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METI Formulates "Contract Guidance on Utilization of AI and Data"

June 15, 2018

The Ministry of Economy, Trade and Industry (METI) has formulated the “Contract Guidance on Utilization of AI and Data” to summarize issues and factors to be considered when drafting a contract on the utilization of AI or data, with sample clauses provided. This Guidance is intended to be used as a reference when private businesses conclude contracts related to data utilization or development and utilization of AI-based software. METI also has compiled comments received in response to the request for public comment and included them in the draft of this Guidance.

1. Background

As the amount of data explodes due to technological innovations such as IoT and AI, data use is expected to create new value added and solve societal issues through data collaboration that transcends business boundaries. It is often difficult, however, for businesses to conclude contracts related to utilization of data or AI technology due to lack of sufficient experience in contract practices and the gaps in understanding between the parties involved.

To address these issues, METI formulated the “Contract Guidance on Data Utilization Rights ver. 1.0” in May 2017. Subsequently, however, by considering opinions from businesses and associations, METI established an AI/ Data Contract Guidance Committee (Chair, Professor Toshiya Watanabe) to discuss radical revisions of said Guidance. As a result of thorough discussion in the committee, the draft of the Contract Guidance on utilization of AI and Data was prepared.

This new Guidance organizes and different types of data utilization contracts, provides in-depth explanations and illustrates actual examples of data utilization; and explains basic concepts concerning rights and responsibilities associated with development and utilization of AI-based software.

From April 27 to May 26, 2018, opinions were solicited from the public and 22 opinions were received.

Based on the opinions received, METI has prepared a “Contract Guidance on Utilization of AI and Data” and a summary of the results of the public comment process.

2. Outline of Guidance

This Guidance was formulated with significant engagement from lawyers and industry experts who are in charge of contracts and that specialize in conflicts of interest and confidentiality. Therefore, discovering the problems encountered by industry in using the guidance, providing solutions to those problems and further recording new issues raised in the continued use of the guidance would prove useful. Contracts related to utilization of AI and data are relatively new, so there are limits to individual private sector attempts to enhance the contracts.

On the other hand, this guidance is not meant to restrict contract finalization procedure in any way or interfere with the doctrine of freedom of contract. It is simply intended to aid the contracting parties in creating appropriate contracts after considering the actual business circumstances, including the relative contribution of the data in question to the profitability of the business.

This Guidance consists of two sections: 1. Data Section and 2. AI Section.

  1. Data Section
    1. Objectives
      The objectives of the data section are to help businesses reduce the cost of implementing a data utilization contract due to lack of experience in implementing such contracts, popularize signing of data utilization contracts, and promote effective data utilization. To achieve these objectives, we described the main issues associated with different types of data utilization contracts, provided contract clause examples, and noted factors to be considered in contract preparation.
    2. Targeted readers
      This section was prepared for a wide range of people, including contracting business operators, associated business and management units, and parties developing systems for data distribution and utilization.
    3. Outline
      This section categorizes data utilization contracts into three types data provision, data creation, and data sharing (platform type) and explains structures, main legal issues and proper contract preparation processes for each contract type. This section also provides model contract clauses for data provision and data creation-type contracts.
  2. AI Section
    1. Objectives
      The objective of the AI Section is to promote the development and utilization of AI technology by explaining characteristics and basic concepts of AI technology and by describing other fundamental concerns, such as factors to be considered in preparing contracts related to the development and utilization of software that uses AI Technology and methods of preventing problems, etc.
    2. Subject
      Companies of all scales, including large corporations (e.g., major IT vendors) and small to medium-sized businesses (e.g., venture companies).
    3. Outline
      The AI Section first explains the basic concepts of AI technology and features of software development using AI technology. The AI Section then proposes “Exploratory Multi-phased” AI development processes which consists of (1) the assessment phase, (2) the PoC phase, (3) the development phase and (4) the retraining phase. The AI Section further describes types of contracts and factors to be considered in contract preparation, with sample clauses provided.

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