AI Contracts: Legal aspects of agreements on artificial intelligence and deep learning tools

When drafting contracts for the use of artificial intelligence, smart algorithms and deep learning tools, a number of special features of the subject matter must be taken into account. This is more than normal standard software. Various types of contracts are conceivable, as is usually the case in IT law, for example:

  • The “Sale“ of a standard AI
  • Individual development of a special AI
  • The temporary assignment of the use of an existing AI (Application Service Providing, ASP)
  • Providing access to the functionality of an already trained AI (Software as a Service, SaaS)
  • Provision of data for the training of an AI
  • Individual training of an AI for special purposes as a service
  • etc.

Specific aspects that will need to be addressed in such contracts are, inter alia:

Data protection, insofar as personal data is concerned, in particular under the application of the new European General Data Protection Regulation (GDPR) which is applicable throughout the European Union since 2018. It should be noted that many state-of-the-art AI applications may easily come into conflict with stringent EU rules on data protection and privacy. This may be especially problematic in the field of medical and health applications.

Specification of data. From a legal point of view, this plays a role in the question of the possible faultiness or material defect of the data or the AI, which may have certain consequences under German law. The characteristics of the data used for training the AI should be defined as accurately as possible. The issue of artifacts or unwanted patterns must be taken into account. There is the problem of falsification of the AI output as a consequence of faulty original data or training date which may contain unknown or undisclosed biases or distortions. It is therefore advisable to address these aspects: Suitability of the data for the desired purpose, representativeness of the data, freedom from artificial influences, factors of the origin or collection of the source data, number of data sets and data fields and possible interfering factors.

Data ownership and intellectual property: The intellectual property regarding the following items should be considered and preferably unambiguously provided for: Who owns the original data, who owns the training data, who owns the original AI algorithms, who shall own the trained version of the AI. The rights to the data must be clarified, for example, whether the supplier of the AI is allowed to retain the source data or shall have access to the results for the future training of the AI, e.g. for other customers. Shal, there be exclusivity for the customer and if so, how is this to be guaranteed and to what shall it refer? It may have to be taken into account that contractual clauses concerning the results derived from the data may have an impact on the rights of the AI developer to use and license his AI on the one hand, and on the rights of the AI user to use the AI and its results only for himself on the other hand.

Error rates: It may make sense to contractually regulate a certain error rate with regard to the results generated or certain maximum values for statistical deviations.

Contract term and duration: In view of the rapid technical development and the possibly evolving form of AI, long term contracts may be problematic and possibly shorter terms might be more appropriate, depending on circumstances.

In addition, the general aspects of the drafting of IT agreements must be considered, including, where applicable, a appropriate definition of the subject matter of the license, contract term, remuneration, termination options, warranty, price reductions and penalties, liability and damages, confidentiality and data protection, etc.

AI contracts can have special additional requirements compared to traditional IT contracts. When drafting the agreement, the individual circumstances of the contracting parties and the subject matter of the agreement, the product and the market must be taken into account, as well as any special aspects of AI as a special form of software and services, and the general rules and provisions of German contract law.

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Last updated: 6 May 2019