AI Update: New FTC Proposed Rules

Earlier this month the Federal Trade Commission shared a notice seeking comments from the public about proposed rules concerning potential liability for generative AI developers. The new rule would (A) find generative AI developers liable for fraudulent impersonation of individuals and (B) create potential liability for companies providing the “means and instrumentalities” of such fraudulent activity. In the same vein, the proposed rules would apply the FTC’s recently adopted rules against the impersonation of government and business entities to individuals.

The importance of the FTC’s proposed use of the “means and instrumentalities” test cannot be overstated.  The test would be used when the generative AI provider has “knowledge” or “reason to know” the AI applications (A) will be used by bad actors in order to (B) “materially and falsely pose as” an individual related to engaging in commerce.  The FTC seeks comments from the entire public—individuals, companies, nonprofit organizations, trade groups, etc.—on this test.

The time period for the public to make comments to the FTC has not started.  The entire schedule for the proposed rulemaking including when the public can make comments will be shared once the proposed rulemaking is published in the Federal Register.  We anticipate the FTC’s total activity related to this proposed rule, which ranges from compiling and analyzing all of the public’s comments to issuing a final rule, will be completed no later than the end of 2024.

If you are interested in learning more about this proposed rule or commenting on this proposed rule to the FTC, please contact Seidman Law Group LLC.

David Seidman is the principal and founder of Seidman Law Group, LLC.  He serves as outside general counsel for companies, which requires him to consider a diverse range of corporate, dispute resolution and avoidance, contract drafting and negotiation, and other issues. He can be reached at david@seidmanlawgroup.com or 312-399-7390.

This blog post is not legal advice.  Please consult an experienced attorney to assist with your legal issues.

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