AI and contract design

Introduction

Drafting contracts in the field of artificial intelligence (AI) is one of the most exciting and challenging tasks of our time. The rapid development and integration of AI technologies into almost all areas of business has ushered in a new era in which the legal framework seems to be constantly lagging behind technical innovations. This dynamic requires not only careful adaptation of existing contractual structures, but also a deep understanding of the many opportunities and risks that AI brings. As a lawyer, I am confronted daily with the challenge of drafting and negotiating contracts in such a way that they meet the complex requirements of these new technologies.

The large number of AI tools available and their various possible uses make it necessary for contracts to be not only precisely formulated, but also flexible enough to take future developments into account. The aim here is to protect the interests of both parties and avoid potential conflicts in advance. The legal implications are just as diverse as the technological applications themselves: From data protection issues and liability regulations to securing copyrights – every contractual clause must be carefully thought through.

At a time when AI is no longer just a theoretical concept but a lived reality, the ability to draft and negotiate contracts effectively is becoming a decisive success factor. It is important to strike a balance between technological progress and legal certainty, while always keeping the individual needs of the contracting parties in mind. Accepting this challenge and developing innovative solutions is not only a necessity, but also a fascinating task that I pursue with passion.

Use of AI by the contractor

It is crucial for contractors to clearly specify in the contract whether and to what extent they may use artificial intelligence (AI) to fulfill their contractual obligations. This requires not only a precise specification of the technologies and tools used, but also open and transparent communication with the client. The contracting parties should clearly agree whether the use of AI requires explicit approval or whether there is general permission. This regulation not only serves to ensure transparency, but also protects the contractor from subsequent complaints from the client. A clear contractual provision can also prevent misunderstandings or conflicts regarding the use of AI. It is also important to define the specific areas of application of AI to ensure that both parties have a common understanding of how and where the technology will be used. This can also help to manage expectations of outcomes and ensure they meet the standards set out in the contract.

Another key aspect is the definition of quality standards in the contract. Although the use of AI can speed up processes and make them more efficient, it can also lead to unforeseen results. Clear quality standards should therefore be defined in the contract, which must also be adhered to when using AI technologies. These standards should be measurable and verifiable to ensure that the services provided meet the agreed requirements. In addition, it is advisable to make contractual provisions on liability in the event that the service provision is faulty or incomplete due to the use of AI. In particular, the limitations and exclusions of liability must be observed in order to minimize the risk for the contractor. It could also be useful to establish dispute resolution mechanisms in the event of disagreements about the quality or scope of the services provided. Such mechanisms could include, for example, mediation or arbitration to facilitate a quick and cost-effective resolution of disputes.

Another critical point is compliance with data protection regulations. The use of AI may involve the processing of personal data, which is why it must be ensured that all data protection requirements are met. The contract should contain provisions that ensure the protection of personal data and grant the client the right to review the use of AI technologies for compliance. This also includes the obligation of the contractor to implement suitable technical and organizational measures to protect the data. In addition, the contract should contain provisions on data processing and storage as well as clear specifications on the deletion or anonymization of personal data after completion of the project. Such provisions help to strengthen trust between the contracting parties and minimize legal risks in connection with data breaches. It is also advisable to provide for regular audits or reviews of data protection measures to ensure that they are always up to date and comply with current legal requirements.

Rights of the client in the use of AI

Clients should pay particular attention to how the use of artificial intelligence (AI) affects their own rights. Particularly with regard to copyrights, it is crucial to ensure that all works generated by AI can be clearly attributed to the client and that no third-party rights are infringed. The contract should therefore contain provisions that regulate the assignment of copyrights to the content created and ensure that the client receives unrestricted rights of use. This includes not only the use and exploitation of the content, but also the right to edit and further develop the works generated by AI. A clear regulation of these rights can avoid later disputes and provide the client with the necessary legal security.

In addition, the contract should contain clauses that make the use of AI transparent and ensure that all technologies used comply with legal requirements. The client should reserve the right to review the use of AI technologies and request adjustments if necessary. This control is particularly important if sensitive data is processed or if the results of the AI-supported processes could have a significant impact on the client’s business. The client should also be able to receive regular reports on the functioning and results of the AI systems used to ensure that they comply with the contractual agreements. Such reports can also help to identify potential problems at an early stage and take appropriate action.

