Using gen AI tools for business?

The devil is in the T&Cs

To assist businesses to make informed decisions about which AI tools to use and for what purposes, we have conducted an in-depth analysis of the terms and conditions (T&Cs) applicable to a range of commonly used, off-the-shelf generative AI tools from an intellectual property perspective.

In this article, we set out the key themes that emerged from our analysis and recommend ways to mitigate IP risk when using generative AI tools.

Key takeaways

• While most AI providers now indemnify their users against losses arising from third-party IP infringements, those indemnities are generally only made available to users of paid versions of AI tools-and are subject to several important exclusions.

• All of the T&Cs we reviewed contain strict limitations on the AI provider's liability-including, in some cases, even in relation to its IP indemnity obligations-meaning a user may have little potential recourse against a provider for losses resulting from the use of the AI tool.

• Some, but not all, of the T&Cs acknowledge that the user and not the AI provider owns the IP rights in the outputs generated by the user using the AI tool, but there is not always an assignment provision giving effect to this. Further, as a matter of current Australian law, IP rights may not subsist in such outputs in the first place.

• Users grant broad, permissive IP licences to AI providers to use both user inputs and outputs, for extensive purposes. In many cases, users are also required to provide IP warranties and indemnities in favour of AI providers regarding such use of inputs. Therefore, careful consideration will need to be given to how users can mitigate the risks of breaching confidentiality, waiving privilege and infringing third-party IP rights in relation to the use of such materials.

• The T&Cs for many AI products are governed by laws in the US or Ireland, and also require disputes to be resolved in those jurisdictions, making the enforcement of rights by Australian users against AI providers potentially onerous.