The growing and widespread use of generative artificial intelligence technology (AI) brings with it an assortment of novel legal issues, affecting businesses and people alike.

On Sept. 19, The Authors Guild, alongside well-known writers like George R.R. Martin, Jodi Picoult, and John Grisham, filed a class-action lawsuit against OpenAI over allegations that its product, ChatGPT, illegally made use of their copyrighted works. This lawsuit comes in the wake of a series of similar legal actions aimed at other technology giants, such as Microsoft, Google, and Meta. Undoubtedly, the growing and widespread use of generative artificial intelligence technology (AI) brings with it an assortment of novel legal issues, affecting businesses and people alike.

What Is Generative AI?

In a broad sense, generative AI is a deep-learning model that learns from existing data to generate new content. Using this technology, OpenAI introduced its own generative AI chatbot, ChatGPT. ChatGPT, like other models, can respond to requests inputted by the user and generate articles, essays, pictures, and even books just as if they were written or drawn by a human. Notepads filled with scribbles from a meeting? ChatGPT will turn them into an organized action item list. Forgot Valentine’s Day? ChatGPT can create a customized card, quoting the entire works of William Shakespeare. The possibilities are endless.

What Comes Out, Must Have Come In

While many are focused on generative AI’s limitless potential, others are focused on what is actually inputted to the system. Indeed, that is exactly what The Authors Guild’s class-action lawsuit seeks to prevent: the unauthorized use of an author’s work as existing data to “train” the generative AI models. According to the lawsuit, “OpenAI has reproduced copyrighted books…without their authors’ consent” and fed “large, publicly available datasets that include copyrighted works” into the system. In turn, ChatGPT “can spit out derivative works: material that is based on, mimics, summarizes or paraphrases the plaintiffs’ works, and harms the market for them.” The use of such information, according to the lawsuit, amounts to “systematic theft on a massive scale.”

However, OpenAI and other AI industry leaders have been quick to respond, arguing that generative AI models create new and unique content, despite being “trained” on publicly available information. Many AI organizations argue that such content falls squarely under the “fair use” doctrine—a defense to copyright infringement. Their argument is supported by longstanding case law including the most recent ruling last May when the United States Supreme Court held that the “fair use of a copyrighted work … for purposes such as criticism, comment, news reporting, teaching … scholarship, or research, is not an infringement of copyright.” Under the fair use analysis, courts look to four factors: the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes; the nature of the copyrighted work; the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and the effect of the use upon the potential market for or value of the copyrighted work.

OpenAI and other organizations argue that ChatGPT and other models make use of the inputted information to train the model on syntax and sentence structure – particularly learning how words and sentences relate to each other. Such a use, according to those organizations in a separate case, “is transformative by nature and quintessential fair use.”

If The Authors Guild’s class-action plaintiffs prevail, AI organizations would likely be forced to obtain consent when using the works of authors, leading to licensing agreements and other forms of compensation. On the other hand, if the court rules in favor of OpenAI, generative AI models would likely be free to access and learn from the vast amount of publicly available information.

Business Considerations With Generative AI

Whichever way the courts rule, we can be sure of one thing: generative AI is here to stay. As such, it remains important for businesses to carefully scrutinize and create AI policies. Here are a few topics businesses might want to consider:

• The acceptable and prohibited uses of AI technology.

Generative AI, like other fields, is subject to distinct laws, regulations, and oversight. While company leadership may have a general understanding of the restrictions, the business’s employees may not. It remains imperative to not only provide guidelines on how employees should utilize the technology, but also to establish consequences in an effort to deter harmful conduct. A standardized and carefully planned AI policy will ensure that employees’ use of generative AI technology complies with relevant state laws and regulations, helping to minimize a business’s exposure to adverse legal claims or sanctions.

• Data privacy and security, including sensitive security information (SSI), attorney client privilege and work product.

Generative AI technology is configured to learn from the publicly available information to which it is exposed. However, generative AI technology can also learn from hypersensitive and proprietary information, at times potentially exposing such information to unwanted, third-parties. Businesses can help mitigate the unintended disclosure of sensitive information by outlining how the data will be collected, stored and used.

• Accountability and consequences of misuse and violations.

Generative AI presents limitless possibilities for growth and productivity. Equally, however, it also presents an increased risk of misuse and liability. The potential risks of AI technology range from algorithmic bias and discrimination to privacy and copyright violations. However, such risks do not lie with AI alone. The utilization of AI by a business’s employees exposes the business to a myriad of avoidable risks, such as the unintentional publishing of sensitive or harmful information, or even an employee’s reliance on false or nonsensical source information. Regardless, the employer may be held vicariously liable for the employee’s actions and will likely bear the brunt of the legal consequences in such scenarios. Therefore, it is a good idea to set out distinct guidelines on the use of AI technology and clearly state the consequences for those who don’t comply with those policies.

Whether you plan to use it or not, generative AI is here to stay. In an effort to keep up, businesses should start planning now on how they will utilize and manage the new AI technology.

Reprinted with permission from the December 19, 2023 edition of Daily Business Review © 2023 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited, contact 877-257-3382 or reprints@alm.com.