Protect Your Business from Billion-Dollar Artificial Intelligence Legal Issues with an Iron-Clad Contract

Want to protect your business from artificial intelligence legal issues? I’m sharing the exact protections you need in your contracts with creators, freelancers and service providers to protect your business against AI troubles.

Artificial intelligence (AI) has skyrocketed in popularity, and everyone seems to be using it to create texts, images and content, but if you’re anything like me, you want to ensure that your business does not run into legal trouble because of works created with AI. As a lawyer myself who drafts contracts for entrepreneurs like you, I am telling you exactly what you need to include in contracts with creatives, freelancers, and service providers to protect your business from artificial intelligence legal issues.

You will learn everything you need to know about how to shield against artificial intelligence legal issues, and we’ll dive into the laws on artificial intelligence and the legal implications of AI if you do not have these protections in place.

After learning all about how to protect your business from artificial intelligence legal issues, you’ll save your business from major copyright ownership issues and major copyright infringement claims!

This post is all about the essentials you need in an iron-clad contract to protect your business from artificial intelligence legal issues and ensure full copyright protection for your brand.

Protection Against Major Artificial Intelligence Legal Issues

What is artificial intelligence doing that will hurt your business?

First, let’s get into the question, “What is artificial intelligence doing to hurt your business?”. Well, it’s not so much what artificial intelligence is doing but what the people you hire are doing with AI that may hurt your business.

AI is now being used by more and more creators, copywriters, podcast producers, video editors, graphic designers, and other freelance creatives. Some of them only use it as a tool or inspiration, while others let an AI machine do all the work for them.

Chances are that whoever you hire to create works for your business, whether it be blog posts for your website, text for your sales page, content for your brand’s social media or a podcast, that person is using AI for all or part of those creations.

At least, that is if you do not have the proper protections in your contract to avoid all the artificial intelligence legal issues that come with it.

What are the legal issues? Well, there are 3 major legal issues that I’ll discuss.

Issue #1: Infringement of intellectual property rights

I’m not going to bore you with all the case law that we’ve had up to this point, but we’ve had quite a few over the past couple of years where people and businesses are being sued for copyright infringement because of works created with AI.

What is artificial intelligence doing to generate work? It’s ‘scraping’ data from the internet and creating work based on those copyrighted texts, images and other content. And, as it turns out, not all those works created by these AI tools are exactly original, but they are so similar or even considered a ‘derivative’ from existing works, which is copyright infringement. 

This all means that whatever you have hired those freelancers and creatives to create for your business using AI could be infringing other people’s intellectual property (IP) rights without you even knowing it (until you get a claim thrown in your lap).

Issue #2: No copyright ownership

Let’s say that the person you hired delivers something that they created with the help of an AI tool that does not infringe on anyone else’s IP rights. 

Then you still run the risk of that work not being protected at all under copyright law!

This may differ, depending on the jurisdiction you are in (which we’ll get into next), but under the copyright laws of most jurisdictions, in order for a work or creation to be protected under copyright law, it needs to be created by a human or have “sufficient human input”. Copyright law generally requires a “minimum level of human creativity and originality.” 

That means that if the creator or freelancer who delivered work to you which work is completely or predominantly created by or with an AI tool, that creation could be completely unprotected. That’s the case even though you have a clause in your contract stating that your business shall own that person’s creations. Because it can’t be considered that person’s creation; it’s the creation of a robot, and that is not protected under copyright laws. 

Now, let’s say it’s created by both the human you hired and AI. Then, it’s the question of whether there’s enough human input involved for it to be protected under copyright law. That is a major issue that a lot of businesses are being sued over.

Issue #3: Differences in national laws

The last one of the artificial intelligence legal issues is that AI is fairly new, and the laws of every jurisdiction are just catching up to them. But this catching up can take many years, over a decade even.

Consider, for example, how long it took after people were already collecting personal data from you (or, let’s say, your parents if you’re Gen Z) before the EU implemented its General Data Protection Regulation (the GDPR, in short). It took Utah, Virginia, Colorado and Virginia until 2023 to implement their privacy laws (which are covered by my privacy policy included in my Legal Website Bundle). Some other States in the US, like Delaware, Indiana, Iowa, Oregon, and Tenessee, to name a few, are implementing theirs finally this year, and some are waiting until next year or even the year after that.

Well, imagine how long it’s going to take for national and state laws to catch up with AI. The courts are confronted with these issues now, while copyright laws were not even created at a time when we were using email.

