Calfee Connections

Calfee Intellectual Property Partner Bradley S. Pulfer sat down with in-house corporate legal counsel to discuss how they are successfully approaching the need to collaborate with their business units to support innovation, and specifically AI usage. The conversation focused on the need to integrate legal compliance directly into company processes – and keep a “human in the loop” – in order to achieve responsible innovation while avoiding the potential for biased outputs and product safety concerns.

Watch the full video.

Recording from Calfee’s November 2024 CLE seminar, "Securing the Future: AI, Data Privacy, and Cybersecurity for Businesses," hosted by the Intellectual Property Practice Group, Columbus, Ohio.

Video Transcript

Question on screen: How can in-house legal counsel partner with their business units to support innovation while still addressing compliance, ethics and other concerns?

Georgia Yanchar:

It's just sort of an evolution where you just try to get more and more robust and mature in your processes and in your education of the teams as to why this is important. I always try to think of the example, like, just include us. We want to be your BFF. Just ask us at the outset when you're planning to do something. We're not going to tell you no, but we're going to be like that extra lantern that you wish was at the front of the Titanic. If they had just had the lantern and would have seen the iceberg a little sooner, they could have avoided it, right?

That’s our job as legal to just sort of guide them into good, clear water. And so just building that, but that takes process and discipline and education and trust. And that I think is a really big challenge of a small but mighty legal team. When you're greatly outnumbered, and compliance and data privacy and all the stuff around AI is something that we have to do in addition to seeing to 10,000 sales contracts getting created each quarter, right? Like sales is always like the thing, right? Revenue, revenue, revenue. But we have this whole other compliance function.

And so just balancing all of that and getting the resources to do it is kind of what we're trying to balance.

Bonnie Smith:

I think the most important thing about it is, it just needs to be integrated into your existing processes in a company. I mean, we have a common product development process we already have. We have third-party risk assessment, we have product safety, right? So, when a product is going before it becomes customer-facing, AI, I don't think it necessarily needs to be its own question. I think it's a piece of each one of those work streams.

I laugh because sometimes the data privacy comes up a lot. And if we decline use, an AI use that comes through our council, a lot of times it's just a data privacy issue that it doesn't matter that it's AI. It's something with the, I'm not a privacy person, but like a GDPR, right that it’s not going to fly in Europe, but I think the question is just integrating it into existing processes are important. We always say, okay, we approve this as low-risk AI use, but that does not negate your needing to go through all the other processes we have in place as a company. You still need to go through your contract review. You still need to get a security architecture review for vulnerabilities.

I think just as a company, stop treating it like, it's “Oh it’s so different,” and just integrating it into every piece, is the goal.

Georgia Yanchar:

I mean, like Bonnie said, “human in the loop,” making sure that ultimately, decisions that impact humans’ lives are made by humans. But also just watching for it.

I think like having a review with that AI, like we were looking at a product in one of our AI use cases, I think for one of them was sort of matching up people, you have data about who the applicant for like an apartment is. Especially, we have a lot of social housing and affordable housing clients, and there's always so much demand. So, trying to match people up with appropriate homes and things, and it's like, okay, you're assuming that if they don't have kids, they want a small yard? You have to watch for assumptions.

Or, you're recommending things that you're taking into consideration different factors. Your factor might be “Have they ever owned a home before?” Well, it turns out that certain demographics are lot less likely to have owned a home before. So maybe that is a characteristic of your algorithm that is going to result in a biased output. You want to then learn, look at the data set you're getting back, and look to see that it actually is balanced with the demographics and things that you would expect, and if it's not, you want to think about, why is it getting that biased output? What do I need to change about the model or the tool so that it is eliminating the inputs or the data that is resulting in that unfair outcome?

The other thing that's a very hot topic in our industry right now is all the antitrust litigation, which Calfee has been helping us keep across, know. The issue of the price of rent and the price of housing in America is a hot issue. One of our competitors has been very much embroiled in litigation where basically the accusation is that AI is resulting in collusion on setting of rents to the detriment of renters. All of the data from all the different companies that own residential rental units, apartments, is being combined into one big pot. Models are being applied to that where it's combined, and then a price suggestion is shot back out. The property management company has basically no say in setting its price. There's no real human in the loop, according to these complaints, and what's happening is it's restricting supply and increasing price of rents to the detriment of all the consumers in America because they have so much data.

