Tech & Sourcing @ Morgan Lewis

How are intellectual property (IP) and data rights allocated when a particular dataset is a key to unlocking a powerful new artificial intelligence/machine learning (AI/ML) model or use case? To find a balance, contracting parties may end up trading a black box for Pandora’s box.

One of the commonly advertised features of AI is that it is beneficial for automation and increasing productivity. When a company considers improving its productivity and employing an AI tool, it will typically go through a contracting process with the service provider and assess the terms of use and associated risks for the business. But what happens if an employee presses on and starts using an AI tool that was not vetted by the company?

As we continue to see AI steadily and increasingly be incorporated into service offerings, businesses should pay special attention to previously “standard” provisions when contracting for the provision and use of services that incorporate AI. This is especially true considering there may be situations where service providers use AI at some point in the workstream without the recipient even realizing.

A significant number of legacy software solutions are now incorporating generative artificial intelligence (GenAI), and most new software solutions have some form of GenAI capabilities. This is true across the majority of, if not all, industries and, as such, it is not surprising that we are seeing a large increase in GenAI-related queries from businesses that use, or are procuring, software.

This blog is the finale to our Cracking AI and Outsourcing Conundrums series, a series in which we’ve discussed thought-provoking topics and set the stage for dynamic discussions with outsourcing customers and providers on the opportunities and risks of generative AI (GenAI) solutions in the outsourcing space. In this Part 4, we examine certain top-of-mind issues arising in connection with ownership and use rights when leveraging GenAI.

Welcome to Part 3 of our Cracking AI and Outsourcing Conundrums series. In Part 1, we discussed at a high level the challenges of requiring outsourcing providers to drive innovation through the use of generative AI (GenAI) while at the same time complying with an outsourcing customer’s AI policies. In Part 2, we dove into the conundrum of balancing a company’s need for enhanced quality checks with the desire (by the company and the outsourcing provider) to drive productivity and realize savings.

In Part 1 of our Cracking AI and Outsourcing Conundrums series, we discussed at a high level the challenges of requiring outsourcing providers to drive generative AI (GenAI) innovation while at the same time complying with companies’ AI policies. One of the challenges we identified was that many outsourcing agreements impose aggressive savings commitments, to be realized through the implementation of technology solutions that enable headcount or other cost reductions.

Innovation: all companies want their outsourcing providers to be at the forefront, whether accomplished by proposing ideas, implementing solutions as part of their business-as-usual services, or offering savings based on productivity commitments or other demonstrable business impact. Some outsourcing providers may even use innovation as a key differentiator during the sales cycle, putting real dollars at risk if innovation projects don’t realize promised savings. And what innovation is more top of mind presently than the use of artificial intelligence?

Join partners Don Shelkey, Kirstin Hadgis, and Ezra Church at 11:30 am–1:00 pm ET on Tuesday, February 27, 2024 as they discuss key considerations that may impact M&A transactions related to privacy and data security. The session will include a spotlight on the impact of artificial intelligence on such transactions.

An ever-increasing number of companies are choosing to use chatbots on their website, in their sales organizations, and to help with customer service. In fact, according to Vantage Market Research, the chatbot market will grow over 23% by 2030. A chatbot can provide a useful tool for consumers who are looking for quick and easy access to information as well as companies looking to provide a high level of attention and service, while allowing its employees to focus on other demands. However, companies should remain aware of and monitor the information the chatbot is sharing.