Another key point for the client is ensuring the integrity of the data processed by AI. The contract should contain provisions to ensure that all data is processed and stored correctly. This also includes measures to prevent unauthorized access and to ensure data security. It is important that the contractor is obliged to implement and regularly review suitable technical and organizational measures to protect the data. In addition, the contract should include data backup provisions to ensure that appropriate recovery measures can be taken in the event of data loss or corruption. The client should also have the right to conduct audits or appoint independent auditors to review the data security measures to ensure that they meet the highest standards. Such measures are crucial to strengthen trust in the cooperation with the contractor and to minimize legal risks in connection with data breaches.

Protection against unauthorized use by the contractor

A critical point for contractors is the regulation of the use of created content or assets for their own purposes. It should be clearly stipulated that the contractor may not use these for training purposes or other internal applications without the express consent of the client. This protects the client from having its content reused in a modified form or even sold on to third parties. Such a provision is particularly important in industries where intellectual property is of high value and where there is a risk of losing competitive advantages through the unauthorized use of content.

The contract should therefore contain clear provisions that limit the contractor’s options for use and ensure that all content created is exclusively available to the client. These provisions should describe in detail which types of use are permitted and which are not in order to avoid any ambiguity. The contract should also regulate how the data generated by AI is handled. The protection of intellectual property must be guaranteed, which is why the contract should specify which party has which rights to the content created. A clear delineation of these rights prevents later disputes over the use and exploitation of the results. It could also be useful to introduce a clause that grants the client the right to regularly review how its content is being used.

In addition, confidentiality agreements should be an integral part of the contract. The contractor should be obliged to keep all confidential information of the client secret and not to use it for its own purposes. These agreements not only protect the client’s sensitive business information, but also prevent unauthorized use by the contractor. Such agreements should clearly define what is considered confidential information and how this information is to be protected. They should also provide for sanctions for breaches of confidentiality to ensure that the contractor takes the importance of protecting this information seriously. A comprehensive confidentiality agreement can also include provisions on the duration of confidentiality obligations and how confidential information is to be handled after the contractual relationship has ended. This helps to strengthen trust between the contracting parties and create the basis for long-term cooperation.

Pros and cons of using AI

The use of artificial intelligence offers numerous advantages: it can automate processes, reduce costs and enable innovative solutions. By using machine learning, companies can gain valuable insights and increase their competitiveness. AI also enables faster processing of large volumes of data and can therefore significantly accelerate decision-making processes.

At the same time, however, there are also risks: Dependence on technology can lead to a loss of control, especially if decisions are made completely automatically. Inadequately trained models can deliver incorrect results or exhibit discriminatory tendencies. There is also a risk of data misuse or loss of sensitive information due to inadequate security measures.

When drafting contracts, it is therefore important to consider how these risks can be minimized. Careful examination of the technologies used and clear contractual provisions can help to reduce potential risks. It is important to remember that AI acts as a tool – the actual inspiration and creativity still comes from humans.

Contracts should be drafted to cover both technical and creative aspects and meet the specific requirements of each industry. Sound advice can help ensure that your contracts are not only legally sound, but also support your business objectives.

Example: AI in the game development contracts

A particularly vivid example of the use of artificial intelligence in contracts is the field of game development. In this dynamic industry, AI is increasingly being used to support and accelerate creative processes. For example, AI tools can be used to generate game content, optimize game mechanics or improve the gaming experience. These technologies offer significant advantages as they enable developers to implement innovative ideas faster and manage complex tasks more efficiently. In addition, AI-supported analyses can provide valuable insights into the gaming experience and help to improve games in a targeted manner.

However, there are also challenges and risks that need to be considered when integrating AI into game development contracts. One key issue is the question of intellectual property rights to the content generated by AI. It must be clearly regulated who owns the rights to this content and how it may be used. There is also a risk that AI tools may deliver unforeseen or undesirable results, which can lead to delays in the development process. Ethical considerations also play a role, especially when it comes to the design of content based on machine learning.

In game development, there are now a variety of tools for finding and implementing ideas based on AI. These range from simple content generators to complex systems that can create entire game worlds. While these tools can significantly enrich the creative process, there is also a risk that they restrict the individual creativity of developers or promote homogenized content. It is therefore important to set out clear rules in contracts as to how these tools may be used and which quality standards must be adhered to. Careful consideration of the advantages and disadvantages as well as precise contractual arrangements are crucial in order to fully exploit the potential of AI in game development while minimizing legal and creative risks.

