The very talented Steve Blank has laid out a case for why U.S. academic research is in serious trouble based on recent U.S. policy changes. As he states, once you lose your advantage it's unlikely to be regained. My guess is that there's a certain point at which the lead is lost and is too difficult to regain. A March 2025 Nature article reports on a poll which indicates that of 1,600 scientists surveyed around 75% are contemplating moving with Canada or Europe as top destinations. I wonder what unintended consequences--particularly those that are beneficial for the United States--may exist in distributing U.S. researchers around the world. Could they be lured back in three years and seven months? And, what could be some unintended negative consequences? Do we really want to lose our best researchers during a military build-up around the world? Gee whiz, it seems like almost everything is a national security issue and all technology is dual use. Steve Blank's blog post is available, here.
IP finance
"Where money issues meet IP rights". This weblog looks at financial issues for intellectual property rights: securitisation and collateral, IP valuation for acquisition and balance sheet purposes, tax and R&D breaks, film and product finance, calculating quantum of damages--anything that happens where IP meets money.
Wednesday, 14 May 2025
Steve Blank Sounds Warning for U.S. Academic Research Decline
Thursday, 3 April 2025
U.S. Department of Justice Creates Anticompetitive Regulation Task Force
On March 27, 2025, the U.S. Department of Justice launched the Anticompetitive Regulations Task Force. The Task Force is soliciting public input concerning regulations that may hinder competition. I wonder if IP-related laws will be examined. The Press Release states:
Today, the Justice Department launches an Anticompetitive
Regulations Task Force to advocate for the elimination of anticompetitive state
and federal laws and regulations that undermine free market competition and
harm consumers, workers, and businesses. The Antitrust Division has a long
history of advocacy against laws and regulations that create unnecessary
barriers to competition. The Task Force will surge resources to these
efforts and invite public comments to support the Administration’s mission to unwind
laws and regulations that hinder business dynamism and make markets less
competitive.
“Realizing President Trump’s economic Golden Age will require
unwinding burdensome regulations that stifle free market competition. This
Antitrust Division will stand against harmful barriers to competition whether
imposed by public regulators or private monopolists,” said Assistant Attorney
General Abigail Slater of the Justice Department’s Antitrust Division. “We look
forward to working with the public and with other federal agencies to identify
and eliminate anticompetitive laws and regulations.”
On Jan. 31, President Trump signed Executive Order 14192 declaring “the policy of the
executive branch” to be that federal agencies should “alleviate unnecessary
regulatory burdens placed on the American people.” Consistent with this policy,
on Feb. 19, President Trump signed Executive Order 14219 directing agencies to “initiate
a process to review all regulations” and identify regulations that, among other
things, “impose undue burdens on small businesses and impede private enterprise
and entrepreneurship.” Consistent with longstanding practice, the Antitrust
Division will support federal agencies’ deregulatory initiatives by sharing its
market expertise on regulations that pose the greatest barriers to economic
growth.
Regulatory capture is a well-studied phenomenon in which
agencies become “captured” by special interests and big businesses, rather than
serving the interests of the American people. But when regulations serve the
few and impose undue burdens on small businesses, private enterprise, and
entrepreneurs, they also harm competition and ultimately hurt American
consumers, workers, and businesses. For example, regulations can increase
compliance costs, preventing businesses from competing on a level playing field
with powerful corporations. Regulations can also discourage or even
intentionally prohibit small businesses and new products from entering markets
and lowering prices for American families. In contrast, eliminating unnecessary
anticompetitive regulations makes it easier for businesses to compete. More
competition empowers the American people — not government regulators — to drive
economic progress and innovation. When every American has a fair opportunity to
enjoy the benefits of competitive free markets, every American has an
opportunity to realize the American dream.
By identifying and working with state and federal agencies to
revise or eliminate these laws and regulations, the Anticompetitive Regulations
Task Force will contribute to making the American dream a reality. As a first
step, the Antitrust Division will initiate a public inquiry to identify
unnecessary laws and regulations that raise the highest barriers to
competition. In particular, the Division will seek information from the public
about laws and regulations that make it more difficult for businesses to compete
effectively, especially in markets that have the greatest impact on American
households, including:
- Housing: Americans spend more than one-third
of their monthly income on housing, and the cost of owning or renting a
home continues to rise. Laws and regulations in housing markets can
contribute to these problems by making it more difficult for companies to
build and ordinary Americans to rent or buy.
