When AI Companies Promise to Protect You — But There's a Catch

When a company uses an AI tool, it often believes it is protected if someone claims the AI stole their work. AI companies like OpenAI, Google, and Anthropic offer legal promises called 'indemnification,' meaning they agree to help pay for certain lawsuits. But lawyers who study these agreements say the protection often has big gaps. The fine print can leave businesses on their own right when they need help the most.

Indemnification is a legal word that means one party promises to cover another party's costs if they get sued. In the AI world, this usually means the AI company will help if a business is sued for using someone else's creative work without permission. Companies that use AI tools hope this promise will protect them. But experts say those promises come with so many exceptions that the protection can nearly disappear.

AI tools work through a chain of people and companies. A company like OpenAI builds a big AI model by training it on huge amounts of text and images. Then another company might build a product using that model, and regular users interact with it by typing questions called 'prompts.' Because so many people are involved, it can be hard to figure out who is responsible when something goes wrong.

Copyright lawsuits against AI companies are already happening in real courts. The New York Times sued Microsoft and OpenAI, saying the AI was trained on its articles without permission. Authors and artists have filed similar cases against other AI companies. These cases show that the legal risks of using AI are very real, and businesses need to know who would pay if they got sued.

The promises AI companies make usually only cover very specific situations. They tend to cover problems that come from the AI company's own training data — the information used to build the model. But they usually do NOT cover problems caused by what the customer does with the AI afterward. This means if a business adds its own data, changes the output, or connects the AI to other software, the company may no longer be protected.

Some of the biggest exceptions involve things that are completely normal when using AI. Most businesses connect AI tools to their own databases, add custom instructions, or build them into their apps. These are everyday activities, not unusual ones. Yet these are exactly the kinds of actions that can cancel the legal protection, leaving businesses with no help if a lawsuit arises.

The problem gets even trickier with 'agentic AI,' which is when AI takes actions on its own, like booking appointments or sending emails. Google's terms say that when an AI agent does something, the customer — not Google — is responsible for it. As AI tools do more things on their own, this gap in protection could become a very serious issue for businesses of all sizes.

Lawyers advise companies to carefully check whether the way they plan to use AI falls under any of the exclusions. They should also make sure the protection they promise to their own customers matches what they actually get from the AI company. If a business promises more protection than it has, it could end up paying for lawsuits out of its own pocket.