Artificial intelligence may have forever changed business marketing, contracts, policies, and communications. However, this technological advancement has also created unprecedented legal vulnerabilities, which have led to more litigation, regulatory penalties, and reputational damage.

Understanding the risks associated with AI could make the difference between safety and litigation in the new AI era.

The Copyright Mine Field: When AI Crosses Legal Lines

One of AI’s most significant vulnerabilities is its tendency to reproduce copyrighted material without the correct attribution or permission. AI systems have access to vast amounts of data, including copyrighted works, and it’s possible for them to inadvertently generate content that infringes on existing intellectual property rights.

This type of blunder became clear in February of this year when a Delaware federal court delivered the first major ruling against an AI company for copyright infringement. The story starts in 2020. Thomas Reuters, owner of the legal research platform Westlaw, sued the AI company Ross Intelligence based on the grounds of proprietary information accessed.

The case was dragged through court for years, with the AI startup citing fair use laws to teach AI as a legal defense. However, the court ultimately sided with Westlaw when Thomson Reuters presented an almost word-for-word copy of Westlaw’s information.

In the end, the damage to Ross’s Intelligence cost millions of dollars and ultimately shut the startup down.

Consider a marketing team that uses AI to create promotional copy, only to discover that the contents were already written by someone else. Slogans and copywriting could be subject to potential infringement claims, damages, and costly litigation. Humans parsing through articles can catch copyrighted material, while AI systems are currently unaware of copyright boundaries.

Now let’s expand the scope. AI is deeply involved in image projection, music, logos, and even product descriptions. When used in a commercial context, businesses are held accountable for infringement of copyright laws, regardless of whether it was done intentionally.

False Claims and Misinformation: The Accuracy Crisis

Among AI’s most ardent detractors is the concept of AI hallucinations. Statements spoken with complete confidence could be completely fictitious, which means businesses that incorporate these statements into their marketing materials, product descriptions, and customer communications ultimately risk violating consumer protection laws.

In 2024, the Federal Trade Commission (FTC) sued multiple companies for false advertising because they had primarily relied on AI-powered business opportunities. Companies such as Ascend Ecom and FBA Machine falsely claimed they offered cutting-edge AI tools to help customers earn thousands of dollars monthly and passive income. The practices ultimately defrauded consumers of at least $25 million. Because of the lawsuit, businesses can’t escape liability by claiming their AI systems generated the false information.

Meanwhile, Apple is under scrutiny for false advertising allegations regarding Apple Intelligence features. The lawsuit filed in March 2025 claimed that Apple promoted capabilities for the iPhone that it simply hadn’t produced and which may not be ready until 2026. The largest complaint is that Apple used AI marketing to drive unnecessary device upgrades based on company promises.

The Apple lawsuit is the first that could portend lawsuits for other, smaller firms. AI can unknowingly publish incorrect details, customer complaints, product liability issues, financial statement hallucinations, and introduce false regulatory investigations.

Because of claims like these, the FTC has cracked down on unfair content conduct. FTC Chair Lina M Khan has said, “Using AI tools to trick, mislead, or defraud people is illegal… The FTC’s enforcement actions make clear that there is no AI exemption from the law on the books.” In short, companies can’t use AI generation to defend against false advertising charges.

Privacy and Data Protection Violations

AI content generation often involves processing personal or copyrighted information. When businesses use AI to create personalized marketing content or customer communications, they might inadvertently expose sensitive data.

Companies must also be aware of AI-generated content in customer service. Personalized recommendations must comply with data protection and requirements. Companies that fail to have proper privacy safeguards may open themselves up to regulatory fines, lawsuits, and damage to customer trust.

The Attribution Problem: Who’s Responsible?

When AI generates content that leads to legal problems, it’s hard to nail down where the damages lie. Businesses could find themselves caught between claims they’re responsible for in AI-fabricated content and arguments.

The major problem arises because of limitations to strategic regulation. AI is so new and is increasing so rapidly that laws have not kept up with the technological developments. As a result, opponents may argue that their businesses were negligent in their AI oversight. Others might struggle to demonstrate that they took reasonable precautions against AI-generated errors due to the lack of compliance requirements.

Defensive Strategies for AI-Generated Content

The most effective strategy for companies interested in AI usage is to practice preventative maintenance by introducing AI governance frameworks to mitigate legal vulnerabilities. Risk management solutions should require treating AI-generated content as both a legal compliance issue and a technological one.

Companies engaging in AI usage should create essential protective measures, including establishing clear AI usage policies, implementing human review processes for any AI-generated content, maintaining a detailed record of all AI tools used and their limitations, and ensuring legal counsel reviews any AI-generated material before it is published.

Companies should also consider cyber liability insurance policies. Because the cyber landscape is becoming more complicated all the time, vendor relationships and agreements with AI service providers could address liability allocation and data protection requirements before they become an issue.

The Documentation Imperative

If your company is embroiled in AI litigation, it’s imperative to demonstrate reasonable oversight. Maintain comprehensive documentation that shows AI governance structure, employee training on AI limitations, and evidence that supports the claim of human supervision over AI-generated content.

Cases involving negligence or misconduct related to AI-generated materials require this type of extensive documentation. Courts are also more likely to view businesses favorably when they can demonstrate that they took proactive efforts to manage all risks associated with AI usage.

The Evolution of AI Liability

AI will continue to advance, and legal standards for AI-generated content need to maintain strict standards that follow its rapid pace. Businesses that establish strong AI governance practices now will ultimately be better positioned to adapt to legal requirements and litigation in the future.

AI is an appealing tool, but it requires careful legal oversight. Ultimately, it will never be a replacement for human judgment and professional responsibility.

When AI-generated content creates legal problems for your business, you need an experienced counsel who understands both technology and litigation strategy. At Mestaz Law, we help businesses navigate complex commercial disputes involving AI and emerging technologies, providing the aggressive representation needed to protect your interests.