Don’t ignore the data ownership problem in your contracts.
Ownership is a legal status. The party who owns something has title, and with that title comes specific rights. If the title is to intellectual property, the owner has the right to exclude others (patents and trade secrets) or the exclusive right to do things (copyright and trademark). Parties can also own other property, like goods, buildings, and land.
Most AI contracts refer to data ownership, but the party with the data rarely meets the legal definition of ownership. Instead, that party has control. They collected, enhanced, and stored the information themselves or received it from someone who did. Subject to any legal or contractual restrictions, the party with the data can use and share that data with others.
Talking casually about owning data is not a big deal in many situations. It is a big problem when we do it in contracts. Contracts define the relationship with the counterparty. Inaccurate ownership claims may expose us to implied warranties and an inability to enforce incorrect terms on their face.
Here are four ways to draft better data provisions:
Focus on rights and usage, not ownership. Skip the ownership debate when no IP is involved. Define what each party can do with the data. Can they analyze it, store it, share it with third parties? Be precise about how long the rights last.
List prohibited uses. Get specific about what the counterparty cannot do with the data. Align with applicable legal restrictions and consider going beyond them, like prohibiting use of the data to develop competing products.
Create accountability. Standard audit rights may not be enough. Compliance certificates or data logs showing how the data is used can give you better visibility than after-the-fact audits.
Customize your remedies. Typical termination and breach claims may leave you exposed when data is misused. Update the contract to provide a clearer path, especially when misuse also creates legal exposure.
Your contract should address what matters. Avoid the imprecise messiness of relying on ownership. Define what rights each party has and what they can do with the data.