Licensing Artificial Intelligence Systems Rights of Licensor and Licensee, Liability for IP Infringement by AI, Rights to

Product of AI System

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THURSDAY, MARCH 8, 2018

Presenting a live 90-minute webinar with interactive Q&A

Frank A. DeCosta, III, Ph.D., Partner,

Finnegan Henderson Farabow Garrett & Dunner, Washington, D.C.

Eran Kahana, Special Counsel and Fellow, Maslon LLP and Stanford Law School, Minneapolis

Huu Nguyen, Partner, Squire Patton Boggs, New York

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Licensing Artificial Intelligence Systems Rights of Licensor and Licensee, Liability for IP Infringement, Rights to Product of AI System

Frank A. De Costa, III

Eran Kahana

Huu Nguyen

About the Speakers • Frank A. De Costa, III is a partner at Finnegan with significant experience in patent

litigation, client counseling, and providing opinions related to high technology matters. Prior to joining Finnegan, Frank was an engineer at Bell Laboratories and earned a Ph.D. in electrical engineering focusing on neural network-based AI systems for image recognition.

• Eran Kahana is a cybersecurity and intellectual property attorney at Maslon LLP as well as a Fellow at Stanford Law School where he writes and lectures on the intersect between law and artificial intelligence. He has been interviewed on cybersecurity, privacy, and technology law at Bloomberg Law, BBC, KABC radio, Minnesota Public Radio, Twin Cities Business magazine, Star Tribune, TheStreet.com, and Stanford University Radio, KZSU FM.

• Huu Nguyen is a partner at Squire Patton Boggs and is a deal lawyer with a strong technical background. He focuses his practice on commercial and corporate transactions. Before being a lawyer, Huu was an Artificial Intelligence researcher.

6

Scope of Talk

• Introduction to AI

• Intellectual Property Basis for AI products and services

• IP Infringement related to AI

• Determining what rights licensor and licensee have to AI

• What IP challenges must IP counsel overcome when licensing AI systems

• How should potential liability “committed” by the AI-created work be addressed

• How AI licensing agreements differ from traditional software/IP licensing

• What are the rights to the product of AI systems

• Future directions

7

Why is AI Trending?

The accelerating growth of enabling technologies is driving AI development:

• Powerful computing and wide availability of GPUs

• Availability of practically infinite storage and a flood of data, i.e., “Big Data”

• Development of smart algorithms

• Advancements in sensor technology (e.g., image and voice)

Increased need to identify patterns with large volumes of business data

8

The Rapidly Expanding AI Market

“AI market will grow from $8 billion in 2016 to more than $47 billion in 2020.”

- Forbes

“38% of enterprises are already using AI, growing to 62% by 2018.”

- Narrative Science Survey

“a greater than 300% increase in investment in artificial intelligence in 2017 compared with 2016”

– Forbes

9

Trying to Define AI

• Artificial Intelligence: the theory and development of computer systems able to perform tasks that normally require human intelligence, such as visual perception, speech recognition, decision-making, and translation between languages.

• Machine Learning: using algorithms to parse data, learn from it, and then make a determination or prediction about something in the world.

• Deep Learning: uses many-layered Deep Neural Networks (DNNs) to learn levels of representation and abstraction that make sense of data such as images, sound, and text.

10

AI in Today’s World

• Expert Systems

• Autonomous Robots

• Intelligent Assistants

• Embedded Systems

• Artificial Neural Networks

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Classification of AI Apps: Evolution of Car Technology

Level A

Cruise Control

Level B

ADAS

GPS Navigation

Level C

Advanced Driver Assist Systems

Level D

Driverless Car

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Licensing AI Intellectual Property

• Transfer of Rights to IP Assets • Copyrighted works of authorship under 17 USC 101, et. seq. • Patents under 35 USC 101, et. seq. • Trade secrets

• Defend Trade Secret Act (DTSA) of 2016 • Most states have trade secret laws based on the Uniform Trade

Secrets Act.

• Risk Mitigation • Infringement • Misappropriation

13

Who is Getting US Patents for AI?

(CPC G06N, G05B 13/00, OR G05B 15/00)

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Who’s the Inventor?