That means that, eventually, laws may change, and that may happen faster in one country over another. But that also means that these laws on artificial intelligence are not aligned internationally, and if a creation that is created by both the human you hired and AI may be protected in one country, it might not be protected in another. This is a major issue since we are doing business with people all over the world.

Implications of AI for your business

So, what are the implications of AI for your business? What are the real artificial intelligence legal issues that your business faces when you have people delivering you works that are completely or even partly generated with AI tools? Well, let me explain two major consequences they could have for your business.

Consequence #1: Risking copyright claims

If your brand’s works that are delivered to you by someone you hired but are actually created with an AI tool infringe on someone else’s intellectual property rights, you will run the risk of that person finding out and suing you for it. 

It’s your brand that is using the works that are infringing someone’s IP rights, so you are liable.

Now, you may run to the creative you hired and demand that they reimburse you for the financial loss you suffered because of what they delivered. 

However, if your contract only states that that person will indemnify your business for copyright infringement caused by their creations, you’re in big trouble. Because that’s not their creation; it’s the creation of AI. So, that could mean you are screwed, and you’re liable for a billion-dollar claim. 

Consequence #2: No control over your brand’s works

Another issue that will arise with the creations you receive from a creative or freelancer that is (predominantly) created with AI is that they are not protected by copyright law. The consequence of that is that you have no control over those creations. You are not able to commercialise unprotected works, meaning you cannot control who makes money from it. Anyone can use unprotected works freely. It means that the creative you hired might use it for other clients. It also means that your competitors can use the same ads created with AI as their own ads without your permission.

These are the major consequences of artificial intelligence legal issues that you want to avoid. I mean, why are you even hiring a human to create something for your business if they are not even the ones creating the creation for you? 

The solution to avoid AI legal risks (while awaiting laws on artificial intelligence)

What is the solution to preventing all these artificial intelligence legal issues altogether?

The best solution is simply to prevent anyone from creating works for your business to use AI-generated works. Again, you hired a human to create those works, so they should be doing what they are paid to do instead of outsourcing it to a robot. 

How do you do that? By having an iron-clad contract in place that prohibits the use of AI. Unfortunately, unlike the contract templates I sell in my contract shop, most contract templates you’ll find online will not include the protection you need against AI. They are still templates from years ago. But I’ve got you. Here are the three must-have protections you need to include in your contracts to protect against artificial intelligence legal issues:

Essential #1: Original works warranty

First of all, your contract should include a warranty stating that all the creations the creative or freelancer delivers to you are their original work. They must vow that it’s original to them and no one else.

Essential #2: Specific AI qualifier

That first warranty should cover it, but the fact that some creatives will still consider a work their own work when they created with (a lot of) help from an AI tool means we must leave no room for interpretation here. That is why I also include an AI qualifier in my contracts stating that no AI-generated content or works are used by the creator/freelancer. That way, you are assured that you will not receive work that is (partly) created with the help of an AI tool.

Essential #3: Indemnity for third-party claims

Then, the next essential element you need to really ward off any costly claims that may result from the works the creative or freelancer has created for you is an indemnity for third-party claims. It means that any costs and damages you incur due to claims you receive from anyone that pertain to the works created by the creative or freelancer you hired, that creative or freelancer will have to reimburse you for. So if it turns out that the creative or freelancer has used an AI tool or stolen some ideas from anyone, they will be fully liable and must compensate you for any claims you may get as a result of that.

So, what do these elements look like in your contract? Well, I have an example from my podcast production agreement to give you an idea:

“10.1 The Producer warrants that the services (to be) performed and the (drafts of the) Episodes and all materials provided by the Producer for or in relation to the Podcast or an Episode are original and do not infringe on any intellectual property rights of third parties. (Essential #1)

10.2 The Producer warrants that no content generated through artificial intelligence or similar automated means, including, but not limited to, text, images, or other multimedia content, is utilised in the creation of the (drafts of the) Episodes or any of the materials provided by the Producer for or in relation to the Podcast or an Episode. (Essential #2)

10.3 The Producer indemnifies and holds harmless the Podcaster against all claims from third parties that arise from or are related to any of the services or deliverables provided by the Producer under this Agreement.” (Essential #3)

And that’s how an iron-clad contract will protect your business from artificial intelligence legal issues!

This post was about how to protect your business from major artificial intelligence legal issues with iron-clad contracts.

Need an iron-clad contract that will protect your business from artificial intelligence legal issues? Find the best contract templates for the creators and freelancers you hire in my contract shop!