enhance the principle that organizations and social media influencers must follow basic disclosure, honesty, and substantiation guidelines. Additionally, the FTC seeks to strengthen the core compliance incentive; endorsers and advertisers can be held liable for false or misleading endorsements or for disclosing material connections. Interestingly, the update for the first time, adds incentives that encourage technology platforms such as Twitter, Facebook, TikTok, and YouTube to develop tools to facilitate endorsers’ compliance with disclosure requirements and recordkeeping to substantiate any claims.
Advertisers and endorsers must clearly disclose any material connections that may affect the endorsement’s credibility. This includes personal, family, and employment relationships or financial incentives such as payments, discounts, or free products. The proposed update emphasizes the importance of disclosing any material connections between advertisers and endorsers. A material connection is any relationship that could potentially affect the credibility of an endorsement. Examples include personal, family, or employment relationships and financial incentives like payments, discounts, or free products. The goal of disclosing these connections is to provide transparency to consumers so they can make informed decisions about the products or services being endorsed.
One issue that the industry continues to grapple with is how to make the disclosure of a material connection when it would not otherwise be obvious to the consumer. We have seen on Twitter, Facebook, TikTok, and YouTube various schemes to include hashtags and other easy to implement disclosures. There is still no industry standard on how and where to make the material disclosure. Regardless, the FTC understands that these disclosures need to be more prominent and that social media platforms need to participate in the disclosure requirement.
Disclosures must be clear and conspicuous to ensure consumers can quickly notice and understand them. The FTC advises against using ambiguous language, small font sizes, or placing disclosures in areas that consumers might overlook. Disclosures of material connections must be clear and conspicuous to ensure that consumers can quickly notice and understand them. Advertisers and endorsers should avoid using ambiguous language, small font sizes, or placing disclosures in areas consumers might overlook (e.g., in footnotes or at the end of a video). The proposed update encourages using clear, easy-to-understand language and prominent placement of disclosures to improve consumer understanding.
Another area where brands, agencies, and endorsers get in trouble is on the issue of honesty. A celebrity or influencer can’t just decide to endorse a product or service because they’re getting paid for it. They must honestly believe in their endorsement. While this is a difficult thing to measure, we have certainly seen instances where influencers fail to use the product and service sufficiently prior to agreeing on a paid endorsement.
Endorsers must provide honest opinions, findings, or experiences in their endorsements. Advertisers cannot instruct endorsers to make false or misleading statements and must have procedures to monitor endorsers’ compliance. The proposed update requires endorsers to provide their honest opinions, findings, or experiences in their endorsements. Advertisers should not instruct endorsers to make false or misleading statements about a product or service. Additionally, advertisers must have procedures in place to monitor endorsers’ compliance with the requirement for honesty, ensuring the integrity of the endorsement.
With the FTC meltdown, we saw endorsers pitching FTC’s services to highly qualified investors. It is unclear exactly where the line is between an expert endorser and a non-expert, but we should expect the FTC to define this issue in upcoming enforcement proceedings. If you are an influencer, brand, or agency, you need to be sensitive to the issue of expert endorsements. If the influencer has special training or knowledge concerning the market niche in which the product or service is being endorsed, it is possible they will be considered an expert and held to a higher standard.
Experts endorsing a product or service must possess the qualifications and expertise they claim to have. Additionally, their endorsements must be based on a thorough and objective product or service evaluation. When experts endorse a product or service, they must possess the qualifications and expertise they claim to have. The proposed update aims to prevent misleading expert endorsements by ensuring experts have relevant credentials and experience. Furthermore, expert endorsements must be based on a thorough and objective product or service evaluation rather than merely personal preferences or opinions.
Advertisers must not use misleading testimonials. If they use consumer testimonials that claim specific results, they must be able to substantiate those results and disclose what a typical consumer can expect. Advertisers must avoid using misleading consumer testimonials in their advertisements. If consumer testimonials claim specific results, the advertiser must be able to substantiate those results with evidence. Additionally, the advertiser should clearly disclose what a typical consumer can expect from the product or service rather than implying that the testimonial results are universally achievable.
Organizations endorsing a product or service must follow the same disclosure, honesty, and substantiation guidelines as individual endorsers. Organizations, like individual endorsers, must follow the same guidelines for disclosure, honesty, and substantiation when endorsing a product or service. This means that organizations must disclose any material connections with advertisers, provide honest endorsements based on objective evaluations, and ensure that any claims made can be substantiated with evidence.