So, AI is basically the proxy for the people in the smoky room in the back. And you have to watch for that. And how those litigations will end, I don't know. I don't have an opinion. I am grateful I am not in them. Knock on wood. But it's interesting. You think there's these ethical issues that come out from use of AI that you have to be thinking about.

Bonnie Smith:

It's interesting to me to hear you talk about it because your situation would be a lot different than ours because you're actually developing tools where the output is going to have some sort of ethical bias issue where I don't think we so much would have customer-facing tools with the issue, but where we're looking at it is in our internal tools that are processing our employee data or our talent team wants to use it. And we've been pretty conservative that we don't enable that technology. So, what we're finding is a lot of existing tools we have now have this new AI functionality that teams want to implement.

And we've really been kind of a little hesitant on it when it's dealing with PII type stuff. The big thing for us is we look at the terms of the vendor. Like if they are offering us some sort of, you know, indemnity or whatever for their bias. We don't want to take any of that on ourselves. So, I would imagine, I am actually glad like, I have safety [concern]. You can have the bias [concern].

To ensure you receive future legal alerts and seminar invitations on related topics, please select the “Subscribe” button at the bottom of this webpage. You can also select the LinkedIn icon next to the Subscribe button to connect with Calfee to ensure you don’t miss future legal blog/vlog posts.

Series:

1. AI Considerations for Corporate Legal Departments Video Series (Part One): How Are Companies Interacting With Emerging Technologies Like AI?
2. AI Considerations for Corporate Legal Departments Video Series (Part Two): What Are the In-House Legal Department Considerations in Branding Their Company's AI?
3. AI Considerations for Corporate Legal Departments (Part Three): What Are the Corporate Legal Department Considerations for Policies Related to Implementing Generative AI?
4. AI Considerations for Corporate Legal Departments Video Series (Part Four): How Are Corporate Legal Departments Balancing Customer Demand and Risk Considerations Related to AI-Enhanced Technologies?
5. AI Considerations for Corporate Legal Departments Video Series (Part Five): How Can In-House Legal Counsel Partner With Their Business Units to Support Innovation While Still Addressing Compliance, Ethics and Other Concerns?
6. AI Considerations for Corporate Legal Departments Video Series (Part Six): What Are Companies Doing to Adjust for the Regulatory Landscape in the AI Space?
7. AI Considerations for Corporate Legal Departments Video Series (Part Seven): How Can Companies Leverage These Emerging Technologies to Improve Legal Operations?

Calfee has one of the largest Intellectual Property and Information Technology practices within a general practice firm in the Midwest. Of the 40+ skilled attorneys, patent agents, and paralegals in Calfee's Intellectual Property practice, more than 30 are registered to practice before the U.S. Patent and Trademark Office. Calfee has nearly 25,000 active patents and trademarks on its dockets, more than 15,000 of which are international. The IP team has handled filings in 190+ countries and has broad experience and a deep bench in prosecution, litigation, opinions, IP business strategy, and counseling.

Calfee, Halter & Griswold LLP is a full-service corporate law firm with 160 attorneys and professionals in five offices in Cleveland, Columbus, and Cincinnati, Indianapolis, and Washington, D.C. Calfee serves clients in the Midwest, nationally and globally in the areas of Corporate and Finance, Employee Benefits and Executive Compensation, Energy and Utilities, Estate and Succession Planning and Administration, Government Relations and Legislation, Intellectual Property, Investment Management Law, Labor and Employment, Litigation, and Real Estate Law. Calfee has been recognized as a leading law firm by Chambers USA 2025 in Antitrust, Banking & Finance, Construction, Corporate/M&A, Employee Benefits & Executive Compensation, Energy & Natural Resources, Environment, Government Relations, Insurance, Intellectual Property, Investment Funds: Regulatory & Compliance, Labor & Employment, Litigation: General Commercial, Litigation: White-Collar Crime & Government Investigations, and Real Estate, and by Chambers HNW 2025 in Private Wealth Law. A founding member of Lex Mundi, Calfee offers international representation through a network of independent law firms with access to 22,000 attorneys located in more than 125 countries. Additional information is available at Calfee.com.