Contract Guidance on Utilization of AI and Data

Don’t you think that digitization is booming only in Germany, Silicon Valley and China? Wrong. In Japan, digitalization has become a boom in recent years. Revolutionary AI technologies and theories have been developed one after another, and new businesses that utilize the huge amount of information gathered twenty-four seven are started. Perhaps it may be widely known that Japanese society is a pre-check type society rather than a post-check type society. As expected, businesses that use the newest AI technology and data utilization technology are running far ahead of administrative checks, but the Japanese government is struggling to catch up and willing to lead the completely new business in new world.

The Ministry of Economy, Trade and Industry (METI) has formulated the “Contract Guidance on Utilization of AI and Data” to raise issues and factors to be considered when drafting a contract on the utilization of AI or data, with sample clauses and hypothetical cases provided. This Guidance can be quite helpful when drafting and considering contracts with regard to data utilization, or development and utilization of AI-based software.
In May 2017, to solve problems due to lack of sufficient experience in contract practices and the gaps in understanding between the parties involved, METI first formulated the “Contract Guidance on Data Utilization Rights ver. 1.0”. But only one year later, through discussing concrete cases brought by business operators, METI dramatically updated this Guidance. Now the new Guidance (total number of pages is 356!) covers not only Data utilization contract, which section was greatly updated from the original Guidance, but also AI-related contracts, which section was newly introduced.

In Data Section, the Guidance describes main issues associated with different types of data utilization contracts with contract clause examples, and it also gives factors to be considered. Data 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 process for each contract type. This section also provides model contract clauses for data provision and data creation-type contracts.

In AI Section, the Guidance explains characteristics and basic concepts of AI technology and describes 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. The AI Section then proposes an “Exploratory Multi-phased” AI development process which consists of (1) the assessment phase, (2) the PoC phase, (3) the development phase and (4) the retraining phase. This is a paradigms-shift from Water-fall type development. The AI Section further describes types of contracts and factors to be considered in contract preparation, with sample clauses provided.

I believe that you can learn many things and find lots of tips to take notes from the new Guidance. The only negative point that I must mention before closing this article is that – except general introduction – the Guidance is provided in Japanese language only! Please don’t misunderstand that the Japanese government hesitates to let foreigners do business in Japan. It is just because Japanese government has quite limited budget to translate the documents into English – as such, it is said as a joke that English version will be provided in the next fiscal year! You can’t believe me? Then let’s check this link, and wait for English version just for a while!