Recently I read a publication by the World Intellectual Property Organisation (WIPO) titled ‘Generative AI – Navigating Intellectual Property’ which was released this year. This was an interesting read for me as it highlighted the opportunities that are created by the advent of this Generative Artificial Intelligence (gen AI) technologies which some have equaled to the invention of the steam engine, or electricity. But as is always the case, where a great opportunity arises, it also presents some risks that needs to be mitigated and managed effectively.
Simply put, a gen AI tool can ‘generate’ (hence the term generative) new content which could be in the form of text, images, videos, computer audio, sound or music as a response to a prompt that is given by a user. This prompt can be in the form of a verbal prompt or a short-written description of the desired output. An example of such a prompt could be “generate an image expressing the integration of intellectual property management into corporate governance for a board of directors showing visuals of AI”. I’ll be the first to admit, that’s quite a lazy prompt but this is just to prove a point – that’s the prompt that generated the image I used on this post.
When considering the risks associated with the utilisation of the gen AI technologies, the question around the legal ownership of the material that is generated by these technologies is still quite unclear and the generated works have intellectual property (IP) in them. An example of the practical consideration could include the question of whether the image I created using the prompt above belongs to me as the person that crafted the prompt? Or is it owned by the person or company that developed the gen AI tool? Or does it belong to the tool itself? Which raises another set of questions, can the tool own IP? All of this is beside the point, at least for the purposes of this discussion anyways, as the key question is how these technologies can be detrimental to the company.
The WIPO publication noted that businesses using gen AI tools must be careful not to inadvertently give away trade secrets or waive confidentiality in commercially sensitive information if such data is used for training or prompting an AI tool. One of the key risks that was identified was the fact that most gen AI tools do save and train using user’s prompts. If the prompt is as simple as the one I used above – then we can perhaps agree that this is possibly harmless and there is not much risk that the organisation could be exposed to. The conversation changes drastically if a user includes confidential or proprietary information as part of the prompt. In that situation, confidentiality or proprietary information could be exposed because the AI tool will not only have a copy of the information within its resource base, but also it could use such information as part of the future outputs that will be generated by the AI tool in response to prompts by other users.
The mitigation measures that can be taken to guard against this potential loss of confidential or proprietary information could be checking and ensuring that the settings on the gen AI tools do not store nor train the AI model using your prompts and better still, to consider utilizing gen AI tools that operate and are stored on a private cloud. Many companies such as Microsoft and Google offer these private cloud services.
The appreciation and the setting up of plans for these risks does not happen by chance, it requires the boards to proactively take action to safeguard the interests of the organisation. Within the South African context, Principle 4 in the King IV Report states that the governing body should appreciate that the organization’s core purpose, its risks and opportunities, strategy, business model, performance and sustainable development are all inseparable elements of value creation process. It is the responsibility of the board to ensure that there are systems and processes in place that will harness maximum potential from the available assets and tools to drive the strategy of the business whilst unlocking opportunities that will benefit the entity. Gen AI tools can be and are being used to drive productivity and enhance service provision in many companies and the board is responsible to ensure that exploitation of these technologies is done in an ethical manner. The board carries the mandate of ensuring that it approves policies and operational plans that would give effect to the company strategy.
Furthermore, Principle 11 of the King IV Report recommends that the board must ensure that there is suitable risk governance framework in place that encompasses the opportunities and associated risks linked to the strategy as well as the potential positive and negative effects of the same risks on the achievement of organisational objectives. Certainly, in the adoption of and exploration of these gen AI technologies, the tone on managing and mitigating the risks must be driven from the top and systematically cascaded down to all employees to support wholesome value creation process.
One of the uncertainties that is surrounding works that is generated by gen AI tools is not only the lack of clarity on the ownership of generated IP but also the issues of IP infringement on materials that is generated by gen AI tools. There are quite a few cases that are before the courts across the world where owners of IP are effectively suing for IP infringement on the works generated by AI. In spite of the risk challenges associated with the use of gen AI technologies, the value of innovation that can be achieved by harnessing these powerful tools cannot be overstated. There is therefore a sound business case for the management of innovation and IP to be deeply embedded in the corporate governance framework of the organisation to ensure that as the company in developing or refining its strategy, it incorporates components of innovation and IP management which is key in this increasingly knowledge-based economy.
The board, in exercising its oversight role in the implementation of a board approved strategy by the executive, it must have mechanisms in place to have a senior executive championing this crucial aspect of the company’s strategy with a direct reporting line back to the board through the chief executive officer. The board must ensure that there is a regular IP risk assessments done that would look at the potential losses that a company would incur.
With this in mind, boards and executives can explore the following ideas to begin the journey of fully integrating innovation and IP management into corporate governance structures of the company to ensure wholesome value creation processes:
- Education & Training
It is critical that all members of the board and executives have a good understanding of what is IP and its strategic importance to the business. These trainings can also highlight how innovation and generation of IP can be enhanced with tools like gen AI in a responsible manner that does not compromise the company. These sessions must be conducted on an on-going basis as part of knowledge-sharing discussions for the board.
- Conducting an IP & Technology Audit
Having gained an understanding on the subject matter, it is important for companies to undergo through a process of discovering the IP that is within their portfolios; understand the value of that IP, determine if it is being effectively utilized, and what opportunities and risks can be explored from such IP. It would be useful to also understand the technologies that are being used in the business and the extent to which they have been deployed.
- Review or Adoption of IP; Innovation; and Technology Policies
Equipped with the education/ training and having an idea of what has been discovered during the audit, the board must continuously review the policy framework of the organisation as it relates to IP, Innovation and Technology to ensure that it is aligned with the overall strategic objectives of the company.
- Performance Metrics
As the old saying goes, “what doesn’t get measured won’t be done” – it is important for the board to ensure that key performance indicators (KPIs) are established in the company that will measure the effectiveness of innovation and IP management practices and how their contribution to overall business objectives are essential.
Integrating IP management into corporate governance frameworks is essential for protecting and maximizing the value of a company’s intangible assets. The board play a crucial role in overseeing that the company’s strategic outlook factors in innovation and IP management. By adopting such a strategy, companies can better navigate the complexities of innovation, IP management and corporate governance to maintain a competitive edge on the increasingly competitive market.
At Entreat Ad·visory, we are here to partner with you provide you with these services to assist your business to unlock wholesome value creation process across the board. Get in Touch with us or Book a Consultation for us to engage.