• Company A develops an AI application.

• Company B buys the AI application and is the owner of the AI.

• Company C provides data and trains the AI.

• Company D allows Company B to operate the AI application on its resources.

• The AI produces something patentable after training. Who’s the inventor?

15

US Patent Inventorship

Current US patent law awards patents to “individual(s)”:

• Under 35 U.S.C. § 100(f) “inventor” means “the individual or, if a joint invention, the individuals collectively who invented or discovered the subject matter of the invention.”

• The Committee Reports accompanying the 1952 Patent Act indicate that Congress intended statutory subject matter to "include anything under the sun that is made by man." S. Rep. No. 1979, 82d Cong., 2d Sess., 5 (1952); H. R. Rep. No. 1923, 82d Cong., 2d Sess., 6 (1952) (emphasis added).

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Capturing AI Inventions at the Source

• Rules/Network Topology

• Training Data Sets

• Hardware/Software Platform Independence

• Sufficiently Enabling Description

• Best Mode

• Trade Secret Features

• Components from Open Innovation Sources

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Patent Eligible AI After Alice Corp. v. CLS Bank International, 34 S. Ct. 2347 (2014)

• The US recognizes that artificial intelligence can include patent eligible subject matter, i.e., USPTO designated Class 706 for Artificial Intelligence.

• AI claims should be drafted to claim more than just an abstract idea.

• The Federal Circuit has found claims directed to AI to include patent eligible subject matter.

• The Federal Circuit has also found claims directed to AI to include patent ineligible subject matter.

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§101 Case Comparison

Vehicle Intelligence and Safety LLC v. Mercedes-Benz USA, LLC, (Fed. Cir. 2015)

• US Patent No. 7,394,392

• Claims methods and systems that screen equipment operators for impairment, selectively test those operators, and control the equipment if an impairment is detected.

• AI: an “expert system” that detects potential impairment in an operator and controls the operation of equipment if an impairment is detected.

• Patent invalid for being drawn to a patent-ineligible concept, specifically the abstract idea of testing operators of any kind of physical or mental impairment.

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U.S. Patent No. 7,394,392 - Claim 8

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§101 Case Comparison

Thales Visionix, Inc. v. United States (Fed. Cir. 2017)

• U.S. Patent No. 6,474,159

• The claims disclose an inertial tracking system for tracking the motion of an object relative to a moving reference frame.

• AI: sensors that calculated the position, orientation, and velocity of an object in 3-D space

• Patent eligible because the claims are directed to systems and methods that use inertial sensors in a non-conventional manner to reduce errors in measuring the relative position and orientation of a moving object on a moving reference frame.

• Claims application or use of data, not just generation

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U.S. Patent No. 6,474,159 - Claim 1

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Written Description and Functional Claiming

35 USC 112:

• (a) The specification shall contain a written description of the invention, and of the manner and process of making and using it, in such full, clear, concise, and exact terms as to enable any person skilled in the art to which it pertains, or with which it is most nearly connected, to make and use the same, and shall set forth the best mode contemplated by the inventor or joint inventor of carrying out the invention.

• (f) An element in a claim for a combination may be expressed as a means or step for performing a specified function without the recital of structure, material, or acts in support thereof, and such claim shall be construed to cover the corresponding structure, material, or acts described in the specification and equivalents thereof.

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Additional § 112(f) Limitations in Software-Related Claims

Programmed computer functions require a computer programmed with an “algorithm” to perform the function

• Specialized functions: functions other than those commonly known in the art, often described by courts as requiring “special programming” for a general purpose computer.

• Ex. “Event detection system that communicates network event information”

• Requires disclosure of an algorithm

• Non-specialized functions: functions known by those of ordinary skill in the art as being commonly performed by a general purpose computer or computer component

• Ex. means for storing data

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Avoid Indefiniteness When Claiming AI

Gradient Enters. v. Skype Techs. S.A., 2015 U.S. Dist. LEXIS 126790 (W.D.N.Y. Sept. 22, 2015)

• U.S. Patent No. 7,669,207; Claim 27

• Skype successfully argued the system claims, Claim 27 and its dependent claims, are invalid under § 112(f) because the patent fails to disclose adequate structure corresponding to the claimed function.

