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Loading: Federal AI Regulations - Three Take-Aways for Businesses

November 10, 2023
5 minute read

Loading: Federal AI Regulations - Three Take-Aways for Businesses

November 10, 2023
5 minute read

Authored By

Rebeca López

Rebeca M. López


Last week was a big week for artificial intelligence (AI) in the United States. On October 30, President Biden signed a landmark Executive Order on the Safe, Secure, and Trustworthy Development and Use of Artificial Intelligence (Order), outlining the administration’s vision for the future of AI. The more than 100-page Order is wide-ranging, addressing intellectual property, privacy, cybersecurity, health care, and labor relations. 

What are the Administration’s Goals?

Priorities outlined in the Order include: (a) creating new standards for AI safety and security, (b) protecting Americans’ privacy (in part through federal privacy legislation), (c) advancing equity and civil rights, (d) protecting consumer, patient, and student rights, (e) supporting workers, (f) advancing American leadership abroad, (g) promoting innovation and competition, and (h) ensuring responsible and effective government use of AI.

What Does the Order Require Federal Agencies To Do?

President Biden ordered various federal agencies to draft regulations within specific time frames, many within only 270 days and all of which must be completed before his term ends. 

Key Order directives include:

  1. Consensus Industry Standards. Requiring the Secretary of Commerce, acting through the Director of the National Institute of Standards and Technology (NIST), to establish guidelines and best practices, in order to promote consensus industry standards for developing and deploying safe, secure, and trustworthy AI systems.
  2. Intellectual Property Guidance. Requiring the US Patent and Trademark Office (USPTO) to publish: (a) guidance to USPTO patent examiners and applicants addressing inventorship and the use of AI, including generative AI, in the inventive process; (b) updated guidance on patent eligibility to address innovation in AI and critical and emerging technologies; and (c) recommendations to the President on potential executive actions relating to copyright and AI, including the scope of protection for works produced using AI and the treatment of copyrighted works in AI training.
  3. AI for Small Businesses. Requiring the Small Business Administration to prioritize allocation of funding to small businesses seeking to innovate, commercialize, scale or otherwise advance the development of AI.
  4. Employer Best Practices. Requiring the Secretary of Labor, in consultation with other agencies and with outside entities, including labor unions and workers, to develop and publish principles and best practices for employers that could be used to mitigate AI’s potential harms to employees’ well-being and maximize its potential benefits.
  5. Civil Rights Enforcement. Requiring the Attorney General to coordinate with and support agencies in their implementation and enforcement of existing Federal laws to address civil rights and civil liberties violations and discrimination related to AI.
  6. Prompt Agency Action. Encouraging independent regulatory agencies to consider using their full range of authorities to protect consumers from fraud, discrimination, and threats to privacy and to address other risks that may arise from the use of AI, including risks to financial stability, and to consider rulemaking, as well as emphasizing or clarifying where existing regulations and guidance apply to AI, including clarifying the responsibility of regulated entities to conduct due diligence on and monitor any third-party AI services they use, and emphasizing or clarifying requirements and expectations related to the transparency of AI models and regulated entities’ ability to explain their use of AI models.
  7. Government Agency Compliance. Requiring the Office of Management and Budget (OMB) to issue guidance to agencies to strengthen the effective and appropriate use of AI, advance AI innovation, and manage risks from AI in the Federal government, including specifying recommendations for external testing for AI, testing and implementing safeguards against discriminatory, misleading, inflammatory, unsafe, or deceptive outputs in generative AI, documenting and oversight of procured AI, among others.

Action is anticipated to be swift. At an AI conference last week, the Chief of Staff for the White House Office of Science and Technology Policy, Technology Division, Nik Marda, noted that the direction from the Biden administration has been to “use all levers” available to it across the broad scope of industries to create AI guardrails.

How are the agencies responding?

Just two days after the Executive Order was signed, in response to its directives, the OMB issued for comment its draft policy on Advancing Governance, Innovation, and Risk Management for Agency Use of Artificial Intelligence, establishing AI governance structures in federal agencies that focused on managing AI risks and protecting federal works. The OMB draft policy is just the beginning of rulemaking that businesses and employers that are developing or deploying AI should be paying attention to.

What are key takeaways for businesses?

  • Monitor Agency Guidance. The year ahead will be busy with numerous new guidelines, principles and regulations in all sectors governing the use of AI. Companies need to monitor any regulating agencies for such guidance.
  • Determine How AI Is Being Used. Work with internal stakeholders and evaluate how AI is already being used in your organization. Is it built into software being used by internal departments or stakeholders? Are decisionmakers relying on internal or external AI resources or utilizing AI in day-to-day activities? Understanding and mapping a business’s use of AI will assist a business in determining how regulations, if implemented, will impact operations.
  • Audit AI Inputs and Outputs. Companies can look to how federal agencies are monitoring and mitigating risks like bias and conducting audits as guidance for reasonable practices. Indeed, AI tools provided by the private sector to the government will have to meet the government use requirements, thus setting the standards for such tools sold to private entities as well. Work with counsel to prepare to conduct privileged audits to determine if changes are need.

For more information on this topic, or to learn how Godfrey & Kahn can help, contact a member of our team.

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