Both advertisers and endorsers can be held liable for false or misleading endorsements or for failing to disclose material connections. The proposed update clarifies that advertisers and endorsers can be held liable for false or misleading endorsements and for failing to disclose material connections. This shared liability encourages advertisers and endorsers to ensure compliance with the guidelines and fosters higher transparency and consumer protection in advertising. These updates aim to maintain transparency and consumer protection in advertising by ensuring that endorsements and testimonials are honest, clear, and not misleading.
Here are the essential changes in the proposed changes to Part 255 regulations for advertisers, brands, agencies, and influencers to consider.
The proposed update highlights the importance of disclosing unexpected material connections that are not readily apparent to consumers. For example, if an endorser has a family member who works for the advertiser or receives a commission on sales generated by their endorsement, they should disclose this information.
The update clarifies that endorsers should disclose their use of affiliate links, which provide them with a commission or other financial incentives when consumers click on the link and purchase. This helps consumers understand the potential influence of financial incentives on the endorsement.
The proposed update underscores the need for social media influencers to disclose material connections with advertisers. This includes sponsored posts, brand partnerships, and other relationships that could affect the credibility of their endorsements.
Endorsements by minors require special considerations. Since minors cannot understand the nature of their endorsement or material connection, the responsibility for disclosure falls on the advertiser.
Currently, technology and social media platforms can’t be sued for Part 255 violations. With the proposed update, social media sites and influencer networks are incentivized to develop tools and features that facilitate endorsers’ compliance with disclosure requirements.
The update emphasizes the importance of advertisers maintaining records to substantiate any claims made in endorsements or testimonials. This includes data on typical consumer results, as well as evidence supporting any specific results claimed in consumer testimonials.
There is no “safe harbor” for advertisers and endorsers who do not comply with the endorsement guides. It is important for brands and celebrities to understand that advertisers and endorsers cannot avoid liability by simply arguing that they were unaware of the rules or that their violations were unintentional.
I am an AI attorney representing AI companies. You are wondering what legal issues AI companies might face. I have developed a list of critical legal issues that all AI companies should consider before launching service-based software. Watch the video below, or read the article that follows.
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In the video above titled “Critical Legal Issues Facing AI and Machine Learning Companies,” our AI attorneys outline the key legal considerations that AI companies must navigate before launching service-based software. These include securing intellectual property rights, understanding liability and responsibility, addressing potential biases and discrimination, and complying with complex regulations and standards. From copyright infringement lawsuits to ethical dilemmas and regulatory compliance, the video provides a comprehensive overview of the legal landscape that shapes the AI and machine learning industry, emphasizing the need for transparency, accountability, and ethical development. Here is s summary of the topics covered in this video.
Consideration should be given to securing intellectual property rights such as patents, trademarks, copyrights, or trade secrets for any AI algorithm or software developed. Companies’ data set to build their platform might be copyright protected. We are already seeing copying infringement lawsuits against AI companies based on the data they have included in their learning models.
Companies must also be aware of data protection laws and ensure compliance with data privacy regulations, including the GDPR or CCPA, especially where personal data is being processed. An AI usage policy must address security and privacy issues specific to your organization.
AI systems can cause harm, and therefore companies should consider the potential risks involved, including any harm that may result from an artificial intelligence system’s failure or misuse. Companies must consider legal responsibility for any harm or damage caused by their AI software, and insurance policies should be implemented to cover any potential liability. Every company which uses AI faces legal and liability risks that can be minimized with an AI use policy that evolves as your AI systems and processes evolve.
AI systems can perpetuate biases and discrimination if not developed unbiasedly.
The AI industry is already facing several ethical issues, including bias in the development of algorithms, privacy concerns, the potential for abuse by malicious actors and states, and transparency around how AI systems make decisions.
To address these issues, companies should take steps to understand and mitigate their biases during development. They should also consider what data they use for training purposes and whether ethical standards have collected it. Finally, companies must ensure clear policies around how their AI systems use personal information and what privacy protections are required by law.
AI companies must consider the regulatory landscape and ensure compliance with all relevant regulations and standards, including industry-specific regulations and standards such as those governing medical devices or financial services.
Companies must ensure their AI systems are transparent, explainable, and accountable, especially when making decisions affecting individuals or groups.
The development of artificial intelligence systems can be constrained by legal requirements that apply to an AI system’s design, development, deployment, and operation. These laws may require a company to obtain specific permissions before deploying an AI system; they may impose restrictions on how an AI system can be used or require companies to take steps to protect individuals’ privacy or other rights.
