Tag: Legal

Will Defining Current Laws to Fit AI, Artificially Stifle its Growth

Posted on by phoffman@channelchek.com

The Legal Problems AI Now Creates Should Pave the Way to a Robust Industry

Is artificial intelligence, or more specifically OpenAI a risk to public safety? Can ChatGPT be ruining reputations with false statements? The Federal Trade Commission (FTC) sent a 20-page demand for records this week to OpenAI to answer questions and address risks related to its AI models. The agency is investigating whether the company engaged in unfair or deceptive practices that resulted in “reputational harm” to consumers. The results could set the stage defining the place artificial intelligence will occupy in the US.

Background

The FTC investigation into OpenAI began on March 2023. It resulted from a complaint from the Center for AI and Digital Policy (CAIDP). The complaint alleged that OpenAI’s ChatGPT-4 product violated Section 5 of the FTC Act. Section 5 prohibits unfair and deceptive trade practices. More specifically, CAIDP argues that ChatGPT-4 is biased, deceptive, and a risk to public safety.

The complaint cited a number of concerns about ChatGPT-4, including:

  • The model’s potential to generate harmful or offensive content.
  • The model’s tendency to make up facts that are not true.
  • The model’s lack of transparency and accountability.

The CAIDP also argued that OpenAI had not done enough to mitigate these risks. The complaint called on the FTC to investigate OpenAI and to take action to ensure that ChatGPT-4 is not used in a harmful way. The FTC has not yet made any public statements about the investigation. OpenAI has not commented publicly on the investigation.

It is not clear what action, if any, the FTC can or will take.

Negligence?

With few exceptions, companies are responsible for the harm done by their products when used correctly. One of the questions the FTC asked has to do with steps OpenAI has taken to address the potential for its products to “generate statements about real individuals that are false, misleading, or disparaging.” The outcome of this investigation, including any regulation could set the tone and define where responsibility lies regarding artificial intelligence.

As the race to develop more powerful AI services accelerates, regulatory scrutiny of the technology that could upend the way societies and businesses operate is growing. What is difficult is computer use generally isn’t isolated to a country, the internet extends far beyond borders. Global regulators are aiming to apply existing rules covering subjects from copyright and data privacy to the issues of data fed into models and the content they produce.

Legal Minefield

In a related story out this week, Comedian Sarah Silverman and two authors are suing Meta and OpenAI, alleging the companies’ AI language models were trained on copyrighted materials from their books without their knowledge or consent.

The copyright lawsuits against the ChatGPT parent and the Facebook parent were filed in a San Francisco federal court on Friday. Both suits are seeking class action status. Silverman, the author of “The Bedwetter,” is joined in her legal filing by authors Christopher Golden and Richard Kadrey.

Unlike the FTC complaint, the authors’ copyright suits may set a precedent on intelligence aggregation. The sudden birth of AI tools that have the ability to generate written work in response to user prompts was “taught” using real life work. The large language models at work behind the scenes of these tools are trained on immense quantities of online data. The training practice has raised accusations that these models may be pulling from copyrighted works without permission – most worrisome, these works could ultimately be served to train tools that upend the livelihoods of creatives.

Take Away

Investing in a promising new technology often means exposing oneself to a not yet settled legal framework. As the technology progresses, the early birds investing in relatively young and small companies may find they hold the next mega-cap company. Or, regulation may limit, to the point of stifling, the kind of growth experienced by Amazon and Apple a few short decades ago.

If AI follows the path of other technologies, well-defined boundaries, and regulations will give companies the confidence they need to invest capital in the technology’s future, and investors will be more confident in providing that capital.

The playing field is being created while the game is being played. Perhaps if the FTC has a list of 20 questions for OpenAI in ten years, it will just type them into ChatGPT and get a response in 20 seconds.

Paul Hoffman

Managing Editor, Channelchek

https://www.ftc.gov/news-events/news/press-releases/2022/06/ftc-report-warns-about-using-artificial-intelligence-combat-online-problems

https://www.reuters.com/technology/us-ftc-opens-investigation-into-openai-washington-post-2023-07-13/

What is the Espionage Act? –  A Nuts and Bolts Description

Posted on by phoffman@channelchek.com

Understanding the US Espionage Act of 1917

This month marks the 106th anniversary of the Espionage Act. Enacted on June 15, 1917, just a couple of months after the United States entered WWI. While the Act is not specifically related to stocks and other investments, discussions of the Espionage Act may, at times, overtake the news and even distract market players or potentially drive market mood. So it is best to have an accurate understanding of the components. The Espionage Act is a federal law that criminalizes spying and other activities that could be harmful to US national security. The variations and intricacies involve spying for foreign governments, leaking classified information, obstructing selective service, and using the US Postal Service to promote interests counter to those of the USA.

The Espionage Act Sections

The Act has five main sections:

Section 792: This section prohibits gathering or transmitting defense information with the intent or reason to believe that the information may be used to the injury of the United States or to the advantage of any foreign nation.

Section 793: This section prohibits gathering or transmitting classified information with the intent or reason to believe that the information may be used to the injury of the United States or to the advantage of any foreign nation.

Section 794: This section prohibits delivering defense information to a foreign government or to a person who is not entitled to receive it.

Section 795: This section prohibits photographing or sketching defense installations without permission.

Section 798: This section prohibits disclosing classified information to unauthorized persons.

