In the past, Artificial Intelligence was a concept used only by tech giants and in sci-fi movies. Now, it has become a real and powerful tool used by businesses of all sizes across all industries.
AI offers great efficiency for business owners and managers. Whether you need to automate customer service, improve your hiring processes or create marketing content, AI can help you streamline procedures with impactful results. But with these advantages come legal issues to be aware of that can easily be avoided with the right tools.
Here are five things business owners should know when incorporating AI:
1. UNDERSTAND YOUR DATA AND WHERE IT COMES FROM
AI runs on data, so knowing where that data originates from matters. If you want to use customer data with an AI tool, make sure to review regional and state privacy laws first.
Practical Tip: Review and update your privacy policies to disclose AI usage. Always get user consent when necessary and avoid using sensitive data without proper security in place.
2. DON’T ONLY RELY ON AI OUTPUTS
AI can make predictions, draft documents or provide analytics, but we know it’s not perfect. Remember the old saying, “If it sounds too good to be true, it probably is.” Don’t rely too much on AI-generated content without review by your team or yourself. This review could save you from liability if the information turns out to be incorrect or discriminatory.
Practical Tip: Build a content review into your processes. Think of AI as an assistant, not a manager. Keep key people in the loop, especially in vital areas like employment decisions or legal compliance.
3. BE AWARE OF IP INFRINGEMENT RISKS
Most AI tools use online content to generate requested results. That means that AI-created images, articles or branding materials may inadvertently violate copyright laws.
Practical Tip: Use AI that features licensing of content, or that includes indemnity provisions. When you’re unsure, have legal counsel review the content for potential infringement, publishing only when it’s been cleared.
4. VENDOR CONTRACTS MATTER MORE THAN EVER
Yours is not the only business using AI tools. Your partners and vendors are too. Before signing or sending out a contract to a partner or vendor, ensure that you read the fine print. It’s critical to understand who owns the data created, how it’s stored and what happens in case of a breach or technical error.
Practical Tip: Make sure any contract you sign defines liability, clarifies data ownership, and offers alternatives if the AI tool fails. Push back on vague terms like indemnity and limitation of liability.
5. BE TRANSPARENT WITH CLIENTS AND EMPLOYEES
AI is still new territory for all businesses. Whether it’s a chat function on your website or a new system to screen résumés, being transparent about AI usage can help build trust and reduce the risk of damaging your reputation or legal complaints.
Practical Tip: Disclose AI use clearly in your public materials and employee manuals. If you’re using AI to analyze employee performance or communications, make sure they comply with monitoring laws and labor regulations.
AI may be an incredibly powerful tool, but it’s not a legal free-for-all. Laws are catching up quickly, and businesses that are proactive now will be better protected down the road.
Consult with an attorney who understands both the technology and the regulatory landscape whenever you’re using AI-based technology for your business.
Jennifer L. Braster is a founding partner of Naylor & Braster, a Las Vegas-based litigation firm that advises businesses on commercial disputes, compliance and risk management.