In the evolving field of AI-as-a-service, legal considerations take center stage, particularly when it comes to drafting AI-specific website agreements. Tailoring terms of service and privacy agreements to the unique characteristics and challenges of AI is not just a legal necessity but a strategic imperative. These agreements must reflect the dynamic nature of AI, addressing specific concerns such as data usage, algorithm transparency, potential biases, liability, and privacy protections. By crafting AI-specific agreements, artificial intelligence and machine learning service and platform companies not only ensure legal compliance and legal risk reduction, but also build trust and transparency with users.
Together, these AI-specific agreements form the legal foundation of the relationship between AI-as-a-service companies and their users, addressing the unique challenges posed by AI technology and ensuring a transparent, responsible, and legally compliant operation.
An AI usage policy is an essential document that guides how artificial intelligence (AI) technology is to be used within an organization. This policy outlines the rules, responsibilities, and ethical guidelines to ensure that AI is used to align with the organization’s values, legal obligations, and business goals. An AI usage policy is step one for every organization whose employees use AI or want to develop AI solutions. Every company needs an AI use policy for its corporate governance and fiduciary obligations.
An AI usage policy is not merely a regulatory compliance document but a roadmap for the responsible and strategic use of AI within an organization. Regardless of its size or industry, every company that is engaged in or planning to engage in AI-related activities must have a robust AI usage policy. Such a policy protects the organization’s legal interests, fosters innovation, ensures ethical conduct, and helps fulfill corporate governance and fiduciary obligations.
By providing clarity and direction, an AI usage policy empowers organizations to leverage AI’s immense potential while managing the associated risks and responsibilities.
This is a primer on GDPR compliance (General Data Protection Regulation). I will cover some definitions, practical considerations, and background you need to know as you navigate your world.
Every employee and department in your SaaS company interacts with different personal data and vendors with which you share personal data. If you’re in the web development department, you’re gonna have a set of specific issues. If you’re doing application development, another set of issues. You will have different issues if you’re involved in prospecting or customer relations management.
In this video (below), we will cover the general things every software as a service (SaaS) company needs to be aware of to increase and improve our compliance and security of personal data.
I will first go through some key definitions: personal data, sensitive personal data—and then some practical considerations: monitoring cookies; using consent mechanisms; using encryption; and finally, some background information: privacy by design and by default; breach notification; accountability, and governance.
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The GDPR has created data privacy rights for all EU citizens and others in the EU to own and control their own personal data. If personal data is captured, stored, or processed by one of your systems, and you have users or customers in the EU, you must meet your GDPR obligation. So what is personal data?
Personal data is a broad category of data that will identify a real person, the data subject. Any data that will identify a real person: an email address, phone number, physical address, and IP address is personal data. If information involves the identity as a physical person by any means (including location), it is personal data.
Some questions you want to consider:
Do I have access to personal information?
Do our partner data processors have access to personal information?
A data processor under the GDPR is a person or a company that processes personal data on behalf of the controller (see definition below).
Processing means an operation or set of operations performed on personal data. It’s basically anything uploading, storing, recording, collecting, organizing, adapting, altering, retrieving, and using personal information. So data processor means anyone who does anything with personal data.
Controller means the person or company which determines the purpose and means of processing personal data. The controller has different obligations than the processors. The controller, the data processor, and the sub-processor must ensure they protect that personal data. They know where that data lives. They can account for that data. They’re identifying and telling you who it’s being shared with. So as a software-as-a-service business, you are a controller when you decide the purposes and means of the process. And you’re a processor when you act under the customer’s instructions.
A sub-processor is a third-party data processor engaged by the data processors with the approval of the data controller, which has or will have access to or process personal data. If you have a vendor, which processes personal data, that vendor would be a sub-processor.
When dealing with personal data, you have to comply with GDPR, which means you have contracts with everyone upstream and downstream who are GDPR compliant, which sets forth all of their rights. The General Data Protection Regulation (GDPR) is a new set of rules designed to protect the privacy of European citizens. It gives individuals eight rights regarding their private information. These rights apply to any data a controller collects, whether a person or an organization.
Information about these rights must be provided by the controller before any data collection takes place. This means that theaters must let their users know they’re collecting personal information and give them information about these rights.
GDPR data rights involve the right to be informed who has your data, access it, have it corrected if there’s a problem, erase it, have all of your personal data erased when you want it erased, know where that specific person’s data lives and export it so you can take it with you, object and prevent processing that is likely to cause damage or distress.
Data privacy compliance is a key part of GDPR compliance and an area you can’t overlook. To provide these rights to individuals, you must know who has the data. Data processors need to sign data processing agreements (DPA) with the data controllers they work with. The DPA should contain a description of the adequate safeguards that are put in place for the processing. Drafting and implementing a DPA will help ensure that you’re compliant with GDPR and that any third parties you are dealing with are also compliant.
