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The Most Important Clause in your AI Contract

Whether you're buying or selling an artificial intelligence solution, one clause reigns supreme as the most important clause in your contract.

Limitation of Liability? No.

Indemnification? No.

IP Ownership? Close!

The most important clause in your contract is the ownership and licensing rights to the Customer's AI models.

What Are AI Models?

Today's artificial intelligences 'learn' by being fed and trained on large volumes of data samples. For example, if I give an AI one million P&L statements and identify taxes as a liability in every one of them, the AI will learn to assume that taxes should be treated as liabilities in future P&L statements.

AI Models (aka: Pattern Data, Aggregated Sample Data, Machine Learning Data) simply refers to the collective knowledge that has been taught to your instance of an AI.

Why is Ownership of AI Models so Important?

Most AI contracts provide that the Service Provider owns all rights, title, and interest to any AI Models the customer develops using the service. This is primarily done so that the Service Provider can feed the user's data samples and AI Models to their version of the AI (the 'Master AI') to improve its overall capabilities, accuracy, and reliability.

However, this also serves a secondary purpose: to make it more difficult for Customers to leave the AI platform.

If a customer cannot take their AI Models with them when they terminate the contract, they will need to train a new AI from scratch or use generic pre-built models developed by another AI Service Provider. This creates an incentive for the customer to continue on the platform as it takes an incredible number of data samples to develop a reliable AI, and pre-built AI Models tend to be less reliable than custom-built ones (in the long run).

Accordingly, the AI Model ownership clause is important to AI Service Providers because it improves customer retention and allows them to use the customer's data samples to improve their product. It is important to customers because it gives them control over their creation and allows them to move their AI in-house or to another AI Service Provider without restriction.

Out-House Attorneys provides General Counsel as a Service and Contract Overflow Support to both Buyers and Sellers of SaaS and AI-powered solutions. Contact us today if your business needs help reviewing, redlining, and negotiating commercial contracts under tight deadlines.

The information provided on this website does not, and is not intended to, constitute legal advice. Instead, all information, content, and materials available on this site are for general informational purposes only. Information on this website may not constitute the most up-to-date legal or other information. This website contains links to other third-party websites. Such links are only for the convenience of the reader, user or browser.

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