The Espionage Act Uses

The Espionage Act has been used to prosecute a wide range of offenses, including leaking information, recruiting spies, and creating disobedience among military ranks.  

Espionage: Espionage is the act of spying for a foreign government. Espionage can involve gathering or transmitting classified information, or it can involve recruiting or assisting spies.

Leaking Classified Information: Leaking classified information is the act of disclosing classified information to unauthorized persons. Leaking can be done intentionally or unintentionally.

Inciting insubordination in the military: Inciting insubordination in the military is the act or behavior of encouraging military personnel to disobey orders. This can be done by spreading rumors, making false statements, or even simply providing material support to those who are planning to disobey orders.

The Espionage Act is a powerful tool that can be used to protect national security. However, the law has also been criticized for its potential to infringe on First Amendment rights. The Espionage Act has been challenged in court on several occasions, the results have been mixed, but as it applies to first amendment rights during wartime, the courts typically sidewith the state.

Espionage is the practice of spying or using spies to obtain secret or confidential information from non-disclosed sources or divulging of the same without the permission of the holder of the information. – Oxford Dictionary

Additions and Amendments

Since 1917 the Act has seen additions and addendums. These include:

Sedition Act of 1918: The Sedition Act was passed as an amendment to the Espionage Act. It criminalized various forms of expression, including any spoken or written words that aimed to incite disloyalty or contempt towards the US government, the Constitution, or the flag. First Amendment challenges, during wartime have mostly failed. The Wilson administration made it against the act to use the US Post Office for any mailing that may violate te act – 74 newspapers had been denied mailing privileges

USA Patriot Act, 2001: Following the September 11 attacks, the USA PATRIOT Act expanded the scope of the Espionage Act by enhancing surveillance and investigative powers. It broadened the definition of “national defense” and allowed for more extensive monitoring of suspected espionage activities.

Take Away

The Espionage Act of 1917 prohibited obtaining information, recording pictures, or copying descriptions of any information relating to the national defense with intent or reason to believe that the information may be used for the injury of the United States or to the advantage of any foreign nation. Since 1917 there have been a couple of new amendments to the original law.

Paul Hoffman

Managing Editor, Channelchek

Sources

https://www.mtsu.edu/first-amendment/article/1045/espionage-act-of-1917

https://constitutioncenter.org/the-constitution/historic-document-library/detail/espionage-act-of-1917-and-sedition-act-of-1918-1917-1918

Musk’s Attempt to Rein In the Securities and Exchange Commission

Posted on by cpatches
Image Credit:  Wired Photostream (Flickr)

Musk’s Lawyers Call SEC Agreement a “Government Imposed Muzzle”

Elon Musk has had enough of being gagged. It has been over four years since he tweeted to his 22 million Twitter followers that he could take Tesla private, at $420 per share (a substantial premium to its trading price at the time), and that funding for the transaction had been secured, adding the only remaining uncertainty was a shareholder vote. On September 27, 2018, the SEC charged Musk, CEO of Tesla Inc., with securities fraud for a series of false and misleading tweets about a potential transaction to take Tesla (TSLA) private. 

Part of the resolution with the Commission was that the CEO and chairman would not use Twitter and mention business without each tweet being vetted by a lawyer. Apparently, the provision restricting open communication with followers is difficult for Elon, who is quite active on the social media microblog platform. The easier part is the $40 million in cash that was part of the settlement ($20mm Musk, $20mm Tesla), and his resignation as Chairman of the Board.

In a brief filed with the 2nd U.S. Circuit Court of Appeals in Manhattan, on the fourth anniversary of the SEC’s charges, Musk’s lawyers called the pre-approval mandate a “government-imposed muzzle” that inhibited and chilled his lawful speech on a broad range of topics. The brief also said the requirement imposed by the SEC violated the U.S. Constitution and undermined public policy by running “contrary to the American principles of free speech and open debate.”

The SEC is expected to respond by filing its own brief with the appeals court.

Elon had filed an appeal previously to terminate the settlement agreement he had as CEO of Tesla with the SEC. That request was denied in April of this year. The denial was awkward as Mr. Musk was moving forward to acquire Twitter for $44 billion.

When on November 6, 2021 Musk asked Twitter followers whether he should sell 10% of his Tesla stake to cover tax bills on stock options, the SEC opened a probe and subpoenaed documents related to his compliance with the earlier settlement.

It’s time to rein in the SEC, according to the filing by Musk’s attorneys. It said the ruling is keeping Musk under “constant threat” as the Commission might reject his view as to which tweets require pre-approval from legal staff.

“Under the shadow of the consent decree, the SEC has increasingly surveilled, policed, and attempted to curb Mr. Musk’s protected speech that does not touch upon the federal securities laws,” the lawyers wrote.

In other events related to Twitter and the Tesla founder, Twitter has sued Musk to complete his purchase of the company. A nonjury trial is scheduled for October 17 in Delaware Chancery Court.

Paul Hoffman Managing Editor, Channelchek

Sources

https://www.sec.gov/news/press-release/2018-219

https://www.sec.gov/news/press-release/2018-226

https://www.reuters.com/legal/elon-musk-seeks-narrow-sec-consent-decree-end-pre-approval-tweets-2022-09-28/

https://www.politico.com/news/2022/04/27/judge-rejects-elon-musks-motion-sec-consent-decree-tweets-00028341