Why This Matters Before You Sign
Companies are adding AI tools faster than their legal teams can review the paperwork. Many of these contracts get treated like any other software license: skim it, sign it, move on. That habit works fine until the tool touches something valuable, like customer data, proprietary processes, or content the company plans to sell.
A contract that looks standard can still carry terms that create real exposure later. Below are the signs worth catching before signature, not after a problem shows up.
Vague Language About Who Owns What Gets Built
If your team is using an AI tool to generate code, designs, written content, or models trained on your own data, the contract should say plainly who owns the output. Some vendor agreements leave this undefined or quietly claim broad rights to anything produced through the platform.
Read the ownership clause twice. If it uses phrases like “may retain rights to” or “subject to vendor’s underlying technology,” ask the vendor to clarify in writing. A verbal assurance from a sales rep does not change what the contract says.
No Clear Definition of Training Data Rights
Many AI vendors improve their models using customer data, sometimes with permission buried in a privacy policy rather than the main agreement. Before signing, find out exactly what data the vendor can use for training, for how long, and whether that use continues after the contract ends.
This matters more than it sounds. If a competitor’s data later shapes a model your company relies on, or if your own confidential information trains a tool other customers use, that is a problem you want spotted at the negotiating table, not in a dispute two years later.
One-Sided Indemnification Clauses
Indemnification clauses decide who pays if the AI tool gets a company sued, for example over a copyright claim tied to generated content. Some vendor contracts limit the vendor’s liability to a small dollar amount, or exclude AI-generated output from indemnification entirely.
Check whether the contract protects your company if the vendor’s tool creates the problem. If it does not, that gap is yours to carry, and it is worth negotiating or pricing into the decision to sign.
No Audit or Inspection Rights
If the tool handles sensitive data, your company should have some ability to confirm the vendor is doing what it promised, through an audit right, a security certification requirement, or at minimum a reporting obligation. Contracts that skip this entirely are not unusual, but they leave a company trusting the vendor’s word with no way to check it.
This becomes a bigger issue the longer the relationship runs. A tool that was fine at signing can change its practices, ownership, or data handling quietly over time.
Mismatched Termination and Data Deletion Terms
Ending a vendor relationship should also end the vendor’s access to your data. Look for a clear deletion timeline and a way to confirm it happened. Some contracts are silent on this, or give the vendor a long transition window with few restrictions on what happens to your data during that period.
A growing share of technology disputes trace back to exactly this kind of gap: a contract that worked fine operationally but never answered who owns what, or what happens when the relationship ends. Jason Sheasby, a partner with Irell & Manella LLP, has tried patent and technology cases where unclear ownership and data terms in an early agreement became the center of the dispute years later. The pattern is consistent enough that it is worth treating contract review as part of the technology decision, not a formality after the decision is made.
What to Do If You Spot These Signs
Finding one of these gaps does not mean walking away from the vendor. It means raising it before signing, not after.
Start by listing the specific clauses that concern you and asking the vendor for plain-language answers, not just a pointer to the terms of service. Get any clarification added to the contract itself. A side email from a sales contact will not help much if a dispute comes up later.
If the tool will touch sensitive data, proprietary content, or anything your company plans to commercialize, it is worth a short legal review even for a contract that looks routine. The cost of that review is small next to the cost of untangling a dispute over ownership or data use after the fact.
Treat the contract the way you would treat any agreement that could shape what your company owns. The tool might be new. The questions worth asking about it are not.