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U.S. Patent No. 7,669,207, Claim 27

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“Designation System”

27

“Event Detection System”

’207 Patent at 1:44-54

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Computer-Readable Medium (CRM) Claim

• The CRM claim is a hybrid of the apparatus and the method claim, having properties of both.

• The CRM claim takes the form of a computer-readable medium storing instructions that, when executed by a computer, cause it to perform a specified method.

• CRM claims remain viable options today—even after Alice Corp. v. CLS Bank Int'l.

• USPTO endorsed CRM claims as patent-eligible by listing CRM claims in its post-Alice Section 101 guidelines on patent-eligible subject matter.

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Example CRM Claim:

US 9,600,929, Claim 4

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Patent Infringement in the U.S.

• “[W]hoever without authority makes, uses, offers to sell, or sells any patented invention, within the United States or imports into the United States any patented invention during the term of the patent therefor, infringes the patent.” - 35 U.S.C.§ 271(a)

• “Whoever” defined as “whatever person” – Webster’s Dictionary

• Cases typically arise where there is some form of human involvement

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AI and Infringement

• Company A develops an AI application.

• Company B buys the AI application and is the owner of the AI.

• Company C provides data and trains the AI.

• Company D allows Company B to operate the AI application on its resources.

• The AI produces something that infringes a U.S. patent. Who’s the infringer?

32

Copyrights

• The U.S. Copyright Act protects “original works of authorship fixed in any tangible medium of expression, now known or later developed, from which they can be perceived, reproduced, or otherwise communicated, either directly or with the aid of a machine or device.” - 17 U.S.C §102(a)

• The “fixing” of the work in the tangible medium of expression must be done “by or under the authority of the author.” - 17 U.S.C §101

• “works of authorship” – undefined in statute but case law restricts this to humans

33

Protecting AI as a Trade Secret

• A fourth type of intellectual property, in addition to patents, trademarks, and copyrights, is trade secrets.

• Consist of information and can include a formula, pattern, compilation, program, device, method, technique or process.

• Must be used in business, and give an opportunity to obtain an economic advantage over competitors who do not know or use it.

• E.g., IBM’s Watson remains a trade secret - Economist

• Examples of AI trade secrets?

• Algorithms and processes whether or not patentable

• Other AI Data such as neural network topology, training data, and sensor data

34

AI Licensing - Current State of Affairs

• No court has addressed AI liabilities

• Scant legislation exists (autonomous vehicles)

• Legacy contract law principles control

• Framing AI liability is still in academic form (e.g., a proto-taxonomy proposed in 2012 – “Artificial Intelligence App Taxonomy and Iterative Liability” Stanford Law School)

35

Agreement Structure – Licensor Perspective

• Narrowly define scope of acceptable use, but remain aware of potential complications from contradicting elements, such as express warranties

• Consider what AI operations might be considered “developments” that need to be retained

• Limit liability for unforeseen consequences

• Cap indemnity and defense to insurance coverage

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Liability

• Applicability of legacy liability principles

• Professional liability models,

• Vicarious liability (agency),

• Products liability (the learned intermediary doctrine)

• Enterprise liability

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Liability (cont.)

• Duty to disclose - how much disclosure? Context dependent

• Foreseeable risk of use – express warranties versus implied warranties

• Risk allocation – Balance depends on the sophistication of the parties; B2B versus B2C

• Future – Setting a duty of care for AI developers; implementing the iterative liability model

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Licenses & Restriction

• License. During the term and subject to the conditions of the Agreement, Licensor grants to Licensee a limited, non-exclusive, revocable and non-transferable license, subject to the terms and conditions set forth in this Agreement, to use the Products (including the Licensor’s AI Data) or Services solely for purposes of [__________]. Licensee shall not use the Products or Services for any other purposes. [Licensee shall be solely responsible for all damages to the Products or arising from Licensee’s data or training used to configure the Products or Services.]

• Licensee shall not prepare derivative works or derivative products based on the Products or Services, or reverse engineer, disassemble, or decompile the Products, including deriving training or sensor data from the Licensor’s AI Data.

