Contracting around AI: Reading the fine print

Even as philosophers debate whether artificial intelligence is the gateway to a utopian future or an existential threat, and scientists drive the quest to artificial general intelligence, lawyers — in the trenches of the here and now — negotiate finely crafted AI agreements.

Since OpenAI launched ChatGPT two years ago, a wave of AI transactions has hit the market with AI provisions proliferating in licensing deals, master service agreements, corporate transactions and more. Unlike practitioners in other legal areas, who can draw on a rich set of templates and forms for language on issues ranging from representations and warranties to liability and indemnities, AI lawyers operate in a greenfield rife with technological change and regulatory uncertainty.

While several states have passed AI legislation, most AI risks are not yet regulated, at least not by AI-specific laws, so lawyers copiously document and negotiate a dizzying array of potential contingencies. In addition to requiring AI developers and deployers to comply with the law, lawyers draft contracts that require parties to make warranties and promise indemnities to minimize risks to copyright, trade secrets, privacy, fairness and equity, cybersecurity, and more.

Agreements with LLM developers

OpenAI's release of ChatGPT launched a feeding frenzy with businesses lining up to adopt generative AI tools, either as deployers, to enhance existing business processes, or as developers, integrating generative AI into their products. In each case, companies need to license generative AI tools from large language model developers, such as OpenAI, Microsoft, Google, Meta and Anthropic.

LLM developers offer off-the-shelf agreements for individuals or small business users, enterprise options for larger players, and negotiated deals for just the largest customers who have specific needs. The quid pro quo is typically additional contractual protections for a higher price.