Tech & Sourcing @ Morgan Lewis

The Federal Trade Commission (FTC) on September 25, 2024 announced Operation AI Comply. The initiative is a response to potential misuse of artificial intelligence (AI) for “deceptive or unfair conduct that harms consumers” and represents the latest in a series of actions taken by the FTC in this space. The enforcement actions target false claims and representations by services providers, and touch upon the use of generative AI tools for competition. The FTC described these cases as “just the latest” in its “ongoing work to combat AI-related issues in the marketplace from every angle.”

As more and more purchases of digital content happen online, without delivery of any physical media to the purchaser, consumers may not be able to access their purchased content in situations where vendors have removed such content from their online libraries, platforms, or apps unilaterally as the result of the expiration or revocation of the content rights. In response to numerous consumer complaints about this occurred or threatened loss of access rights to content purchased online, California Governor Gavin Newsom signed AB-2426 into law on September 24, 2024. The bill will come into effect on January 1, 2025.

Mere months after the Federal Trade Commission (FTC) approved a final rule banning almost all worker noncompete clauses, the US District Court for the Northern District of Texas granted in Ryan LLC v. Federal Trade Commission the plaintiffs’ preliminary injunction motions, halting the noncompete rule for just those plaintiffs in that case. The court found that the FTC likely exceeded its statutory authority and acted arbitrarily and capriciously.

When a contracting party decides that the counterparty is worth an exclusive commitment, such a decision often rests on some minimum expectations and basic assumptions. But, in light of Murphy’s law, it may be worthwhile to put the proposed union through a stress test.

Please join us for the next installment of our Startup & Accelerate webinar series, focusing on key artificial intelligence considerations for emerging companies. In this webinar, partner Michael S. Ryan and of counsel Brian P. Slough will explore important legal and technology issues and questions that startups and emerging companies should consider with respect to the development, licensing, and use of AI technologies.

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.

In our latest blog post on preparing for the EU’s Digital Operational Resilience Act (DORA), entering into force on January 17, 2025, we take a look at second-level requirements under DORA covering the classification and reporting of major information and communications technology (ICT) related incidents. These requirements will need to be addressed through operational risk management frameworks and contract remediation efforts with technology vendors.

Beginning January 17, 2025, financial entities based in the European Union must have in place processes and policies, and mandatory contract provisions with their third-party technology vendors, that comply with the EU Digital Operational Resilience Act (DORA).

Today, cutting-edge technology and how it is being used garners news coverage, but how companies build these products and get them to their customers is often overlooked. Companies negotiate and contract for the development and manufacture of the products as well as the sometimes complicated logistics necessary to deliver them to customers quickly in an increasingly demanding marketplace.