Artificial intelligence (“AI”)Artificial intelligence (“AI”) is swiftly permeating all aspects of the fashion industry – from supply chain operations, including improved visibility into future demand, to the creative process, where text-prompts can give rise to new designs, and even the models, which brands can developed virtually and use to showcase a wider range of sizes and styles. At first blush, AI – and in particular, generative AI, a type of AI that is capable of generating text, images, or other media, using large language models like ChatGPT – appears to be an incredibly disruptive technology that brings with it significant gains for those brands that embrace it early, but doing so is not without risk. In light of the potential for reputational, financial, and legal exposure that comes with the adoption of AI, brands must approach this technology with care, from both an ethical and business standpoint.
The main way that brands can protect themselves from disputes and other issues in relation to their use of AI is to carry out proper due diligence on the AI platforms they are working with and to ensure that any contracts with AI service providers are negotiated with the involvement of technical experts and lawyers with appropriate expertise. This includes careful attention to the relevant intellectual property (“IP”) elements. For any company, IP is likely to be at the center of its strategy to futureproof the business. At the same time, since IP is a key source of uncertainty when it comes to AI, it is the source of potential disputes for companies making use of such technology.
The output of generative AI systems, for example, may consist of creative content for branding, clothing designs, and images of catwalk models, and may have multiple roles within a business. One of the most critical questions when it comes to the use of generative AI platforms is whether a brand can rely on the IP in the AI-generated outputs as being owned by the brand, and whether a brand will be exposed to infringement claims by third parties if it deploys that output. This represents a very real risk and the answer to this question will depend on, among other things, the contractual arrangements between the parties in question, and how the law evolves to deal with ownership and infringement in the context of AI-generated works. (Questions of infringement, both in the input and output stages, are currently being considered by courts.)
Beyond IP, there is a myriad of other points that companies should considered carefully before integrating AI into their business. Has sufficient due diligence been carried out on the external AI service provider and their services? What is the supplier actually agreeing to provide, and what objective, measurable, standards will they be held to? How will you determine whether or not the AI is functioning properly, especially given that large language models are complex systems that typically come with little transparency as to how they work (both in terms of training and output)? Is the supplier being held to appropriate ethical and data-related standards?
These questions are important not only from the perspective of a brand’s legal and financial exposure, but also for protecting its reputation.
It is also worth considering how disputes involving AI might be best resolved. This is an area in which confidential arbitrations, as opposed to public court proceedings, are often chosen in dispute resolution clauses, particularly in view of the confidentiality concerns around the personal data of customers, as well as the fact that suppliers are keen to keep the workings of their AI systems out of the public domain in order to avoid making this information available to their competitors. All the while, limiting the resolution of disputes to confidential arbitrations provides companies with the added benefit of reducing the scope for negative media attention.
Often, the starting point in any commercial dispute is the contract, and the position is no different with AI. As a result, the need for companies to get these contracts right is paramount.
Lizzie Williams is a dispute resolution lawyer at Harbottle & Lewis LLP with experience in fashion, retail, and technology disputes.