Artificial intelligence (AI) is transforming business operations worldwide. As AI becomes more integral to commercial products, your business needs to navigate a range of complex legal and ethical issues.
In this guide, we’ll explore some common legal considerations for AI integration to help you understand which legal areas and documents using AI can impact.
The use of AI in your products can be extremely high-risk. For specific legal advice on this topic, contact our commercial solicitors.
Contents:
Is there an AI regulatory framework in the UK?
Unlike the EU AI Act that came into force on 1 August 2024, the UK doesn’t yet have a single comprehensive law dedicated exclusively to AI. However, existing UK legislation and regulatory frameworks can address different aspects of AI implementation. The current government is exploring future AI regulation, so you should watch this space closely.
A few common legal issues that arise when integrating AI into your products include:
- AI and privacy issues: AI can process huge volumes of data, raising significant data protection concerns. Under the UK General Data Protection Regulation (UK GDPR), transparency, fairness, and accountability are required when handling personal information, giving rise to various rules when sharing personal data with AI tools.
- AI and intellectual property issues: The generation of new outputs and content by AI raises complex questions about ownership. Intellectual property (IP) laws in the UK apply to AI-generated content. However, determining protection eligibility and ownership can be challenging.
- AI and consumer protection: AI in consumer products introduces concerns related to safety, accountability, and bias. The Consumer Rights Act 2015 means that businesses provide accurate product information to consumers. Consumers need to be able to make informed decisions and seek redress for faulty AI products.
- AI and accuracy: The accuracy of AI-generated outputs is crucial to avoid problems such as misrepresentation and negligence. Liability concerns can arise from the multiple parties involved in AI systems, making it vital to verify the outputs of generative AI tools thoroughly.
- AI and contracts: When purchasing AI tools or products, you must address specific contractual considerations to safeguard your business. For instance, IP protection and indemnities, warranties regarding data quality and output and apportioning liability.
Using AI in your products
AI technology can be integrated into your business in various ways at different levels, each with its own legal considerations.
Here are some key ways your business could use AI:
- Level 1 – Use of free AI services: Free AI services can be attractive for businesses looking to leverage AI without significant costs. For instance, using tools like ChatGPT to create content may seem cost-effective, but carries risks. Sensitive data could be inadvertently leaked to AI tools by your staff, and reliance on inaccurate information can lead to costly mistakes for your teams.
- Level 2 – Buying stand-alone third-party AI services: Purchasing AI services from third-party providers is increasingly common, but it introduces more legal challenges. IP issues related to input data and AI-generated content must be addressed, along with the apportioning of liability.
- Level 3 – Integrating AI into your own products: Integrating AI directly into your products can be high risk and presents many legal issues, including risk management, IP rights, and product liability concerns. These challenges are particularly relevant when customers use your products with embedded AI technologies independently.
Key legal considerations for different levels of AI use
As you consider integrating AI at various levels, navigating the legal issues effectively is crucial.
