Navigating AI in Business: Safeguarding Trade Secrets and Data Privacy
As businesses increasingly integrate artificial intelligence (AI) tools into their operations, one of the most significant risks they face is the potential exposure of sensitive information. Whether using AI-powered analytics, automation, or customer-facing applications, companies must take deliberate steps to protect trade secrets, proprietary data, and customer information.
In this article, we will examine the legal and practical measures businesses should implement to safeguard their data assets when using AI—particularly when working with third-party providers.
Why AI Heightens Data Privacy and Security Risks
AI systems often require access to large volumes of data to function effectively. However, the use and transfer of this data create exposure points that can compromise a company’s competitive advantage or violate data privacy laws.
Common data security risks when using AI include:
Loss of control over proprietary data entered into third-party AI tools
Inadequate confidentiality provisions in vendor agreements
Potential for AI providers to reuse or store sensitive business information
Increased internal exposure due to insufficient access restrictions
Without proactive safeguards, businesses may inadvertently allow confidential information to be misused, sold, or leaked.
Key Legal Strategies to Protect Business Data
Implement Robust Confidentiality Agreements
Confidentiality agreements must explicitly cover:
The use of AI systems
Data processing responsibilities
Prohibitions on data reuse or sharing by third parties
Agreements should also include clear breach protocols and remedies to protect the business in the event of a data compromise.
Restrict Internal Access to Sensitive Data
Only authorized employees should have access to proprietary datasets, especially those processed by AI platforms. Establish:
Strict role-based permissions
Secure data storage solutions
Internal training on AI-related data security protocols
Conduct Thorough Vendor Contract Reviews
When working with third-party AI providers, contracts must:
Clearly define data ownership
Set specific limitations on how vendors can use your data
Require appropriate security measures (e.g., encryption, audits)
Failing to include these provisions can lead to unintended data sharing, exposure to foreign jurisdictions, or loss of intellectual property control.
Recommended Best Practices for AI Data Security
Data Minimization: Limit the volume of sensitive information shared with AI tools.
Encryption: Ensure all data transfers to AI providers are securely encrypted.
Regular Audits: Conduct periodic assessments of data access and AI tool performance.
Third-Party Vetting: Carefully evaluate the security credentials and reputations of all AI vendors.
Clear Data Retention Policies: Specify how long AI vendors can store data and when it must be destroyed.
These practices, combined with strong legal agreements, create a multi-layered defense against potential breaches or misuse.
How Thomas Law Can Help Protect Your Business
At Thomas Law, we provide comprehensive support to help businesses:
Draft customized confidentiality and non-disclosure agreements tailored to AI use
Structure third-party vendor contracts that prioritize data security and limit liability
Develop internal policies that govern data access and usage for AI systems
Ensure compliance with data privacy laws, including CCPA, GDPR, and HIPAA (where applicable)
We help businesses secure their most valuable assets while enabling responsible AI adoption.
Next Steps
If your business is using or considering AI tools, now is the time to review your data security protocols and vendor agreements to ensure adequate protection of your proprietary information.
Contact Thomas Law today to schedule a consultation and learn how we can help you safeguard your trade secrets and customer data in an AI-driven environment.
Coming Up Next in the Series
In the next article, we will examine the essential AI-specific contract clauses every business should include to protect against liability, secure ownership rights, and maintain control over AI-generated outcomes.
Stay informed. Stay protected.