The role of AI in creative work: storytelling, audiovisual production and literature

AI in storytelling

In the field of storytelling, artificial intelligence has the potential to fundamentally change the way stories are conceived and told. AI-powered systems can help develop narrative structures, shape characters and even generate complete stories. These technologies offer authors and creatives new opportunities by accelerating the creative process and providing inspiration. For example, algorithms can analyze which elements were particularly successful in existing stories and derive new concepts from them. This can be particularly useful in the early stages of brainstorming.

However, the use of AI in storytelling also brings challenges. One of the biggest concerns is the potential homogenization of content, as AI systems could tend to fall back on tried and tested formulas and thus compromise the originality of new stories. There is also the question of copyright: who owns the rights to a story that has been partially or fully generated by an AI? These legal uncertainties must be clearly regulated in contracts in order to avoid conflicts. Ethical considerations also play a role, especially when it comes to ensuring that AI-generated content does not contain any discriminatory or inappropriate elements.

AI in audiovisual production

Artificial intelligence is increasingly being used in audiovisual production to optimize creative processes and increase production efficiency. AI technologies can be used, for example, to automatically edit video material, create visual effects or improve sound quality. These tools enable producers and directors to realize their visions faster and more cost-effectively. In addition, AI-supported analyses can provide valuable insights into viewer preferences and help to tailor content specifically to the audience.

Despite these advantages, there are also challenges when integrating AI into audiovisual production. One key issue is quality assurance: while AI tools can speed up processes, there is a risk that they will not always deliver the desired artistic quality. It is therefore important to define clear standards for the quality of the content produced in contracts. Legal aspects must also be taken into account, particularly with regard to the copyright of AI-generated visual or audio elements. This also raises the question of responsibility for the content: who is liable if an AI-generated element infringes copyright or is otherwise problematic?

AI in the area of authors and writers

For authors and writers, artificial intelligence offers new tools to support the writing process. From the generation of ideas to the creation of text drafts and stylistic revision, AI systems can make the creative process much easier. These technologies enable authors to work more efficiently and focus on the creative design of their work. This can be a significant advantage, especially for authors with high production demands.

Nevertheless, there are challenges and concerns regarding the use of AI here too. One key issue is preserving the author’s individual voice: while AI tools can be useful, there is a risk that they can dilute or standardize an author’s personal style. Contracts should therefore contain provisions to ensure that the use of AI does not restrict the author’s creative expression. Legal issues also need to be clarified: Who owns the rights to a text that has been created with the support of an AI? And how can it be ensured that no plagiarism occurs?

Overall, artificial intelligence offers both opportunities and challenges in the creative sector. While it opens up new possibilities and supports creative processes, its integration requires careful legal examination and contractual safeguards. Clear regulations can minimize potential risks and exploit the full potential of these technologies.

Conclusion

The integration of artificial intelligence into business processes requires careful contract drafting in order to avoid legal uncertainties and protect both parties. As an experienced lawyer specializing in IT law, I am at your side to develop tailor-made contracts that take all relevant aspects into account.

By formulating clauses precisely, potential conflicts can be avoided and your interests protected in the best possible way. I invite you to get in touch with me…

Author: Marian Härtel

Marian Härtel ist Rechtsanwalt und Fachanwalt für IT-Recht mit einer über 25-jährigen Erfahrung als Unternehmer und Berater in den Bereichen Games, E-Sport, Blockchain, SaaS und Künstliche Intelligenz. Seine Beratungsschwerpunkte umfassen neben dem IT-Recht insbesondere das Urheberrecht, Medienrecht sowie Wettbewerbsrecht. Er betreut schwerpunktmäßig Start-ups, Agenturen und Influencer, die er in strategischen Fragen, komplexen Vertragsangelegenheiten sowie bei Investitionsprojekten begleitet. Dabei zeichnet sich seine Beratung durch einen interdisziplinären Ansatz aus, der juristische Expertise und langjährige unternehmerische Erfahrung miteinander verbindet. Ziel seiner Tätigkeit ist stets, Mandanten praxisorientierte Lösungen anzubieten und rechtlich fundierte Unterstützung bei der Umsetzung innovativer Geschäftsmodelle zu gewährleisten.