If your company uses AI, there is a good chance some of it is open-source, and few owners know where. Freely available AI models now sit behind many everyday business tools, from document drafting and customer chat to bookkeeping and scheduling software. They can save money and keep sensitive information in-house. They also come with terms, gaps and paperwork that most owner-managed companies have never looked at.
We work with private companies across British Columbia on their contracts, corporate records and transactions. From that seat, we think every company using AI should be able to answer four plain questions.
1. Which AI does your business actually run on?
Most companies can name the AI tools their staff use. Far fewer can name the models underneath them. A software product your company subscribes to may be built on an open model that the vendor never mentions, and a developer you hired may have downloaded one to build an internal tool.
It also helps to know that "open" is a loose label. Some models are fully open, with everything needed to study and rebuild them. Many are only partly open: the finished model can be downloaded and used, but the data it learned from is not disclosed. The answer to this first question is simply a list, kept current, of the AI models your company relies on and where each one came from.
2. What does the licence let you do?
Free to download is not the same as free to use however you like. Open AI models are released under licences, and many are written by the developer rather than taken from the standard open-source forms. Some limit commercial use, cap the size of business that may use them, forbid using the model to build a competing product, or bar use in certain countries.
Those terms can also change between versions of the same model. A company that checked the licence once, a year ago, may be relying on a newer release with different rules. The licence deserves the same attention as any other contract the business depends on.
3. Who answers if something goes wrong?
Open models are typically provided as is. There is no warranty, no indemnity and no one to call. If an open model produces a harmful result, infringes someone's rights or exposes a security weakness, the developer has usually disclaimed responsibility.
Where the model sits inside a product you buy, your contract with that vendor is often your only protection, so it should say something meaningful about AI. We recommend that vendor agreements confirm that the vendor complies with the licences of the models it uses, give an intellectual property indemnity that does not exclude open-source components, and commit the vendor to fixing and reporting security issues promptly. Where privacy is involved, keep in mind that a BC company's obligations under the Personal Information Protection Act do not change because the tool is free.
4. Could you answer a buyer, investor or lender tomorrow?
When a company is sold, raises money or refinances, the other side will ask about its technology, and AI is now part of that conversation. Expect questions about which models the business uses, on what licence terms, what data they touch and who owns what they produce.
A company with clear answers and organized records moves through due diligence faster and gives the other side fewer reasons to reduce the price or demand special protections. A company that has to reconstruct the answers under a closing deadline rarely enjoys the experience.
Put AI on the board's agenda, and in the minute book
The four answers belong in the company's records, not in one employee's memory. For most of our clients, that means a short AI inventory kept with the company's material contracts, and an update to any existing technology or open-source policy so that it covers AI models, the data they use and what they produce. A separate AI policy is rarely necessary.
Where AI becomes central to how the business operates, directors should know about it. A brief report to the board, and a resolution approving a significant AI decision, creates a clear record that the directors turned their minds to the risks. That record is valuable in a transaction and in any later dispute.
How Whiteboard Law can help
We help BC companies review AI-related licences and vendor agreements, prepare AI inventories and board resolutions for the minute book, and get ready for the AI questions that now come up in sales, financings and investments. Please contact us to discuss your company's situation.
This update is provided by Whiteboard Law for general information only and is not legal advice.
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