In NYLJ, Partners Ian DiBernardo and Brandi Howard Examine Customer Agreements in AI Era

Partners Ian DiBernardo and Brandi Howard co-authored an article for the New York Law Journal about how to manage risk and preserve the value of customer agreements at the intersection of data and artificial intelligence.

In the March 22 article, the authors noted that companies must think through intellectual property and the related contractual risks.

“Companies operating at the intersection of data and artificial intelligence (AI) have enormous potential but also face evolving risks,” they wrote. “Big data is not new; data has become a valuable currency for numerous industries—from financial services, real estate and health care to social media and e-commerce.”

What is new, however, is the surge in the number of businesses applying AI to extract more value, more efficiently from data and to expand the applications to which that data can be applied. However, with this new opportunity comes new risks.

Some of those risks to consider include the internal AI usage policies companies put in place, the gaps in legacy agreements, proactive risk mitigation for downstream risks and the development of ownership rights and liability frameworks in intellectual property.

Customer agreements should address the ownership of intellectual property derived from the licensed data, the authors stated.

“Legacy customer agreements in data-centric businesses often call for the provider to own aggregated, anonymized data and the results of the provider’s processing or analyzing the client data,” they explained. “This type of clause may provide an argument for the provider, but assessing the level of risk presented by such legacy agreements may turn on a number of factors, perhaps primarily, the scope of the often-defined term, ‘derived data.’”

They noted that data as a service has become ubiquitous and the application of AI to those services is quickly following suit.

“As providers rethink their own business models and anticipate the changing businesses of their clients, they should rethink their customer agreements to manage risk and preserve the value of their assets and businesses,” they concluded.

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