- Transportation: Laws and regulations in areas
like airlines, rail, and ocean shipping can grant antitrust immunities,
outright monopolies, or safe harbors for conduct that undermines
competition. As a result, Americans pay more for travel, fuel, and a
variety of other products.
- Food and Agriculture: By the end of the
Biden-Harris Administration, grocery prices were 27% higher than at the
end of the first Trump Administration. Eliminating unnecessary
anticompetitive regulations will help farmers, growers, and ranchers
increase the amount of food they produce and unlock lower prices for
American consumers.
- Healthcare: Laws and regulations in healthcare
markets too often discourage doctors and hospitals from providing
low-cost, high-quality healthcare and instead encourage overbilling and
consolidation. These kinds of unnecessary anticompetitive regulations put
affordable healthcare out of reach for millions of American families.
- Energy: Reliable and affordable energy is
essential to modern American life — whether in homes, businesses,
manufacturing plants, schools, hospitals, sporting events, or data
centers. Laws and regulations can undermine reliability and affordability
by protecting incumbent electricity providers from competition or
disruptive innovation.
The public will have 60 days to submit comments at www.Regulations.gov (Docket
No. ATR-2025-0001), no later than May 26. Once submitted, comments will be
posted to Regulations.gov. All market participants are invited to provide
comments in response to this inquiry, including consumers, consumer advocates,
small businesses, employers, trade groups, industry analysts, and other
entities that are impacted by anticompetitive state or federal laws and
regulations.
In addition to reviewing responses from the public, the Task
Force will bring together attorneys, economists, and other staff from across
the Division, together with interagency partners, to identify state and federal
laws and regulations that unnecessarily harm competition. The Antitrust
Division will then take appropriate action, including helping agencies revise
or eliminate these regulations.
The Task Force will also consider other ways to advocate for
the removal of anticompetitive laws and regulations. The Division routinely
files amicus briefs and statements of interests in private litigation, and it
will continue to do so to promote competition and oppose anticompetitive laws
and regulations. The Division also provides comments on proposed legislation in
the states on the request of state legislators. These efforts will continue
with an eye toward protecting competition and interstate commerce in light of
dormant Commerce Clause principles.
The Justice Department has a long history of serving as the
Executive Branch’s chief competition advocate by working with agencies to
identify and eliminate unnecessary regulations. In 2018, the Justice Department
released a
report on how regulations can harm competition. Following this report, the
Justice Department submitted dozens of comments to federal agencies supporting
efforts to eliminate unnecessary regulations and increase competition. For
example, the Justice Department, in consultation with the Federal Trade
Commission, submitted
a comment opposing regulations that would have protected
incumbent electricity transmission companies from much-needed competition in
energy markets across the country. The Justice Department filed comments aimed
at making it easier for individuals and small businesses to navigate the
federal government bureaucracy. The Justice Department also provided technical
assistance and trainings to federal agencies to help them analyze how new and
existing regulations might affect competition, or whether competition may be a
better alternative to regulation altogether.
The Anticompetitive Regulations Task Force will continue
these efforts, supporting ongoing efforts across the Trump Administration to
unleash competition by eliminating unnecessary, burdensome, and wasteful
government regulations. For more information on the Task Force, including
contact information, see Anticompetitive
Regulations Task Force page on the Division’s website.
Bad Timing: Starving the University Technology Transfer System
A group of over 1000 scientists who are elected members of
the National Academy of Sciences, Engineering and Medicine has released a
letter expressing concern with the Trump Administration’s handling of research
funding. The letter states, in part:
If our country’s research enterprise is dismantled, we will
lose our scientific edge. Other countries will lead the development of novel
disease treatments, clean energy sources, and the new technologies of the
future. Their populations will be healthier, and their economies will surpass
us in business, defense, intelligence gathering, and monitoring our planet’s
health. The damage to our nation’s scientific enterprise could take decades to
reverse.
