One key issue to remain aware of is that it is often unclear whether IoT technology is a product, a service, or a mix of both. IoT technology could be subject to traditional product liability standards, so it is possible that either the software developer or the product manufacturer could be held liable in the event of damages caused by amalfunction. Assigning legal liability is particularly unclear if the IoT device utilizes Artificial Intelligence (AI). Currently, no laws address injuries caused by AI. Given how uncertain liability in relation to IoT devices is in the law, delineate liability as explicitly as possible in your contracts. Many IoT devices use AI technology to function. AI is not a single technology, but rather a broad term for computer technology with the ability to simulate human intelligence. This simulated intelligence can take many forms: analyzing data and drawing conclusions about it, learning from data to perform tasks better over time, identifying patterns, predicting future outcomes, optimizing practices, and/or automating repetitive functions. AI can be very useful for businesses, which may use AI for anything from compliance monitoring to industrial robotics. If you are acquiring a business that uses AI, carefully review the representations and warranties made by the vendor and ensure they adequately address the business impact of a system failure or malfunction. Additionally, you should be sure to scrutinize the non- infringement warranty. AI systems may produce infringing code when performing its functions without direction by the operator, and the issue of intellectual property infringement liability by AI systems is still unclear. Make sure the representations and warranties made by the vendor adequately allocate liability in the event that the AI system produces infringing code. You should also seek indemnification from a vendor to reduce liability in the event that an AI system’s decision-making process results in a liability.
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