As general interest and investment in AI has accelerated since the initial public launch of ChatGPT, so too has the U.S. federal government both increased its spending in the area[i] and the speed with which it adopted guidelines on the utilization of AI more generally.[ii] This tracks other actions outside the U.S.,[iii] and anticipates corresponding initiatives at the state and municipal levels.[iv]Continue Reading AI Considerations in Government Contract-Related M&A Transactions
Is your M&A target a company that develops or uses artificial intelligence (“AI”) tools? AI, and generative AI technologies specifically, are powerful business tools but present novel legal issues in the context of M&A transactions. It is increasingly important to identify and understand the unique legal risks associated with the use of AI technologies, tailor your diligence to investigate them and include AI-specific reps and warranties in your deal documents. To effectively do this, it is important to have someone well-versed in AI technology and the associated legal issues on the deal team. Many subtle issues, if not properly understood and addressed, can lead to liability and/or loss of business value. The attached article addresses the expansion of due diligence, beyond standard tech diligence, to include the analysis of AI tools developed or used by the target. It covers some of the key AI-specific legal issues to consider in M&A, but the issues in each transaction will be unique depending on the target company’s involvement with AI. Once you understand the target company’s involvement with AI, it is important to consider the unique legal issues and the diligence needed beyond the standard diligence questions.Continue Reading M&A Transactions: Diligencing AI Issues with Target Companies
Is your M&A target a manufacturing company with automated production, a consumer products business with online sales and marketing or an education company that creates content for students? The increasing use and development of artificial intelligence (“AI”) systems and products, particularly generative AI, has created risks for businesses using such tools. AI plays a role in many industries and businesses whose products and services are not themselves AI. In the context of a M&A transaction, it is important to identify and allocate responsibility for these risks. Risks of AI may include: infringement (including through use of training data as well as outputs), confidentiality, IP ownership and protection (including limits on protection of IP generated by AI), regulatory (e.g., privacy, recent AI related legislation), and other risks arising from use such as indemnity obligations or managing contractor use of AI.Continue Reading M&A Transactions: Drafting AI Representations and Warranties for Non-AI Companies
The use of artificial intelligence (AI) is booming. Investors and companies are pouring cash into the space, and particularly into generative AI (GAI), to seize their share of the market which McKinsey reports could add up to $4.4 trillion annually to the global economy. Some companies are investing tens or hundreds of millions of dollars or more into GAI. Whether companies are building their own AI technology and training their own AI models, or leveraging third party tools, there are significant legal issues and business risks that directors need to consider as part of their fiduciary obligations and corporate governance. Five of the top issues to understand and consider are addressed in this article. Many other issues can arise. A wave of litigations and enforcement actions has swelled. Boards should get educated on these issues and ensure appropriate policies and corporate governance are implemented to manage the business and legal risks.Continue Reading 5 Things Corporate Boards Need to Know About Generative AI Risk Management
A new bill, the Token Taxonomy Act was introduced to congress to amend the Securities Act of 1933 and the Securities Exchange Act of 1934 to exclude digital tokens from the definition of a security, to direct the Securities and Exchange Commission to enact certain regulatory changes regarding digital units secured through public key cryptography, to adjust taxation of virtual currencies held in individual retirement accounts, to create a tax exemption for exchanges of one virtual currency for another, to create a de minimis exemption from taxation for gains realized from the sale or exchange of virtual currency for other than cash, and for other purposes.
Continue Reading New Effort to Exempt Crypto Currency from Certain SEC, Tax and Other Regulatory Burdens
The SEC has opined that, depending on the facts and circumstances of each individual ICO, the virtual coins or tokens that are offered or sold may be securities. If they are securities, the offer and sale of these virtual coins or tokens in an ICO are subject to the federal securities laws.
Continue Reading SEC Declares That Initial Coin Offerings (ICOs) May Be Securities; Finds DAO a Security