The AUTM, the Association of University Technology Managers,
noted that the Great Recession would have been much worse if it had not been
for university technology transfer. Harming the engine that’s been
creating innovation and new business may not be such a good thing right
now. Besides pushing us into a recession, I do wonder what the political
fallout will be of the increased removal of research funding from universities. Not
only do universities spin-off companies to varying degrees of success but
there are universities located in many, many congressional districts--and those
universities are major regional employers. The full letter is available, here. The
Scientific American discusses the full letter, here.
Wednesday, 29 January 2025
US Copyright Office Report on Copyrightability of AI Output
The U.S. Copyright Office has released a report titled, “Copyright and Artificial Intelligence: Part 2 Copyrightability.” The report is in response to comments by interested parties concerning the copyrightability of AI generated outputs. The report has a helpful summary of the approach of other countries. The full report is available, here. The report makes several conclusions and recommendations:
• Questions of copyrightability and AI can be resolved
pursuant to existing law, without the need for legislative change.
• The use of AI tools to assist rather than stand in for
human creativity does not affect the availability of copyright protection for
the output.
• Copyright protects the original expression in a work
created by a human author, even if the work also includes AI-generated
material.
• Copyright does not extend to purely AI-generated material,
or material where there is insufficient human control over the expressive
elements.
• Whether human contributions to AI-generated outputs are
sufficient to constitute authorship must be analyzed on a case-by-case basis.
• Based on the functioning of current generally available
technology, prompts do not alone provide sufficient control.
• Human authors are entitled to copyright in their works of
authorship that are perceptible in AI-generated outputs, as well as the
creative selection, coordination, or arrangement of material in the outputs, or
creative modifications of the outputs.
• The case has not been made for additional copyright or sui
generis protection for AI generated content.
Wednesday, 22 January 2025
Addressing Insider Threats: CIA Analyst Divulges Confidential Information
One of the most difficult cybersecurity issues concerns predicting insider threats -- identifying the person or persons in your organization who are likely to divulge personal data or intellectual property. The U.S. Department of Justice issued this press release recently:
A former CIA analyst pleaded guilty today to retaining and
transmitting Top Secret National Defense Information to people who were not
entitled to receive it, information which was publicly posted on a social media
platform in October 2024.
According to court documents, Asif William Rahman, 34, of
Vienna, was an employee of the CIA since 2016 and had a Top-Secret security
clearance with access to Sensitive Compartmented Information (SCI).
. . .
According to court documents, on Oct. 17, 2024, Rahman
accessed and printed two Top Secret documents containing National Defense
Information regarding a U.S. foreign ally and its planned actions against a
foreign adversary. Rahman removed the documents, photographed them, and
transmitted them to individuals he knew were not entitled to receive them. By
Oct. 18, 2024, the documents appeared publicly on multiple social media
platforms, complete with the classification markings.
After Oct. 17, 2024, Rahman deleted and edited journal
entries and written work product on his personal electronic devices to conceal
his personal opinions on U.S. policy and drafted entries to construct a false
narrative regarding his activity. Rahman also destroyed multiple electronic
devices, including a personal mobile device and an internet router he used to
transmit classified information and photographs of classified documents, and
discarded the destroyed devices in public trash receptacles in an effort to
thwart potential investigations into him and his unlawful conduct.
Beginning in the spring of 2024 and continuing through
November 2024, Rahman repeatedly accessed and printed classified National
Defense Information, including documents classified up to the Top Secret level,
to take them to his residence. There, Rahman reproduced the documents and,
while doing so, altered them in an effort to conceal their source and his
activity. Rahman then communicated Top Secret information that he learned in
the course of his employment to multiple individuals he knew were not entitled
to receive it.
Rahman was indicted by a grand jury on Nov. 7, 2024, and was
arrested by the FBI as he arrived to work on Nov. 12, 2024. He has remained in
custody since his arrest.
Rahman pleaded guilty to two counts of willful retention and
transmission of classified information related to the national defense. He is
scheduled to be sentenced on May 15, 2025. He faces a maximum penalty of 10
years in prison for both counts in the plea agreement. A federal district court
judge will determine any sentence after considering the U.S. Sentencing
Guidelines and other statutory factors.
