THE LEGAL SIDE OF AI TOOLS: WHAT USERS SHOULD KNOW

Author: Gautam Sharma, Dharmashastra National Law University, Jabalpur

Introduction

AI technology has rapidly become an integral part of many professions, including teaching, law, and business. Most people, however, do not fully understand the impact of the legal ramifications of the technology and the potential consequences of using an AI tool without reviewing the “Terms and Conditions” first. Using an AI tool however can cause users to forfeit knowing how their data is processed and how their data is manipulated because of their interaction with a third-party system. This scenario brings to the fore several fundamental issues around privacy, data misuse.

This blog explores the key legal issues that ordinary users, students, and professionals should keep in mind before relying on AI tools. It asks a simple but crucial question: how can users enjoy the benefits of AI without exposing themselves, their clients or their organisations to avoidable legal risks?

What Happens to Your Data?

People may think that their input into an AI tool simply disappears but rather it has been sent to a remote server and depending on the tool may be stored and processed for a variety of reasons, including for model improvement, abuse detection or analytic purposes as outlined in the tool's Terms of Use and Privacy Policy. Without knowing the extent users grant positive and implicit consent to the broad collection and processing of their information.

People may not be fully aware of the implications of the AI Tool and Data Privacy laws as they draft and submit information to such tools. Data Protection Laws, such as the Digital Personal Data Protection Act, 2023 in India are based on the principles of consent, purpose limitation and reasonable security frameworks as a standard of protection for personal data.

Privacy, Confidentiality and Sensitive Information

One important risk AI tools pose and what we need to consider is how people use them is by dropping “real life” documents and facts into the chatbox to squeeze out information quicker. This is almost certainly how small to large scale lawyers, businesses and even students are sharing with a third-party system that they have no control over and is almost certainly how they are sharing client information such as names, details about transactions and disputes, medical documents or other documents that are still internal.This means that confidential or sensitive information can be stored for some time outside the purview of the user.

This is exposing users to possible serious proprietary and ethical issues. Lawyers and other professionals are given certain duties of confidentiality and data protection and putting some client or organisational data into a public AI tool can be unauthorised disclosure and data breach on their part. There are significant risks in even “anonymising” the documents that are to be put into the public AI tool by having names removed as people can still be identified by patterns, facts and other unique details that some would consider ordinary like financial data or other information.

Liability When AI Is Wrong

Unfortunately AI cannot tell the difference between right and wrong and its answers may even be made up in detail or whole. It is especially dangerous if users trust the AI to make important, risky decisions in a business, finance, health care or legal context. Its AI outputs may cause users to incur losses or permanently harm their reputation. Because AI is still non-sentient, Courts must hold the human employer, user, or provider responsible for the AI system's legal impairment or violation.

Rather than properly addressing the AI system in question, too many Courts are simply manipulating notions of negligence, contract and product liability to contain or manage disputes concerning AI. This in turn allows other professionals in the field to avoid their responsibility. It is for this reason that professionals submit AI outputs to the Courts unverified which is of course simply a high-risk activity in the practice of litigation or other risk-oriented practices such as advisory roles.

Practical Safety Checklist for Users

Use well‑known trusted AI tools instead of random apps or extensions.
Before using a tool, quickly check its Terms of Use and Privacy Policy, especially how it uses and stores your data.
Do not share confidential client information, trade secrets, financial details, health data or ID numbers in public AI tools.
Treat AI output as a draft or starting point, not as final advice or authority.
Be careful with biased, offensive or unfair language that AI may produce and revise it to meet ethical and professional standards.
Follow your organisation’s or university’s AI policy about what data can be uploaded and how AI can be used.

Conclusion

AI tools have fully integrated into our study, work, and business life, and accompany real legal risks and ramifications for users. Every prompt and upload raise concerns related to the processing of personal data, the potential exposure of sensitive information, ownership of AI-generated content, and liability for inaccurate or harmful content. For the Indian users, the Digital Personal Data Protection Act, 2023 and upcoming AI governance frameworks that advocate for privacy, responsibility, and safe AI implementation, are the data protection rules currently shaping this risk landscape. Concurrently, existing regulations regarding copyright, contracts, and negligence are also in effect. Therefore, users of AI risk incurring unresolvable disputes and liability by using AI without reviewing its terms, implementing adequate data safeguards and validating its outputs.