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Warranties – Failure of Essential Purpose for Goods

• See UCC § 2-719. Contractual Modification or Limitation of Remedy.

(1)Subject to the provisions of subsections (2) and (3) of this section and of the preceding section on liquidation and limitation of damages,

(a) the agreement may provide for remedies in addition to or in substitution for those provided in this Article and may limit or alter the measure of damages recoverable under this Article, as by limiting the buyer's remedies to return of the goods and repayment of the price or to repair and replacement of non-conforming goods or parts; and

(b) resort to a remedy as provided is optional unless the remedy is expressly agreed to be exclusive, in which case it is the sole remedy.

(2)Where circumstances cause an exclusive or limited remedy to fail of its essential purpose, remedy may be had as provided in this Act. …

This Photo by Unknown Author

is licensed under CC BY-ND

40

Warranties – Limited Warranties

• LIMITED WARRANTY. Subject to the limitations and conditions set forth in Section [___], Licensor warrants to Licensee that for a period of [NUMBER] days from the [Effective Date/[date of installation of the Licensed Software] (the "Warranty Period"): (a) the Products will [substantially] conform in all [material] respects to the specifications set forth in the Documentation, when installed, operated and used [as contemplated by the Parties] [as set forth in the Documentation and in accordance with this Agreement]…

• Issue • Licensor may not want to give any warranty • What about warranty that the product and services comply

with law? • See autonomous vehicle testing license requirements set forth

in https://dmv.ny.gov/dmv/apply-autonomous-vehicle-technology-demonstration-testing-permit

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Warranties - Remedies

• SOLE REMEDY. The limited warranties set forth above apply only if Licensee: (a) notifies Licensor in writing of the warranty breach before the expiration of the Warranty Period; (b) as of the date of notification, is in compliance with all terms and conditions of this Agreement (including the payment of all license fees then due and owing); and (c) has not modified the Products [except as otherwise permitted under the Documentation and this Agreement]. Upon receipt of the notice, if Licensor breaches, or is alleged to have breached, any of the warranties set forth in Section ____, Licensor may, at its sole option and expense, take any of the following steps to remedy such breach: (a) replace any damaged or defective Products on which Licensor supplied the Licensed Software;… (e) terminate this Agreement and, provided that Licensee fully complies with of this Agreement, promptly refund to Licensee the fees paid for the Products. SECTION ____ SETS FORTH THE LICENSEE'S SOLE REMEDY AND THE LICENSOR'S ENTIRE OBLIGATION AND LIABILITY FOR ANY BREACH OF ANY LICENSOR WARRANTY OF THE PRODUCTS.

42

Warranties – Failure to Warn and Assumption of Risk

• DISCLAIMERS. TO THE EXTENT PERMITTED BY LAW, EXCEPT FOR THE EXPRESS WARRANTY SET FORTH IN SECTION ___, THE PRODUCTS AND SERVICES ARE PROVIDED “AS-IS”, “WHERE-IS” WITHOUT ANY WARRANTIES WHATSOEVER; THE EXPRESS WARRANTY HEREIN IS IN LIEU OF ANY AND ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING THE IMPLIED WARRANTY OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, AND THERE ARE NO WARRANTIES, EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OF ACCURACY, AVAILABILITY, OR NON-INFRINGEMENT[; AND LICENSEE ACKNOWLEDGES AND AGREES THAT THE PRODUCTS AND SERVICES ARE NOT INTENDED TO MAKE DECISIONS OR REPLACE LICENSEE’S DECISIONS WITH RESPECT TO [__________], AND LICENSEE USES THE PRODUCTS AND SERVICES AT ITS OWN RISKS.]

• Issue • Isn’t the AI product supposed to provide some level of quality or

accuracy? • Do Licensees want to disclaim the quality of their data and

training?

43

Warranties – Consumer Goods

• If this relates to consumer sales or licenses add:

• SOME STATES MAY NOT ALLOW, SUCH DISCLAIMERS, EXCLUSION OR LIMITATION, SO THE ABOVE DISCLAIMER, EXCLUSION OR LIMITATION MAY NOT APPLY TO THE LICENSEE.

• See the Magnuson–Moss Warranty Act for more details about consumer warranties.