Tuesday, 7 January 2025
American Intellectual Property Law Association Releases IP Wishes Letter to Incoming Trump Administration
The AIPLA has released a letter to the Trump Administration that highlights concerns with the IP system in the United States. The letter addresses patent eligibility, patent quality, AI and IP, digital piracy and counterfeiting, trade secrecy and international IP harmonization. The letter is available, here.
White House Releases Fact Sheet on US India Strategic Technology Collaboration
The White House released a Fact Sheet outlining collaboration efforts concerning national security and technology with India on January 6, 2025. The Fact Sheet states in relevant part:
Today, U.S. National Security Advisor (APNSA) Jake Sullivan
met with Indian National Security Advisor (NSA) Ajit Doval, Indian External
Affairs Minister S. Jaishankar, and Prime Minister Modi in New Delhi as the
United States and India continue to forge a strategic technology partnership
that benefits both of our countries and our partners around the world.
APNSA Sullivan and NSA Doval launched the U.S.-India initiative on Critical and
Emerging Technology (iCET) in 2022 at the direction of President Biden and
Prime Minister Modi. In the intervening years, our two nations have taken
significant steps forward together to integrate our technology and defense
supply chains in recognition that, now more than ever, we need to work with our
partners to build a trusted and resilient innovation base.
During their capstone meeting, APNSA Sullivan and NSA Doval underscored the
vital importance of our efforts to jointly produce and develop strategic
technologies that will allow us to deliver secure, reliable, and cost-competitive
technology solutions for the world. As the United States and India deepen
collaboration across key sectors – from space to semiconductors, biotechnology,
cybersecurity, advanced telecommunications, and clean energy – we have seen the
promise of our partnership deliver results. Our partnership has also
anchored multilateral work with like-minded nations from across the
Indo-Pacific and Europe, including the Bio-5
Biopharmaceutical Supply Chain Consortium, the U.S.-India-ROK Technology
Trilateral, and ongoing cooperation with Australia and Japan through the Quad.
Finally, APNSA Sullivan and NSA Doval reaffirmed our shared resolve to adapt
and strengthen our technology protection toolkits and discussed efforts to
address national security concerns associated with overcapacity in key
technology sectors. At the same time, they commended the progress we have
made to address long-standing barriers to bilateral strategic trade,
technology, and industrial cooperation.
The two national security leaders expressed their confidence that the bridges
we have built across our governments, industry, and academia will endure and
reflected on the significant achievements we have driven across every dimension
of the technological enterprise – from the seabed to the stars, and
beyond. This includes:
Launching a New Era in Space Technology Cooperation
- Announcing the first-ever joint effort between
American and Indian astronauts at the International Space Station with
the launch of
Axiom-4 scheduled to take place this spring, which will mark a
significant milestone in the U.S.-India human spaceflight partnership and
space exploration;
- Reducing barriers to collaboration around commercial
space technology following the U.S. government’s recent conclusion of
updates to Missile Technology Control Regime export policy, which will
open the door to additional technology licensing and co-development
opportunities in support of the U.S.-India space partnership;
- Working toward the launch of a new bilateral space
accelerator to promote commercial space cooperation, including around
lunar exploration, human spaceflight, geospatial data and services, and
the co-development of technology;
- Celebrating the conclusion of a Strategic Framework
for Human Spaceflight Cooperation to deepen interoperability in space and
working toward the imminent completion of additional agreements to
commence advanced training for ISRO astronauts and ground personnel at the
NASA Johnson Space Center and for joint experiments at the International
Space Station;
- Preparing for the launch of the NASA-ISRO Synthetic
Aperture Radar, a jointly developed satellite that will map the entirety
of the Earth’s surface twice every 12 days as the United States and India
work together to combat climate change and other global challenges, this
spring;
- Deciding to hold the first bilateral experts’
exchange on space situational awareness and space traffic coordination in
the first half of this year. This exchange builds upon the two
nations’ shared commitment to pursue opportunities for deeper collaboration
to ensure safe and sustainable space operations;
- Exploring additional avenues for cooperation in space
exploration technologies, including docking and interoperability
demonstration missions, as well as India’s participation in the United
States Traffic Coordination System for Space program.
