Artificial Intelligence (AI) has sparked significant interest and witnessed rapid growth, thereby becoming a vital focus of technology transactions. Remarkably, the inherent standard acquisition agreement seems not to have matched the pace and demand of AI companies. These modern tech entities pose unique risks to potential buyers, risks that a standard transaction approach may fail to tackle. These challenges are often linked to AI’s reliance on data and the ever-evolving nature of its insights.
As a result, potential buyers of AI companies should contemplate tailoring standard merger and acquisition agreements to cater to AI-specific attributes and issues. This critical advice comes from the team of experts at Orrick, Herrington & Sutcliffe LLP, an internationally recognized law firm specializing in tech transactions.
When considering these transactions, five potential pitfall areas demand particular attention. They are:
- Insurance coverage complexities
- Data privacy regulations and compliance
- Intellectual property rights pertaining to AI software and algorithms
- Third-party dependencies such as cloud service providers or platform-hosting entities
- Probable future operational costs and the investment required to maintain, upgrade, or adapt the AI technology
While AI technology presents remarkable opportunities for businesses, the potential complexities involved in AI transactions are equally daunting. Hence, appropriate due diligence, well-tailored contractual agreements, and insightful legal advice are paramount for successful transactions involving AI. This topic underlines the importance of understanding and adapting legal strategies in an age marked by rapid AI expansion.
For the complete, original analysis of the topic discussed, refer to the paper “Transactions in the Age of Artificial Intelligence: 5 Potential Pitfalls to Consider” as published on JD Supra.