• See also https://www.ftc.gov/tips-advice/business-center/guidance/businesspersons-guide-federal-warranty-law

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AI & Tort Liability

§ 402A Special Liability of Seller of Product for Physical Harm to User or Consumer

(1) One who sells any product in a defective condition unreasonably dangerous to the user or consumer or to his property is subject to liability for physical harm thereby caused to the ultimate user or consumer, or to his property, if

(a) the seller is engaged in the business of selling such a product, and

(b) it is expected to and does reach the user or consumer without substantial change in the condition in which it is sold. (2) The rule stated in Subsection (1) applies although

(a) the seller has exercised all possible care in the preparation and sale of his product, and

(b) the user or consumer has not bought the product from or entered into any contractual relation with the seller.

Caveat:

The Institute expresses no opinion as to whether the rules stated in this Section may not apply

(1) to harm to persons other than users or consumers;

(2) to the seller of a product expected to be processed or otherwise substantially changed before it reaches the user or consumer; or

(3) to the seller of a component part of a product to be assembled. RST 2d of Torts, § 402A

45

Licensor Indemnification

• Indemnification. Licensor shall defend, indemnify, and hold harmless the Licensee, its affiliates, and their respective shareholders, officers, directors, employees, agents, successors, and permitted assigns from and against all losses, damages, … , in connection with any third party claim, suit, action, or proceeding ("Claims") arising out of or resulting from (a) any [material] breach of this Agreement by the Licensor; (b) Licensor's [gross] negligence and willful misconduct, (c) death and bodily injury arising from the negligence or willful misconduct of Licensor[ or strict or product liability relating to Product]; and (d) intellectual property infringement, misappropriation or violation arising from the [use of] the Products or Services, in each case whether or not caused by the negligence of Licensee or any other indemnified party.

• Issue • To make more Licensor friendly, limit to gross negligence and carve

out liability due to Licensee’s provided data, training and bad acts. • Add typical right to furnish a non-infringing replacement or

terminate • To shift more liability to licensor change to “(c) damage to

property, death and bodily injury arising from the Product”

46

Licensee Indemnification

• Indemnification. Licensee shall defend, indemnify, and hold harmless the Licensor, its affiliates, and their respective shareholders, officers, directors, employees, agents, successors, and permitted assigns from and against all Claims arising out of or resulting from (a) any [material] breach of this Agreement by the Licensee; (b) Licensee's [gross] negligence and willful misconduct, (c) death and bodily injury arising from Licensee’s negligence or willful misconduct; (d) all [use] [misuse] of the Products and Services, (e) intellectual property infringement, misappropriation or violation arising from the Licensee’s data and materials and (f) all data and training provided by Licensee, in each case whether or not caused by the negligence of Licensor or any other indemnified party.

• Issue • To make more Licensee friendly, limit to only misuse that arises

from a material breach of the Agreement, and exclude Licensor’s own negligence from coverage.

• To shift more liability to licensor change to “(c) damage to property, death and bodily injury arising from the use of the Product”

47

Indemnification and Negligence

• When the intent is clear, an indemnification agreement will be enforced even if it provides indemnity for one's own or a third party's negligence. See Bradley v. Earl B. Feiden, Inc. 8 N.Y.3d 265 (N.Y. 2007); Levine v. Shell Oil Co., 28 N.Y.2d 205, 212-213 (N.Y. 1971); Rossmoor Sanitation, Inc. v. Pylon, Inc., 13 Cal. 3d 622, 628 (1975)].

• Hypo

• Licensor wishes to limit risks that its Licensee’s use of its drones could harm others even if Licensor is negligent

• It adds the following to the end of the Licensee’s indemnification clause: “… , in each case whether or not caused by the negligence of Licensor or any other indemnified party.”