Deepening Defense Innovation and Industrial Cooperation
- Welcoming the advancement of discussions between
Ultra Maritime and Bharat Dynamics Limited to enhance undersea domain
awareness through a first-of-its-kind partnership on co-production of U.S.
sonobuoys in support of the U.S. and Indian defense industrial bases;
- Welcoming India’s acquisition of the MQ-9B platforms,
the possible co-production of land warfare systems, and progress on other
co-production initiatives outlined in the U.S.-India Roadmap for Defense
Industrial Cooperation;
- Celebrating the third edition of the India-U.S.
Defense Acceleration Ecosystem (INDUS-X) Summit which took place at
Stanford University in September 2024, and highlighting the continued
progress under INDUS-X, including the Gurukul Educational Sessions and the
launch of a third joint challenge on space situational awareness in low
earth orbit;
- Welcoming the completion of an upgraded Memorandum of
Understanding between the Defense Innovation Unit and the Defense
Innovation Organization to expand cooperation on defense innovation and
deepen collaboration between the U.S. and Indian startup ecosystems;
- Deepening cooperation between the U.S. Defense
Innovation Unit and India’s Innovations for Defense Excellence to
accelerate the joint adoption of cutting-edge commercial technologies for
military solutions and capability enhancement of both countries’ defense
ecosystems;
- Noting continued progress in the discussions between
GE Aerospace and Hindustan Aeronautics Limited for the co-production of GE
F414-INS6 engines to power India’s future fighter fleet;
- Expanding defense industrial partnerships, such as
the launch of an AI Multi-Doman Situational Awareness product jointly
developed by General Atomics and 114ai to support joint all domain command
and control.
Building a Clean Energy and a Critical Minerals
Partnership for the 21st Century
- Advancing discussions to unlock new commercial
partnerships around the deployment of small modular reactor technology in
India;
- Reflecting the progress the United States and
India have made—and will continue to make—as strategic partners and
countries with a shared commitment to peaceful nuclear cooperation, NSA
Sullivan announced US efforts to finalize necessary steps to delist Indian
nuclear entities, which will promote civil nuclear cooperation and
resilient clean energy supply chains;
- Commending the signing of a bilateral Critical
Minerals Memorandum of Understanding between the U.S. Department of
Commerce and the Indian Ministry of Commerce and Industry and the Ministry
of Mines, and driving additional areas of cooperation in critical mineral
supply chains such as for graphite, gallium, and germanium;
- Advancing collaboration between U.S. and Indian
organizations and companies for carrying out research studies for
beneficiation and co-development of processing technologies for critical
minerals, including lithium, titanium, gallium, and vanadium;
- Building a collaborative program between the
Geological Survey of India and the U.S. Geological Survey on exploration,
characterization and evaluation of rare earth elements and critical
mineral deposits.
Promoting Strategic Semiconductor Supply Chain
Partnerships
- Advancing a strategic semiconductor partnership
between the U.S. Space Force and 3rdiTech to establish a compound
semiconductor fabrication plant in India to manufacture infrared, gallium
nitride, and silicon carbide semiconductors that will be used in national
security-relevant platforms; this includes favorably reviewing a technical
assistance agreement and export licenses to promote technology transfers;
- Building on the U.S.-India Semiconductor Supply Chain
and Innovation Partnership MOU and promoting secure, resilient, and
sustainable semiconductor supply chains through continued collaboration
between the U.S. Department of Commerce and the India Semiconductor
Mission, Ministry of Electronics and Information Technology including
facilitating investments in semiconductor manufacturing and strengthening
R&D collaboration around state-of-the-art semiconductor and packaging
technologies.
Building New Collaboration around AI, Advanced Computing,
and Quantum
- Developing a government-to-government framework for
promoting reciprocal investments in AI technology and aligning protections
around the diffusion of AI technology;
- Strengthening cooperation around the national
security applications of AI, following the U.S. government’s recent
issuance of a National Security Memorandum on AI last fall, and promoting
safe, secure, and trustworthy development of AI;
- Noting the importance of sustained engagement for
cooperation on Quantum Information Science and Technology (QIST) as agreed
to in the second meeting of the U.S.-India Quantum Coordination Mechanism
held last August, during which both countries committed to achieving
concrete outcomes;
- Initiating new cooperation in quantum science and
technology, including through a workshop on post-quantum cryptography and
quantum hardware held at the University of California, Los Angeles in
September 2023 and facilitating visits of Indian technical experts from
academia and the private sector to visit U.S. national laboratories and
quantum institutions.