Non-fungible tokens, or NFTs, have become increasingly popular in recent years. As a result, the number of NFT-related thefts has risen as well. One standard method that scammers use to steal NFTs is by sending a link to a user that, when clicked, compromises the user’s wallet and allows the thief to transfer the valuable NFT to their own account. The thief can then quickly resell the NFT to an innocent third party, making a profit while the original owner is left empty-handed.
The NFT market exploded in 2022, and it seemed like OpenSea was spending more time focused on its own growth and investor relations than on protecting its customers. For many platforms, the priority is growth rather than customer service. This means platforms like OpenSea fail to properly train customer service teams, which can lead to many horror stories by users who not only got scammed by a third party but then got run over by OpenSea’s refusal or failure to provide any assistance. In some cases, the inept assistance provided by OpenSea makes the problem drastically worse. Stories by platform users wherein a response by OpenSea takes days, weeks, or months are all too common.
While users are responsible for avoiding clicking on malicious links, even experienced blockchain technicians and NFT traders are getting scammed. This highlights the need for platforms like OpenSea—one of the largest NFT marketplaces—to take greater responsibility for protecting users.
Many people believe that OpenSea could be doing more to prevent the transfer or sale of stolen NFTs. Some users are calling for stricter verification processes and more stringent security measures to be put in place. As the NFT market grows, platforms like OpenSea must take the necessary steps to protect their users and maintain the market’s integrity. Ultimately, the responsibility falls on both the platform and the users to ensure the security of their assets, but platforms like OpenSea must take proactive measures to prevent the theft and sale of stolen NFTs.
One of Traverse legal’s clients is pursuing litigation and/or arbitration against OpenSea for an inexplicable series of events created by its lack of response or inept response to one such NFT theft. OpenSea employees were trying to extort the platform used for a de facto ‘release of liability’ in exchange for regaining control of his account and dozens of his NFTs.
You can read the sequence of events below.
Let us know what you think.
Summary: (full article below) The first issue that AI companies need to address early is that they are operating in a SaaS environment. AI companies typically do not provide a license to download or use their software. Users don’t need a license since they don’t download the AI engine, database, or software. Instead, subscribers access AI software, which is controlled and hosted on the company’s servers.
AI projects must consider the second issue of identifying and protecting their IP – trade secrets, trademarks, and copyrights. If your AI project uses someone else’s AI engine, ensure they are indemnifying you against copyright issues based on the data set they created for their AI algorithm.
View the video or read the article below for more information.
The number of technology businesses being created on top of these AI databases daily is staggering. Here are the two biggest issues that these new AI companies need to address.
The first legal issue involves the upstream and downstream software-as-service terms. A SaaS agreement is not a license agreement. Users don’t download your software to use a software-based cloud service. Subscribers access the software through a website, API, plugin, or mobile app, which the software owner controls and is hosted on the software owner’s servers. There are two SaaS agreements you need to consider.
The first is the upstream Service agreement with any provider of AI database and LLM services. Most new artificial intelligence and machine learning companies are connecting to a third-party AI engine to build something new on top of that engine. OpenAI allows companies to use its engine through an API to commercialize the service. When you connect to a third-party API (such as OpenAi offers), you connect to their service under their SaaS contract. You need to have your AI lawyer review the SaaS terms and use policies to ensure your AI company can comply with the terms, that those service terms are fair, and that you are reducing your legal risk as much as possible.
All subscription-based AI projects must have a solid software as a service agreement. The second AI projects need to do is you need to make sure they identify and protect their IP – trade secrets, trademarks, and copyrights. If your AI project uses someone else’s AI engine, ensure they are indemnifying you against any copyright issues they may encounter based on the data set they created for their AI algorithm.
We are seeing more lawsuits filed by copyright owners against AI projects alleging that the AI project used copyright-protected text or images when creating their database. An increase in AI litigation is expected. It will take decades for courts to figure out how to apply the law to IAI issues and projects.
Every AI subscription service needs to do an IP audit, develop an IP protection strategy, review any upstream software as a service agreement, and draft a SaaS for subscribers. While there are certainly more legal issues to tackle and legal projects for your AI attorneys to manage, these issues must be addressed before your project launch.
Planning and drafting an enforceable SaaS agreement takes a skilled business and technology-savvy attorney. Every time you release a new update, those changes or additions should be reviewed, notice provided by users, and affirmative assent by those subscribers.