48

Limitations of Liability

• EXCLUSION OF DAMAGES. EXCEPT AS EXPRESSLY OTHERWISE PROVIDED IN SECTION [___], IN NO EVENT WILL Licensor BE LIABLE UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ITS SUBJECT MATTER UNDER ANY LEGAL OR EQUITABLE THEORY, INCLUDING BREACH OF CONTRACT, TORT (INCLUDING NEGLIGENCE), STRICT LIABILITY AND OTHERWISE, FOR ANY (a) … (f) CONSEQUENTIAL, INCIDENTAL, INDIRECT, EXEMPLARY, SPECIAL, ENHANCED OR PUNITIVE DAMAGES, IN EACH CASE REGARDLESS OF WHETHER SUCH PERSONS WERE ADVISED OF THE POSSIBILITY OF SUCH LOSSES OR DAMAGES OR SUCH LOSSES OR DAMAGES WERE OTHERWISE FORESEEABLE, AND NOTWITHSTANDING THE FAILURE OF ANY AGREED OR OTHER REMEDY OF ITS ESSENTIAL PURPOSE.

• See UCC § 2-719(3). Consequential damages may be limited or excluded unless the limitation or exclusion is unconscionable. Limitation of consequential damages for injury to the person in the case of consumer goods is prima facie unconscionable but limitation of damages where the loss is commercial is not. 49

Limitations of Liability

• CAP ON MONETARY LIABILITY. EXCEPT AS EXPRESSLY OTHERWISE PROVIDED IN SECTION [___], ]IN NO EVENT WILL THE [COLLECTIVE] AGGREGATE LIABILITY OF LICENSOR ARISING OUT OF OR RELATED TO THIS AGREEMENT, WHETHER ARISING UNDER OR RELATED TO BREACH OF CONTRACT, TORT (INCLUDING NEGLIGENCE), STRICT LIABILITY OR ANY OTHER LEGAL OR EQUITABLE THEORY, EXCEED [[NUMBER] TIMES/PERCENT OF] THE TOTAL [OF THE] AMOUNTS PAID [AND AMOUNTS ACCRUED BUT NOT YET PAID] TO LICENSOR UNDER THIS AGREEMENT [IN THE [NUMBER] [YEAR/MONTH] PERIOD PRECEDING THE EVENT GIVING RISE TO THE CLAIM [OR $[AMOUNT], WHICHEVER IS [GREATER/LESS]]]. THE FOREGOING LIMITATIONS APPLY EVEN IF ANY REMEDY FAILS OF ITS ESSENTIAL PURPOSE.

50

Exclusions to Limits of Liability

• Potential mutual carve outs to Limits of Liability:

• Exceptions to Limitations of Liability. The exclusions [and limitations] of in Section [__] and Section [__] do not apply to a Party’s [indemnification obligation or] confidentiality obligations, infringement of a Party’s intellectual property rights, or either Party’s liability for gross negligence or willful misconduct.

• If the agreement is for the sale or license to consumers:

• SOME STATES MAY NOT ALLOW, SUCH DISCLAIMERS, EXCLUSION OR LIMITATION, SO THE ABOVE DISCLAIMER, EXCLUSION OR LIMITATION MAY NOT APPLY TO THE LICENSEE.

• Issue

• Should indemnification be carved out from the limits?

• Who benefits most, the Licensor or the Licensee?

51

Insurance

• Insurance is a good idea for Licensor and Licensees

• Commercial General Liability, E&O, Professional Liability, etc.

• Contractually require insurance

• Additional insured – Who should be covered?

• Some might be statutorily required. See California Vehicle Code section 38750(c)(3); CA DMV Regulations, Sections 227.08 thru 227.14

- $5M of insurance is required for each tester of AV cars

52

AI Data

• “AI Data” means algorithms and processes, data, corpus, training sets, parameters, neural network, rules, sensor data, etc. …

• Trade Secret law is important because copyright law protects the expression of facts, but not the facts themselves. See Feist Publications, Inc., v. Rural Telephone Service Co., 499 U.S. 340 (1991)

• Example is the Light Detection and Ranging (LiDAR) data that is the subject of the Waymo v. Uber suit

• Issue

• Since most AI “knowledge” is stored as data or information, Trade Secret protection is the ideal means for protecting the information

• Having confidentiality provisions is necessary (but not sufficient) to keep information secret.

• But AI Data is likely based on data observations, which by definition was “known by the public”

53

AI Data - Waymo LLC vs Uber Technologies, Inc.

