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How Can Your Business Protect Itself From AI-Related Liability?

Ivory Law Group

 

Tech-forward companies move fast. We’re in an age of innovation. When new tools hit the market, the smartest companies don’t sit back—they test, adapt, and integrate.

Artificial intelligence is no different. It’s a force multiplier when used correctly. But like any powerful tool, AI carries risk. The goal isn’t to avoid that risk—it’s to understand, manage, and mitigate it. Waiting on the sidelines out of fear won’t cut it in today’s environment. Corporate executives and general counsel who understand how to lean into AI without letting it sink the ship will lead the next wave of innovation.

AI is a Tool for Creation, Not Copying

Using AI to create doesn’t mean handing over your intellectual property strategy to a machine. Generative AI can draft code, write ad copy, develop product images, and more. But if it pulls from protected sources without permission, your business could face claims for copyright or trademark infringement. Those claims aren’t hypothetical—lawsuits are already underway across industries and borders.

Some companies try to avoid that entirely by banning AI. That’s not a strategy (or at least not a forward-thinking one). Instead, businesses should ensure their teams and vendors use tools with clear licensing policies and outputs that don’t replicate or remix existing protected works. Your people still need to act as the gatekeepers. Originality and risk mitigation can live in the same house if you stay proactive and build policies around both.

Bias is Often Built Into Programming (And AI is No Exception)

If your AI-driven hiring tools or performance evaluations replicate human bias, the liability is yours. Just because software does the screening doesn’t mean you’re shielded from claims under federal employment laws. Many AI platforms train on biased data sets because of bias built into the programs by humans who carry those biases themselves. That creates an algorithmic echo chamber that reinforces discrimination—sometimes based on race, gender, disability status, or other protected characteristics.

Companies using AI in HR functions should regularly audit their systems, document oversight processes, and ensure human review before making final decisions. This isn’t about avoiding AI—it’s about ensuring your use of it aligns with legal requirements and your company’s values.

Protecting Client Data and Information in the Age of AI

On top of concerns about IP infringement, AI tools that ingest client data introduce confidentiality risks. The wrong settings, tools, or shortcuts could create vulnerabilities no one intended. Companies, especially those working with sensitive or regulated information, should make it a priority to establish and enforce strict AI data use policies. Confidentiality isn’t negotiable, and AI doesn’t excuse breaches.

Insurance as a Failsafe for Outstanding AI Use Questions

Standard business insurance wasn’t built with AI in mind. That’s starting to change. Some carriers have begun adding exclusions for AI-driven discrimination or IP violations, but widespread changes haven’t fully rolled out yet.

Now is the time to review your policies. See what coverage exists under current Errors and Omissions or Directors and Officers insurance. Look into supplemental options that anticipate the direction these claims are heading. The market will evolve in response to litigation, and proactive companies can stay ahead by choosing carriers that understand the tech landscape—and underwriting accordingly.

Modern Legal Insights for Modern Innovators

AI isn’t going anywhere—and neither are the legal risks that come with it. Ivory Law Group helps growth-stage tech companies create tailored legal strategies to harness the benefits of AI while managing exposure. We partner with companies and their internal legal teams to implement personalized legal solutions that keep innovation moving forward rather than scaling it back. Contact Ivory Law Group today and move forward with confidence in the age of AI.

*Disclaimer: The content provided in this blog is for informational purposes only and does not constitute legal advice. Reading this blog does not create an attorney-client relationship with Ivory Law Group or any of its attorneys. For legal advice, please consult with a qualified attorney directly.

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Ivory Law Group

We provide fractional general counsel support for growth-stage companies, offering flexible coverage across commercial transactions, contracting, governance, capital raising, M&A, employment matters, and legal operations. Our model delivers the legal support companies need, without the cost or commitment of a full-time hire.