Using artificial intelligence responsibly in your business

By Lindsay Kotzman, Lily Boghikian and Lachlan Jones.
P&B Law Founder and Partner Lindsay Kotzman joins with Lawyers Lily Boghikian and Lachlan Jones to guide businesses through the legal issues to consider when integrating AI technology into business operations. The authors combine their legal expertise and commercial experience with a focus on addressing the novel challenges clients can face as they negotiate new technologies and business innovations.

Failure of oversight can be damaging and dangerous

A global consultancy made headlines recently when reviewers discovered dozens of AI-fabrications in its report for an Australian government department. Questions were asked in Parliament about whether its work could be relied on as the basis for policy decisions. Senators also challenged the consultant’s six-figure fee for work generated by AI and not properly checked.

Even the most experienced business users can be tripped up when generative artificial intelligence tools (GenAI) invent plausible-sounding references (‘hallucinating’). GenAI tools are now widely available and embedded into business software packages. This incident reminds businesses of all sizes to ensure they use these tools responsibly.

Complying with Australian law when using GenAI

Governments around the world are developing legal approaches to regulate AI use. The Australian government’s recently released National AI Plan indicates there are no plans to develop comprehensive legislation to regulate all uses of AI (unlike for example the European Union’s Artificial Intelligence Act). Rather, Australian legal frameworks will be amended as necessary to address risks and opportunities introduced by the new technologies.

Some laws such as Australian privacy and online safety laws are beginning to include specific provisions around the use of AI. In other cases, laws are technology neutral. That means businesses in Australia need to make sure their AI use complies with existing obligations including under defamation, consumer protection and intellectual property laws. It also means staying up to date as legal obligations change.

Principles for responsible use of AI

Australia’s National Artificial Intelligence Centre recently published Guidance for AI Adoption for Australian businesses. It identifies six essential practices for businesses to adopt AI safely and responsibly:

1. Decide who is accountable and create an AI policy
2. Understand and plan for impacts
3. Measure and manage risks
4. Share essential information with users and stakeholders
5. Test and monitor AI systems
6. Maintain human control.

One key step is to identify potential legal, commercial and reputational risks. To assist with this step we have identified some important legal and commercial considerations when using GenAI.

In summary, AI is a tool not a shortcut. Human oversight is always needed, and users should:

1. Check that content is relevant, accurate, fair and unbiased.
2. Protect confidential information and privacy.
   
3. Ensure content does not breach another person’s rights.
4. Be transparent. Disclose use of AI.
5. Understand the limitations of AI tools and seek specialist advice where needed.

Always use human oversight – check for accuracy, relevance and bias

AI tools use very complex neural networks to look for patterns and predict the most likely response to the question they were asked, based on data available to them. AI tools can be a great way to scan large volumes of data, see what a common response to an issue might look like, or quickly generate a vast range of conceivable answers.

However, publicly available AI tools are largely opaque. General users are unlikely to know how their algorithms work or the data they have been trained on. Since we cannot check GenAI’s ‘thinking’, it is even more important to check the outputs. Failing to check AI-generated content raises both legal and commercial risks.

Accuracy

AI tools aim to generate the answer they calculate that you are looking for. Sometimes that includes hallucinating something that could exist but doesn’t – such as a reference source or quotation.

Relying on AI tools without careful checking could undermine trust and confidence in the quality of your work. In business, the problem is becoming known as ‘AI workslop’. That is, using generative AI as a shortcut to create polished-looking responses that someone else needs to check and verify. For example, we see policies or business plans that are so generic it seems clear they’ve been AI-generated as a box-ticking exercise.

This may be a commercial issue. They may not provide the information a lender or lessor needs. They may suggest your business doesn’t have well thought-out plans or strategy.
If they contain inaccurate or made-up information, they could also breach defamation or consumer protection laws.

Relevance

AI-generated content can only be based on the source materials provided. It can be a useful summary of those materials, but it cannot reflect insight into your situation.

In our experience, a draft document generated using AI tools contains about a quarter of what we need. The wording might be too generic to be useful, or it might not make sense in context. And an AI-tool may be unable to distinguish whether sources are relevant. For example, it might draft policy based on US law, or legislation not yet in force.

Bias and discrimination

As well as their tendency to hallucinate, AI tools can be biased, mainly because of inherent biases in the source material they have been trained on. For example, there have been concerns that AI tools used to screen resumes demonstrate both gender and racial biases. Similar biases could come into play if you are using an AI tool to analyse customer data, or draft marketing plans, for example.

This could cause reputational damage and risk breaching employment or anti-discrimination laws.

Ensure privacy and confidentiality

If you are going to use an AI tool to help you write documents for your business, make sure you understand where and how it stores and uses content before you upload anything confidential or commercially sensitive. If you are not sure, it’s safest to assume information could be used or shared by the AI.

Even if you are comfortable disclosing your own business information, be sure you are not breaching your privacy or confidentiality obligations.

Recording meetings and using AI transcribing tools could involve the same concerns. Always ensure you have consent to record any meetings – and be prepared to turn off the recording if needed.

Protect others’ rights and intellectual property

There are still legal questions about how intellectual property law will deal with AI-created content. Artistic works must have a human author to be protected under Australian copyright law.

That means it is unlikely purely AI-generated works could be protected, and they may breach the intellectual property of the artists whose work was used to train the AI. But there are still many issues that have not been tested.

Transparency

From December 2026, businesses covered by the Australian Privacy Act 1988 must tell customers if they use personal information with automated decision-making or decision-support. This could apply to tools such as recruiting filters, medical diagnostic support, or AI-assisted loan evaluation tools.

In other cases, clients may start requesting you to spell out where and how you use GenAI, if they are not doing this already. Getting clear about how your business uses tools, how you protect privacy and how you check outputs will ensure you can answer those questions when they arise.

Understand AI’s limitations

AI tools are rapidly becoming more sophisticated. They can supplement and support business operations. However, they can only respond based on source material they have access to. They are never a shortcut for strategic thinking and always need human oversight. Human experts on the other hand draw on experience to craft innovative strategies or narrowing down options to achieve the outcome you desire in the time that you have.

Get our specialist advice for your business.

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