• Waymo [LLC] sued Uber Technologies, Inc. (“Uber”), Ottomotto LLC, and Otto Trucking LLC (together, “Ottomotto”) in the U.S. District Court for the Northern District of California (“District Court”) alleging, inter alia, claims of patent infringement and violations of federal and state trade secret laws. Specifically, Waymo alleges that its former employee, Mr. Levandowski, improperly downloaded thousands of documents related to Waymo’s driverless vehicle technology and then left Waymo to found Ottomotto, which Uber subsequently acquired. Waymo LLC v. Uber Techs., Inc (Fed. Cir. 2017); http://www.cafc.uscourts.gov/sites/default/files/opinions-orders/17-2235.Opinion.9-11-2017.1.PDF

• The Waymo case is a trade secret misappropriation dispute related to a departing employee but is informative for licensing and protection of AI Data

54

AI Data - Waymo LLC vs Uber Technologies, Inc.

• Waymo asked for $1.859 billion for Trade Secret 25 … and less for the remaining trade secrets. Waymo LLC v. Uber Techs., Inc. (Waymo I), No. 17-cv-00939-WHA (JSC), 2017 WL 2485382; https://www.documentcloud.org/documents/4059938-1778-Waymo-s-Opposition-to-Defendants-Mtn-to.html

• February 2018, Uber agreed to pay Waymo $245M to settle the suit.

• https://www.reuters.com/article/us-alphabet-uber-trial/waymo-accepts-245-million-and-ubers-regret-to-settle-self-driving-car-dispute-idUSKBN1FT2BA

55

Confidential Information and Contractual Protections

• Exclusions from Confidential Information. Except as required by applicable federal, state, or local law or regulation (“Law”), and except for [Licensor’s] [or Licensee’s] AI Data which will remain confidential, the term “Confidential Information” as used in this Agreement shall not include information that falls within the following exceptions (“Confidentiality Exceptions”): (a) at the time of disclosure is, or thereafter becomes, generally available to and known by the public other than as a result of, directly or indirectly, any act or omission by the Recipient/Licensee or any of its Representatives; …

56

Aggregate Data

• Aggregate Data. Licensor shall own the aggregate and statistical data Licensor collects regarding Licensee's use of the Products and Services (“Aggregate Data”) and such Aggregate Data shall be considered the Confidential Information of Licensor, provided that any such data shall contain no reference to and shall not be [directly] attributable to the Licensee or be usable for deriving the Licensee’s AI Data[, provided that, such Aggregate Data may be used to determine demographics and other non-personal information.]

• Hypo • Licensor wants to collect “aggregate” face image data so it can

sell the data as another source of income. • Issue

• Licensees have an interest in protecting their data • How to balance Licensee’s and Licensor’s interests?

57

AI Creation? Right to Products of AI Systems

• Ownership of an authored work is protected by copyright and can be protected (subject to certain conditions being met) under trade secret law

• AI has no legal rights

• AI cannot (yet) be a legally-recognized author of a copyright nor owner of a trade secret

• Absent a contrary agreement, AI-created data is owned by the owner of the AI

• AI cannot infringe – infringement is directly attributable to owner/licensee of AI tool

58

Ownership of AI Inventions

• As AI becomes more developed, inventorship/ownership questions will arise.

• When it comes to AI, draft agreements that contemplate:

• Who owns the invention created by AI

• Whether to restrict AI access to training data sets

• Indemnification

59

Is a Monkey’s Selfie Copyrightable?

60

Is a Monkey’s Selfie Copyrightable?

• No?, “there is no mention of animals anywhere in the Copyright Act.”

• Supreme Court and Ninth Circuit

repeatedly interpreted the Act to refer to “persons” or “human beings.”

• Extending copyright protection to

animals is up to Congress and the President.

• Settled before 9th Circuit Decision Naruto, et al. v. David John Slator (N.D.Ca. 2016)

• What does this mean for AI?

61

Conclusion

• Understand the fundamentals of IP and tort liability

• A holistic approach and creative drafting are necessary

• frank.decosta@finnegan.com

• Eran.Kahana@maslon.com

• @cyberlawyering

• Stanford Law School Blogs/CodeX

• Huu.Nguyen@squirepb.com

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