Areas of Service

GENERAL BACKGROUND

Artificial Intelligence (“AI”) is an umbrella term that may refer to a range of technologies including Machine Learning, Cognitive Computing, Deep Learning, Predictive application programming interfaces (APIs), Natural Language Processing (NLP), Image Recognition and Speech Recognition. The International Data Corporation forecasts that the Indian market for AI software, hardware and services, worth USD 3.1 billion in 2020, will grow to USD 7.8 billion by 2025.¹ The AI may largely be a B2B (business-to-business) dominated market, however there are B2C (business-to-customer) AI offerings out there as well, such as AI-enabled self-driving cars. There are different categories of stakeholders in the AI industry. There are AI platforms such as IBM, Google, Meta, Infosys and other Big Tech companies which offer variations of plug-and-play AI services. They also act as AI enablers by offering the AI infrastructure / framework solutions for business to build their products or services on. Further there are companies which use AI in their own AI enhanced products and services such as autonomous car manufacturers, voice assistant product providers, etc.

NDA has been proactive in cultivating expertise in the AI industry including on machine learning and deep learning, predictive software, image/speech recognition solutions. We have assisted our clients on various legal and regulatory issues that arise with the deployment of AI solutions such as attribution of liability, protection of intellectual property such as licensing and ownership, data transfer and privacy concerns, and enforcement aspects. Our research-oriented approach has helped us to be at the forefront of any new technology and the legal implications of deploying the same. We blend our cross-practice expertise panning legal, tax and regulatory expertise to advice on complex issues and evolving innovative business models.

We have a dedicated disruptive technology practice which extensively focuses on new-age legal and regulatory issues. A unique contribution to our ability comes from the fact that some of the team members have gained experience in the technology industry prior to joining NDA, and thus bring a lot of value additions to the team in terms of industry knowledge.

LEGAL AND REGULATORY FRAMEWORK APPLICABLE TO THE AI INDUSTRY

The important legal and regulatory aspects that arise with deployment of AI are as follows:

• Recognition of AI in India: The push towards awareness and adoption of AI has increased over the years. The Ministry of Electronics and Information Technology in a joint initiative with the National e-Governance Division (NeGD) and the National Association of Software and Service Companies (NASSCOM) have established a research and information database called INDIAai.² The National Institution for Transforming India i.e. NITI Aayog had published a National Strategy for AI in 2018 proposing a two-tiered research infrastructure to be set up at the national level to develop understanding as well as collaborating with private players for deploying application-based research.³ It published a further document titled ‘Responsible AI’ in February 2021 which detailed ethical considerations and principles for responsible deployment of AI.⁴ A second document was published later that year focusing further on the role of the government and private parties in taking the industry forward.⁵ The Department of Telecommunications has also introduced Guidelines for Registration Process of M2M Service Providers requiring them to register with licensed telecom service providers and comply with certain technical, security and encryption conditions.⁶

• Legal Personality: Legal personhood is invariably linked to individual autonomy, but has however not been granted exclusively to human beings. The law has extended this status to non-human entities as well, whether they are corporations, ships, and other artificial legal persons. The question of whether legal personhood can be conferred on an artificially intelligent entity boils down to whether the entity can and should be made the subject of legal rights and duties. The essence of legal personhood lies in whether such entity has the right to own property and the capacity to be sue and be sued. Though, not always codified, we have evaluated global jurisprudence on such issues including legal personhood to machines, rights on intellectual property created by computing etc.

• Intellectual Property: AI is a treasure-house of creativity and knowledge of developers and thus intellectual property rights arise as one of the core issues in the industry. Under the Copyright Act, 1957, it is to be determined whether an AI would be deemed to be an ‘author’ given the uncertainty over there being a legal personality. Interestingly, the copyright office had recognized an AI tool as the co-author of a copyright-protected artistic work for the first time in India in August 2021.⁷ However, it was reported that the copyright office later issued a withdrawal notice and enquired about the legal status of the AI.⁸ Similarly under the Indian Patents Act, 1970, there is no express requirement of an inventor of a patent to be a natural person, and hence it would be interesting to see how jurisprudence would evolve on an AI being able to make a patent claim. There are also questions that arise on whether an AI can be a “proprietor of a new or original design” under the Designs Act, 2000.

• Data Protection: AI systems are increasingly involved in functions such as data analytics, healthcare, education, employment, internet of things, transportation, etc. and this has resulted in AI being able to access a vast repository of Personally Identifiable Information (“PII”). With the rise in popularity of voice assistants such as Siri (Apple), Alexa (Amazon) and Cortana (Microsoft), and enormous increase in the use of predictive technologies by advertisement publishers to use such PII to identify behavioral patterns of individuals and accordingly put forward a targeted advertising which is preferable to the concerned individual, the privacy implications of using such PII becomes equally huge. The right to privacy is held to be a fundamental right under the Constitution of India as affirmed by the Supreme Court in K S Puttaswamy & Anr. v Union of India & Ors.⁹ The Government of India is also deliberating on a Data Protection Bill, 2021 provides for the creation of a sandbox to encourage innovation in AI wherein startups would be granted relaxation to certain compliances under the Data Protection Bill, 2021 to deploy and test various technological applications of AI.

• E-contracts: The ability to form contractually binding relationships trace back to the debate of giving AI entities a legal personality. The validity of contracts formed through electronic means in India can be derived from the Information Technology Act, 2000. This act also provides legal recognition to electronic records. The contents of electronic records can also be proved in evidence by the parties in accordance with the provisions of the Indian Evidence Act, 1872. With the evolution of AI, blockchain and smart contracts, the possibility of an AI entering into a contract of its own volition has become more prominent. Core elements of a valid contract under the Indian Contract Act, 1872 and the determination of AI as a ‘legal person’ under the said act becomes an important question to determine enforceability of an e-contract.

• Accountability and Liability: The last and probably the most significant core issue surrounding AI is how to attribute liability to AI in cases of damage. At present, there is a lack of legal jurisprudence when it comes to “standard / duty of care’ with regard to AI systems along with “product liability”. Whether an AI owes a duty/standard of care becomes important to gauge when imputing responsibility / liability upon an AI for a supposedly negligent action or faulty decision making which results in actual consequences e.g., a facial recognition algorithms run by deploying AI technology by law enforcement agencies may be erroneous or biased and may lead to wrongful arrests or initiation of criminal proceedings.¹⁰ There have been instances where organizations have suspended use of their AI tools due to faulty decision making or due to public backlash in the aftermath thereof. There are arguments put forth that that if AI would be fully autonomous (such as super-intelligence), then they must be aware of their actions. If they are aware of their actions, they must be liable for their actions. However, the challenge is attributing legal personality to AI to in turn attribute liability to an AI’s actions. In cases of criminal liability, the criminal conduct (actus reus) and the internal or mental element (mens rea) are both required to be established. Whether these elements should be attributed to an AI independently or whether the programmer of the AI would be attributed to these elements would depend on the various theories of liability one would refer to.

CONCLUSION

In an age where autonomous cars, autonomous robots, predictive advertisements, etc. have become reality, it is no more the time to look at AI as a subject of interest of the future but as a technology that is integral to the present. As per a December 2021 report, 27% of companies already use AI in their customer service functions and 25% of companies use AI in their finance related functions, both of which are key business functions for organizations. Thus, any deployment of AI must always accompany a thorough assessment of its impact under various existing legal and regulatory constructs in the absence of a developed jurisprudence.