Bridging our People, Talent, and Innovation Bases
- Celebrating progress toward opening U.S. Consulate
Bengaluru in early 2025 and continuing work to establish new Indian
Consulates in Boston and Los Angeles;
- Advancing a “Bio-X” initiative that would promote
biotechnology cooperation by leveraging the synergies between domestic
programs and enhancing the competitiveness of the biotechnology industries
in both countries;
- Celebrating steps that expand of the ability of
top AI scientists, engineers, and entrepreneurs from India to
come to the United States, including rulemaking that modernized the
U.S. H-1B application process, recent clarifications of the rules for O-1
visas and other visa categories, and other efforts that have streamlined
visa processing;
- Noting the recently launched U.S.-India Advanced
Materials R&D Forum, which convened its inaugural meeting in November
2024, to expand collaboration between U.S. and Indian universities,
national laboratories, and private sector researchers.
U.S. Department of Justice Releases Final Rule on Protecting Personal Data in Bulk Transfers
The Department of Justice recently issued a final rule preventing access to U.S. citizens personal data. The Press Release states, in relevant part:
. . . Today, the Justice Department issued a
comprehensive final rule carrying out Executive Order (E.O.) 14117
“Preventing Access to Americans’ Bulk Sensitive Personal Data and United States
Government-Related Data by Countries of Concern.” The E.O. charged the Justice
Department with establishing and implementing a new regulatory program to
address the urgent and extraordinary national security threat posed by the
continuing efforts of countries of concern (and covered persons that they can
leverage) to access and exploit Americans’ bulk sensitive personal data and
certain U.S. Government-related data.. . .
“This final rule is a crucial step forward in addressing the
extraordinary national security threat posed of our adversaries exploiting
Americans' most sensitive personal data,” said Assistant Attorney General
Matthew G. Olsen of the Justice Department’s National Security Division. “This
powerful new national-security program is designed to ensure that Americans'
personal data is no longer permitted to be sold to hostile foreign powers,
whether through outright purchase or other means of commercial access.”
The Final Rule implements the E.O. by promulgating generally
applicable rules for certain categories of data transactions that pose an
unacceptable risk to the national security of the United States. As described
in the E.O., countries of concern and covered persons can use their access to
this data to engage in malicious cyber-enabled activities and malign foreign
influence activities, bolster their military capabilities, and track and build
profiles on U.S. persons (including members of the military and U.S.
Intelligence Community, as well as other Federal employees and contractors) for
illicit purposes such as blackmail, coercion, and espionage, and to bolster
their military capabilities. Countries of concern and covered persons can also
exploit this data to collect information on activists, academics, journalists,
dissidents, political opponents, or members of nongovernmental organizations or
marginalized communities to intimidate them; curb political opposition; limit
freedoms of expression, peaceful assembly, or association; or enable other
forms of suppression of civil liberties.
The Final Rule reflects the risk highlighted in the E.O. that
the vulnerability of Americans’ bulk sensitive data is exacerbated because
countries of concern are increasingly using bulk sensitive personal data to
develop and enhance artificial intelligence (AI) capabilities and algorithms
that, in turn, enable the use of large datasets in increasingly sophisticated
and effective ways to the detriment of U.S. national security. Countries of
concern can use AI in conjunction with multiple unrelated data sets, for
example, to identify U.S. persons whose links to the federal government would
be otherwise obscured in a single dataset and who can then be targeted for
espionage or blackmail.
Among other things, the Final Rule identifies countries of
concern and covered persons to whom the Final Rule applies, and designates
classes of prohibited, restricted, and exempt transactions. The Final Rule
establishes bulk thresholds for certain sensitive personal data, including
human ‘omic data, biometric identifiers, precise geolocation data, personal
health data, personal financial data, and certain covered personal identifiers.
