Decades in Business, Technology and Digital Law

Negotiating License Terms for Artificial Intelligence Platform

by | Apr 2, 2024 | Firm News

Negotiating license terms for an artificial intelligence (AI) platform involves a complex interplay of technical, legal, and business considerations. As AI technologies continue to evolve and permeate various sectors, the importance of crafting well-balanced licensing agreements cannot be overstated. These agreements not only protect intellectual property rights but also ensure fair use, compliance with regulations, and alignment of expectations between the AI platform providers and users. This article explores key aspects to consider when negotiating license terms for an AI platform, offering insights to both licensors and licensees aiming for a mutually beneficial agreement.

Understanding AI Licensing

AI licensing involves granting permission to use AI technologies, algorithms, models, or platforms under specific conditions. Unlike traditional software, AI systems often rely on continuous learning from new data, raising unique considerations such as data rights, privacy concerns, and model updates.

Key Considerations in AI Licensing Negotiations

Intellectual Property Rights: Clearly define the ownership of the AI models, underlying algorithms, and any data or outputs generated. It’s crucial to address the derivation rights, especially if the AI system evolves over time based on user data or inputs.

Scope of Use: The license should specify the permitted uses of the AI platform, including any restrictions on commercial or non-commercial use, geographic limitations, and the number of users or instances. It’s important for licensees to negotiate flexibility to accommodate future growth and changes in their business.

Data Rights and Privacy: Given the data-driven nature of AI, it’s essential to establish who owns or controls the data fed into the AI system, the data generated by it, and how privacy concerns are addressed, particularly in light of regulations like GDPR or CCPA.

Performance and SLAs (Service Level Agreements): AI systems’ performance can vary based on numerous factors. The license agreement should include SLAs defining performance metrics, uptime commitments, and remedies for any failures to meet these standards.

Updates and Maintenance: AI technologies rapidly evolve, necessitating regular updates. Negotiate terms regarding the frequency and nature of updates, maintenance responsibilities, and how updates might affect system performance or data handling.

Liability and Risk Allocation: AI decisions can have significant implications. Clearly outline the allocation of risks and liabilities, especially in scenarios where AI-driven decisions might lead to financial loss or legal complications.

Termination and Exit Rights: Include clear terms about the termination of the license agreement, ensuring that there are provisions for data retrieval, model portability, or transitioning to another platform without undue hardship.

Compliance and Ethical Considerations: AI systems must comply with relevant laws and ethical guidelines. The license should ensure adherence to ethical AI use, non-discrimination, transparency, and accountability standards.

Strategies for Successful Negotiation

Due Diligence: Both parties should thoroughly understand the AI platform’s technical capabilities, limitations, and regulatory landscape before entering negotiations.

Flexibility and Scalability: Licenses should allow for scalability and flexibility, accommodating future technological advancements and business growth.

Expert Involvement: Involving legal and technical experts in the negotiation process can help address the complex interplay of AI technology and legal considerations.

Balancing Interests: Aim for a win-win agreement that balances the licensor’s need to protect their IP and derive value with the licensee’s need for flexibility and operational efficiency.


Negotiating license terms for an AI platform requires a careful balance of protecting intellectual property, ensuring legal compliance, and meeting the operational needs of the licensee. By focusing on key considerations and employing strategic negotiation practices, parties can establish licensing agreements that foster innovation, growth, and the ethical use of AI technologies.