AI Licensing Tip - 'Flashing Yellow Light' & 'Thoughtful Infringement Compromise' Provisions

On Applied AI, we will regularly share AI licensing tips from Craig Auge, a partner in the Vorys Columbus office and a member of the firm’s technology and commercial transactions practice.   These tips offer brief insights into AI-related provisions that could be utilized in licensing contracts.  

Add a “flashing-yellow light” provision

Example:

“Developer will not use generative artificial intelligence to develop any Work Product without Customer’s prior written consent, such consent not to be unreasonably withheld.”

Insights on applying:

• This basic commitment acts as a flashing-yellow light – requiring a dialogue in which Customer can get comfortable with the scope of a Developer’s use of GenAI for any number of reasons, such as concerns about types of input used and privacy concerns, underlying foundational model or application license requirements, re-use for commercial purposes, ownership, and infringement.
• The above provision could include “represents and warrants” and be adjusted for context, such as “products provided” or “services provided.”

Add the “thoughtful infringement compromise” provision

“When providing the Services and creating the Deliverables, Provider shall be entitled to use generative artificial intelligence (“GenAI”) tooling and is allowed to incorporate input from Customer with the output generated by such tooling in the Deliverables.  To the extent Provider incorporates output generated by GenAI tooling in a Deliverable, Provider will take commercially reasonable precautions (consistent with commercially reasonable practices in Provider’s industry) to ensure that such output incorporated in the Deliverables does not infringe, misappropriate, or violate any third party’s IP Rights.  Provided that Provider has taken such reasonable precautions: (i) Provider will not be liable for any damages incurred by Customer as a result of the GenAI-generated output portion of a Deliverable infringing a third party’s IP Rights, and (ii) the IP Rights indemnity and defense set forth in Section X shall not apply to such third-party claims in respect of such output portion of the Deliverables.”

Insights on applying:

• Although a new technology with some unknowns about IP infringement, there can be negotiated compromise between (at the one end) the typical Provider-takes-all-IP infringement risk and (at the other end) no provision at all.
• Factors to consider may include initial training data, enhanced training data, input prompts, and what Customer does with the output.