The Final Rule also prescribes processes to obtain licenses authorizing otherwise
prohibited or restricted transactions; protocols for the designation of covered
persons; and provides advisory opinions, and recordkeeping, reporting, and
other due diligence obligations for covered transactions.
The Final Rule is consistent with the United States’
commitment to promoting an open, global, interoperable, reliable, and secure
internet; protecting human rights online and offline; supporting a vibrant,
global economy by promoting cross-border data flows that are required to enable
international commerce and trade; and facilitating open investment. Notably,
the Final Rule does not impose generalized data localization requirements
regarding the physical or electronic storage of Americans’ bulk sensitive personal
data or U.S. Government-related data, nor does it require locating computing
facilities within the United States to process such data. The Final Rule does
not prohibit U.S. persons from conducting medical, scientific, or other
research in countries of concern, or from partnering or collaborating with
covered persons to share data to conduct researching, if that activity does not
involve the exchange of payment or other consideration as part of a covered
data transaction. The Final Rule also does not broadly prohibit U.S. persons
from engaging in commercial transactions, including exchanging financial and
other data as part of the sale of commercial goods and services with countries
of concern or covered persons, or impose measures aimed at a broader decoupling
of the substantial consumer, economic, scientific, and trade relationships that
the United States has with other countries.
The Final Rule further exempts several classes of data
transactions from the scope of its prohibitions and restrictions, including
personal communications and certain financial services transactions, corporate
group transactions, transactions authorized by Federal law and international
agreements, investment agreements subject to a Committee on Foreign Investment
in the United States (CFIUS) action, telecommunication services, biological
product and medical device authorizations, clinical investigations, and others.
The Final Rule’s prohibitions and restrictions are consistent
with other access restrictions on sensitive personal data that have been
imposed in other contexts, including transactions reviewed by the CFIUS and the
Committee for the Assessment of Foreign Participation in the U.S.
Telecommunications Services Sector (Team Telecom).
Lastly, under the Final Rule, parties engaging in vendor
agreements, employment agreements, and investment agreements involving access
by countries of concern or covered persons to bulk U.S. sensitive personal data
or U.S. Government-related data would be restricted transactions that must
comply with the separate security requirements that have been developed by the
Department of Homeland Security’s Cybersecurity and Infrastructure Security
Agency (CISA) in coordination with the Justice Department. These security
requirements include organizational and system-level requirements (such as
ensuring that basic organizational cybersecurity policies, practices, and
controls are in place), and data-level requirements (such as data minimization
and masking, encryption, and privacy-enhancing techniques). These critical
requirements will be published separately by CISA through the Federal Register
and on CISA’s website.
In connection with the Final Rule, the Justice Department
will publish compliance, enforcement, and other guidance, which will be located
at www.justice.gov/nsd/data-security..
. .
Tuesday, 29 October 2024
AI as a Valuation Helper: Duty to Disclose AI Use
In a recent decision, Matter of Weber (October 2024), involving a trust in New York, the court addressed the use of artificial intelligence by an expert in a valuation determination. The decision states:
Use of Artificial Intelligence
[A] portion of his testimony bears
further and separate discussion as it relates to an emerging issue that trial
courts are beginning to grapple with and for which it does not appear that a
bright-line rule exists.
Specifically, the testimony revealed that Mr. Ranson relied
on Microsoft Copilot, a large language model generative artificial intelligence
chatbot, in cross-checking his calculations. Despite his reliance on artificial
intelligence, Mr. Ranson could not recall what input or prompt he used to
assist him with the Supplemental Damages Report. He also could not state what
sources Copilot relied upon and could not explain any details about how Copilot
works or how it arrives at a given output. There was no testimony on whether
these Copilot calculations considered any fund fees or tax implications.
The Court has no objective understanding as to how Copilot
works, and none was elicited as part of the testimony. To illustrate the
concern with this, the Court entered the following prompt into Microsoft
Copilot on its Unified Court System (UCS) issued computer: "Can you
calculate the value of $250,000 invested in the Vanguard Balanced Index Fund
from December 31, 2004 through January 31, 2021?" and it returned a value
of $949,070.97 — a number different than Mr. Ranson's. Upon running this same
query on two (2) additional UCS computers, it returned values of $948,209.63
and a little more than $951,000.00, respectively. While these resulting
variations are not large, the fact there are variations at all calls into
question the reliability and accuracy of Copilot to generate evidence to be
relied upon in a court proceeding.
