DealLawyers.com Blog

The latest edition of Wachtell’s 136-page white paper, “Intellectual Property Issues in M&A Transactions” includes a new chapter devoted to artificial intelligence. Among other things, that chapter discusses AI-related reps and warranties.  Although it acknowledges that many AI-related issues may already be addressed by the “standard suite” of IP reps, it notes that there is a trend toward including reps specifically addressing uses of AI technology and related risks. This excerpt addresses the specific topics that may be covered by those AI-related reps:

Depending on the context, these may include representations and warranties that:

– require identification of the use of AI in the operation of the business, including as incorporated into, or used in the creation of, products or other material assets and IP, and in the making of any material decisions, including with respect to hiring, firing, and other potentially sensitive use cases;

– neither the acquisition or use of training data for an AI system nor the output of the AI system infringes third-party rights or laws, including the DMCA;

– the business has not sought patent protection for inventions made in whole or part by AI (except where a human inventor has made contributions sufficient to obtain a valid patent for such inventions);

– the business has not sought or claimed copyright in works authored in whole or in part by AI (except where a human author has made contributions sufficient to obtain valid copyright protection for such works);

–  the business has taken reasonable measures to protect against potential biases of AI systems and comply with relevant regulations;

– the business has taken reasonable measures to prevent unauthorized access, inadvertent disclosure, and exfiltration of confidential information or sensitivedata through the use of AI; and

– the business’s use of AI has not resulted in adverse consequences, claims, or investigations.

In addition to addressing transaction-specific issues like reps and warranties and due diligence, the white paper’s AI chapter provides an overview of the emerging legal issues and risks associated with the development of AI models and infringement by model outputs, the legal status of AI-generated intellectual property, and AI governance frameworks and regulations.

– John Jenkins