Generative artificial intelligence and M&A: New challenges in intellectual property protection

What is Generative Artificial Intelligence?

Generative AI refers to AI systems capable of creating new and original content, such as texts, images, music, or even software, from existing data. This technology uses advanced algorithms and deep neural networks to generate results that appear to have been created by humans. Well-known examples of generative AI include tools like ChatGPT (for text generation), DALLE (for image creation), and CODEX (for generating programming code).

Generative AI’s ability to produce original, often high-quality content is changing the way businesses innovate, create products and services, and manage their intellectual assets.

The Impact of Generative AI on Mergers and Acquisitions

In the context of M&A, generative AI can play a key role at various stages of the process, from preliminary research to post-acquisition integration.

For example, during the Due Diligence phase, AI algorithms can be used to analyse large volumes of data, identify patterns, and generate detailed reports to facilitate decision-making. However, the use of generative AI in these operations also introduces new risks and legal challenges that must be carefully understood and managed.

One of the main challenges in M&A transactions involving generative AI is the issue of intellectual property. Intangible assets, such as patents, copyrights, and trade secrets, are crucial for many tech companies and are a key factor in the value of a transaction. When a company uses generative AI to create new products, code, or content, the question arises of who owns the intellectual property rights to those creations.

Who Owns the Copyrights of AI-Generated Creations?

One of the most complex issues in intellectual property is the ownership of copyright in AI-generated works. According to current legislation in many countries, copyright traditionally belongs to a person or legal entity that has created an original work. However, since generative AI is not a human entity, doubts arise about whether a machine or AI system can be considered the “author” of a work and, therefore, the holder of those rights.

In Spain, the Intellectual Property Law states that copyright can only be attributed to natural persons, which means that creations generated by AI cannot be protected by copyright in the same way as those created by humans. In this context, companies using generative AI to develop products or services must have clarity on who holds the intellectual property rights to the resulting creations.

Typically, in a business environment, the rights to works generated by AI are attributed to the company that owns the AI or the person who developed or trained the AI model. However, negotiations regarding the ownership of AI-generated creations should be clearly specified in M&A contracts to avoid potential post-acquisition disputes over the ownership of these intangible assets.

The Use of Generative AI and Trade Secrets

Another key aspect in the protection of intellectual property in M&A processes is the management of trade secrets. Trade secrets include valuable information for a company, such as formulas, processes, designs, or business strategies that are not public knowledge. During the M&A process, companies often share confidential information with potential buyers to facilitate the transaction’s evaluation.

However, using generative AI to process and analyse this data presents an additional challenge. If AI is trained with trade secrets and used to create new products or solutions, the question arises of whether these AI-generated results should also be considered trade secrets. Companies must be very cautious about how their AI models handle this sensitive information. Additionally, non-disclosure agreements (NDAs) should be adapted to include specific clauses related to the use of generative AI and the protection of trade secrets.

Patents and Creations Derived from Generative AI

Another legal challenge in M&A is the issue of patents. Companies developing innovative technologies based on generative AI may create patentable inventions, whether in software, electronic devices, or even industrial processes. However, patenting an invention created with the help of generative AI can raise controversy over patent ownership.

Generally, the patent of an invention belongs to the person or entity that made the invention, which could include the programmer who designed the AI system. However, in the case of an autonomous invention generated by AI, it may be necessary to review national and international patent laws to determine whether an AI can be considered an inventor or if the patent should be attributed to the company that developed or commercialized the technology.

Challenges in Negotiating M&A Agreements

Integrating generative AI into M&A processes requires a thorough review of the agreements formalizing the deal. Companies must ensure that intellectual property rights related to generative AI are clearly defined, both in terms of ownership and use. This includes addressing the ownership of AI-generated assets, rights to future creations, and potential issues related to third-party intellectual property infringement.

Additionally, in M&A negotiations, buyers will need to carefully assess whether intellectual property assets related to generative AI are well protected, if there are potential patent or copyright conflicts, and whether existing contracts in the acquired company adequately address these aspects.

Conclusion

Generative AI is presenting new challenges in intellectual property protection in the context of M&A. As companies adapt to this disruptive technology, legal aspects of intellectual property, such as copyright, patents, and trade secrets, must be carefully considered. M&A transactions involving generative AI should include detailed agreements that clearly establish ownership of rights to AI-generated creations and how intangible assets will be managed during the integration process. The key to avoiding future disputes lies in proper planning, strong negotiation, and robust intellectual property protection.

At ILP Abogados, we have a team of experts in M&A and intellectual property who can advise you on the legal aspects of M&A processes involving generative AI.

If you are interested in more information or need legal advice on any matter related to M&A and intellectual property, please feel free to contact us.

If you liked this article, you may also find it interesting to read the following one:

Artificial Intelligence and M&A: A New Ally in Decision-Making

Contacto No te quedes con la duda, contacta con nosotros. Estaremos encantados de atenderte y ofrecerte soluciones.