What Legal Risks Should Businesses Consider When Using AI?

Businesses using AI must carefully manage legal risks to make the most of this technology without running into trouble. Key issues include unclear rules about who owns the intellectual property (IP) for AI-generated content. In the UK, current laws don’t clearly protect these outputs, which means businesses could struggle to stop others from copying their work. Even contracts about ownership might not hold up if they don’t align with IP laws, leading to disputes.

However, the EU’s AI Act, approved in May 2024, introduces the first global framework for regulating AI by classifying systems based on risk, with strict rules for high-risk tools and bans on harmful uses like social scoring. It ensures safety, transparency, and accountability while promoting innovation through regulatory sandboxes, where businesses can test AI safely. 

Companies must comply with these standards to access the EU market, including meeting ethical requirements, managing data responsibly, and registering high-risk AI systems. Non-compliance carries significant fines, providing a clear and unified approach that reduces risks and builds trust in AI technologies.

Data protection is another major concern. AI tools often use sensitive or personal information, and mishandling this data could violate privacy laws like GDPR. This can result in fines or expose trade secrets that should stay confidential. Sharing too much information with AI systems could even harm future patent applications.

Ethical risks also come into play. If AI systems produce biased results like making unfair decisions about loans or hiring it could lead to legal problems and damage the company’s reputation. Businesses need checks in place to detect and fix biases in their AI tools.

Liability is another issue. Mistakes made by AI tools, especially in areas like healthcare or safety, can cause serious problems. Companies need clear processes to handle complaints and ensure the AI outputs are accurate and reliable.

Finally, using third-party AI tools can create risks around data ownership. Without clear agreements, businesses might lose control of their data or face claims of IP infringement.

To reduce these risks, businesses should evaluate potential legal and ethical issues early on, keep sensitive data secure, and involve humans in key decision-making processes. Setting up strong policies and compliance frameworks will help companies use AI responsibly and avoid legal headaches.