Interestingly, when asked the following question: "are
you accurate", Copilot generated the following answer: "I aim to be
accurate within the data I've been trained on and the information I can find
for you. That said, my accuracy is only as good as my sources so for
critical matters, it's always wise to verify.
When asked "are you reliable", Copilot responded
with: "[y]ou bet. When it comes to providing information and engaging in
conversation, I do my best to be as reliable as possible. However, I'm also
programmed to advise checking with experts for critical issues. Always good to
have a second opinion!" When the follow-up question of "are your
calculations reliable enough for use in court" was asked, Copilot
responded with "[w]hen it comes to legal matters, any calculations or data
need to meet strict standards. I can provide accurate info, but it should
always be verified by experts and accompanied by professional evaluations
before being used in court . . . "
It would seem that even Copilot itself self-checks and relies
on human oversight and analysis. It is clear from these responses that the
developers of the Copilot program recognize the need for its supervision by a
trained human operator to verify the accuracy of the submitted information as
well as the output.
Mr. Ranson was adamant in his testimony that the use of
Copilot or other artificial intelligence tools, for drafting expert reports is
generally accepted in the field of fiduciary services and represents the future
of analysis of fiduciary decisions; however, he could not name any publications
regarding its use or any other sources to confirm that it is a generally
accepted methodology.
It has long been the law that New York State follows
the Frye standard for scientific evidence and expert
testimony, in that the same is required to be generally accepted in its
relevant field (see Frye v. United States, 293 F. 1013 [D.C.
Cir. 1923]).
The use of artificial intelligence is a rapidly growing
reality across many industries. The mere fact that artificial intelligence has
played a role, which continues to expand in our everyday lives, does not make
the results generated by artificial intelligence admissible in Court. Recent
decisions show that Courts have recognized that due process issues can arise
when decisions are made by a software program, rather than by, or at the
direction of, the analyst, especially in the use of cutting-edge technology (People
v Wakefield, 175 AD3d 158 [3d Dept 2019]). The Court of Appeals has
found that certain industry specific artificial intelligence technology is
generally accepted (People v. Wakefield, 38 NY3d 367 [2022] [allowing
artificial intelligence assisted software analysis of DNA in a criminal case]).
However, Wakefield involved a full Frye hearing that
included expert testimony that explained the mathematical formulas, the
processes involved, and the peer-reviewed published articles in scientific
journals. In the instant case, the record is devoid of any evidence as to the
reliability of Microsoft Copilot in general, let alone as it relates to how it
was applied here. Without more, the Court cannot blindly accept as accurate,
calculations which are performed by artificial intelligence. As such, the Court
makes the following findings with regard to the use of artificial intelligence
in evidence sought to be admitted.
In reviewing cases and court practice rules from across the
country, the Court finds that "Artificial Intelligence"
("A.I.") is properly defined as being any technology that uses
machine learning, natural language processing, or any other computational
mechanism to simulate human intelligence, including document generation,
evidence creation or analysis, and legal research, and/or the capability of
computer systems or algorithms to imitate intelligent human behavior. The Court
further finds that A.I. can be either generative or assistive in nature. The
Court defines "Generative Artificial Intelligence" or
"Generative A.I." as artificial intelligence that is capable of
generating new content (such as images or text) in response to a submitted
prompt (such as a query) by learning from a large reference database of
examples. A.I. assistive materials are any document or evidence prepared with
the assistance of AI technologies, but not solely generated thereby.
In what may be an issue of first impression, at least in
Surrogate's Court practice, this Court holds that due to the nature of the
rapid evolution of artificial intelligence and its inherent reliability issues
that prior to evidence being introduced which has been generated by an
artificial intelligence product or system, counsel has an affirmative duty to
disclose the use of artificial intelligence and the evidence sought to be
admitted should properly be subject to a Frye hearing prior to
its admission, the scope of which should be determined by the Court, either in
a pre-trial hearing or at the time the evidence is offered.