AI Arbitrations: A Summary of Recent Issues
By Lisa Romeo
Artificial intelligence is transforming how we work across industries, but with rapid innovation comes legal complexity. From breach of contract claims to consumer protection issues, AI-related arbitration cases are increasing. Below are summaries of recent AI arbitration disputes detailing the legal challenges businesses and consumers face.
The claims include general contractual disputes about the “business” of AI services and claims regarding the efficacy and safety of AI tools. Please note that the summaries below reflect only the claims asserted and not the respondents’ defenses or any decisions on the merits.
The AI Sales Guarantee That Wasn’t
A company purchased an AI sales tool guaranteed to double its revenue—or “its money back.” Six months later, the purchasing company hadn’t seen the promised results. They requested that the provider refund the sales price, but the provider did not respond. So the claimant filed arbitration, alleging that the failure to honor the money-back guarantee constituted a material breach of contract.
AI Text Messaging Gone Awry
A consumer filed a Demand for Arbitration under the Consumer Arbitration Rules against a retail company, alleging violations of the Telephone Consumer Protection Act (TCPA) and applicable state law. The claimant contends they initially enrolled in promotional text messages but then revoked that consent. They allege they received numerous marketing messages after the revocation while their phone number was registered on the National Do-Not-Call (DNC) Registry.
AI Chatbot Gone Wrong: Privacy Violations and Security Breaches
A financial services provider turned to AI to enhance customer service, deploying an automated telephone helpline. The claimant alleged both technical failures of the chatbot and that the AI provider breached federal privacy laws.
AI-Powered Fraud?
Many AI-driven business tools promise efficiency and automation, but what happens when those promises fall flat? A claimant in an arbitration case alleges they paid thousands for specific AI-powered service training—only to receive a service that didn’t perform as advertised.
The customer sought compensation for financial losses, legal fees and damages for misrepresentation and fraud.
Mandatory Minimums
The claimant, an AI company, initiated a cross-border mediation, alleging the respondents breached their agreement by failing to purchase the minimum required services. The respondents argue that some services provided were of inadequate quality.
AI and Trademark Disputes: The Unauthorized API Battle
What happens when someone builds an unauthorized API to access an AI company’s proprietary technology? One AI firm claims that happened when a third party allegedly developed an API that provided users with automated access to the AI company’s platform—without permission.
Despite receiving a cease-and-desist letter, the respondent allegedly continued to profit from the unauthorized API access, prompting the AI company to seek an injunction and financial restitution through arbitration.
The AI Startup and the Broken Contract
An AI software firm partnered with a company to develop an autonomous product. Under their agreement, the company was supposed to pay the AI firm a certain sum each year for five years. However, after 18 months, the company allegedly stopped paying and attempted to terminate the contract early.
The AI firm filed for arbitration, arguing that the contract didn’t allow for immediate termination and demanding the unpaid fees.
The Legal Ethics of AI Litigation
In a unique AI-related dispute, a law firm and an AI patent holder are at odds over a settlement. The law firm argues that it is entitled to additional legal fees from representing the patent holder, while the patent holder asserts counterclaims against the firm.
AI and Surveillance
Lastly, a consumer filed an arbitration claim against an AI chatbot company, alleging cyberstalking, unauthorized surveillance and threats linked to the AI platform. The claimant accuses the company of facilitating harassment, failing to take action despite multiple reports, and violating consumer privacy laws.
AI is rapidly reshaping industries and the nature of business. However, contracts relating to AI technology may still give rise to claims of a garden-variety breach and claims over AI use (or misuse).
As AI’s integration expands, arbitration cases involving AI-related disputes or AI-related parties are becoming more prevalent. These cases highlight critical issues such as contract enforcement, data usage rights, liability for algorithmic decisions and regulatory compliance. These cases demonstrate the need for clear contractual terms, robust dispute resolution mechanisms and arbitrators with some familiarity with AI. Moving forward, businesses and legal practitioners should proactively anticipate disputes arising from their AI-related contracts, ensure that agreements account for emerging risks, and leverage arbitration to resolve complex technological disputes efficiently.
The author created this content with the help of GenAI tool Chat GPT 4o.