Here are some key issues your business may need to consider for each level of AI integration:
| Consideration | Level 1: Free AI services | Level 2: Third-party AI services | Level 3: AI integration into products |
| Data privacy and compliance | You should be mindful of UK GDPR compliance by limiting the personal data input into third-party AI systems. | Consider the risks around data sharing with AI suppliers including the need to enter UK GDPR-compliant contracts to address data protection issues and make sure you have carried out robust due diligence on third parties you are sharing personal data with. | Implement comprehensive data protection measures for this level of AI use, depending on how the products use personal data. This will include a range of considerations depending on the specific use of data and legal advice is essential. |
| Quality and accuracy | Evaluate the quality and accuracy of AI-generated content to avoid reputational risks from inaccuracies or biases. | Assess the reliability of AI outputs. You should include quality assurance clauses in contracts with third-party providers to manage risks. | Ensure the quality and safety of AI-generated outputs in your products, particularly where end customers will use them. |
| Intellectual property | Clarify ownership of AI-generated content and comply with any licensing terms. Be aware of potential IP risks when using free AI tools. Will your business own the outputs of content generated? | Define and secure IP rights in services agreements. Address potential IP issues related to input and output data and ownership rights. | Protect IP rights when embedding AI into products. Define ownership of any AI-generated content in licence agreements with your customers. |
| Contractual risks | Review the terms of service for free AI tools for any hidden risks. Ensure your business complies with any terms and restrictions. | Consider the need to negotiate a range of key contractual clauses with AI providers, addressing content ownership, liability, and indemnification, depending on the level and risk of the services. | Consider the need for comprehensive contracts covering AI use, liability, IP rights, and data protection. Include disclaimers about AI functionalities where necessary. |
| Product liability risks | Consider your potential liability for inaccuracies or biases in AI-generated content. Evaluate the risks to your business's reputation. How reliable are free tools your team will use to create vital business content? | Identify potential product liability issues from AI services and ensure contractual protection against errors and biases which could cause your business harm. | Assess product liability risks and ensure compliance with relevant laws, particularly when products are offered to consumers. |
| Governance and staff training | Develop a governance strategy which focusses on ethical use and risk exposure when using AI tools. Consider policies for monitoring AI usage and a generative AI in the workplace policy for staff to follow. Train your staff on AI risks, biases, and responsible use. | Establish a governance framework for third-party services involving the use of AI. Issue policies for staff procuring and using third-party AI services. | Implement a robust AI governance framework, including ethical guidelines and risk management when integrating AI into your products. Train your staff on AI-related issues to address customer concerns and support their product use. |
Key documents for AI integration
Following the key considerations above, you may need to update various documentation in line with your AI integration including but not limited to the following:
| Document | Level 1: Free AI services | Level 2: Third-party AI services | Level 3: AI integration into products |
| Risk assessment documents | Conduct and document assessments on data privacy, quality, and reputational risks. | Conduct thorough risk assessments and due diligence to cover various issues from data protection to IP issues. | Implement ongoing risk assessments, audits and management frameworks addressing data protection, IP, quality, and product liability. |
| Data protection policies and agreements | Update your data protection policies to reflect AI tool use and data handling. Consider the need for a DPIA when necessary. | Update your data protection policies to include third-party AI services. Ensure you conduct comprehensive DPIAs and enter into compliant agreements covering data processing or sharing. | Ensure you implement robust data protection policies for AI integration, including the considering of transparency, data subject rights and compliance with UK GDPR. |
| AI use policies and training materials | Draft policies outlining permitted AI use, data handling, and ethical guidelines. For instance, addressing risks such around quality, accuracy, and reputational risks when using AI tools. Update your training materials to include AI awareness and train your staff on the implications of AI use. | Develop policies for selecting and managing third-party AI services, focusing on quality assurance and compliance with ethical standards. | Develop detailed AI policies relating to the development, deployment, and monitoring of these products. You may need to address various ethical considerations, bias mitigation, and transparency. |
| Customer agreements | Not applicable. | Not applicable. | Draft comprehensive customer agreements addressing AI use and rights permissions, data privacy, IP rights, and liability. You should include disclaimers about AI limitations where necessary. |
| Third-party contracts including NDAs | Review third party terms or contracts for free AI tools, with particular focus on key issues such as how they will protect input data and IP ownership of output data and confidentiality. | Draft and negotiate detailed contracts with AI providers, addressing data protection, IP, and liability and indemnification. You may need an additional NDA depending on the sensitivity of the data you’ll be sharing. | Manage contracts with AI partners who are involved in developing your products, ensuring they include terms around data protection, IP rights, liability, and indemnification. |
The importance of developing AI policies and legal advice
Integrating AI into your business can bring new opportunities, but also a lot of unique legal challenges that require careful thought and planning.
Potential risks include data breaches, inaccuracies, bias, product liability issues, and more. As such, risk management and due diligence are critical before deploying AI into your commercial products.
You should develop tailored AI policies that address key legal issues, such as UK GDPR compliance, IP, and consumer protection to help mitigate these risks.
Working with experienced commercial solicitors can help you navigate these complexities and ensure your AI projects are legally sound.
