In-depth: Should brands consider adding AI-related clauses to their agency contracts?

Brands and agencies engage in discussions regarding the significance and intricacies of AI-related clauses within agency contracts

Akansha Srivastava
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Delhi: As artificial intelligence, particularly generative AI, becomes increasingly prevalent in advertising and marketing, brands and agency leaders propose integrating AI clauses into creative agency contracts.

While Indian brands have yet to adopt this practice, Ashish Tiwari, Chief Marketing Officer, believes it's worth considering. "It's a beneficial practice that brands should contemplate implementing. There should be terms and conditions around up to what extent AI is implemented in the creative process by ad agencies," he stated.

The former Chief Marketing Officer at Noise, Gaurav Mehta, suggested that there could be clauses surrounding the scope of work related to AI in the agency contracts. 

He said, “The scope of work related to AI will put things in black and white. SOW for designers and generative AI-driven creative processes can be clearly defined.”

“The output of GenAI looks very similar. There is no individuality, which a lot of creators otherwise used to have. Therefore, the scope of work for AI in contracts will be helpful,” said Mehta. 

Abhik Santara, the CEO of Atom Network, seconded Mehta’s thoughts and said that without a clear regulation outlining how the agency can and can't use AI in creativity, the client might be unknowingly exposed to risk.

AI-related clauses should already be included in new contracts, considering the direction we are heading," asserted Piali Dasgupta, former Senior Vice-President of Marketing at Columbia Pacific Communities.

She added, "While it remains to be seen how much of this will be followed in practice, implementing AI clauses at least reduces the likelihood of people becoming more lenient and less vigilant.”

No brand desires its creative output to mirror a competitor's marketing approach. However, with agencies' AI platforms often trained using brand assets, marketers harbour concerns that their intellectual property could inadvertently contribute to a competitor's creative efforts, said a brand consultant. 

Dasgupta said, “While AI in general is a great way of boosting productivity and scaling with stringent teams, in the long term, brands run the risk of the communication looking very similar to somebody else's communication. Therefore, the brand’s positioning and distinction can be challenged to some extent.”

Adityan Kayalakal, Head of Marketing at Veera, a mobile-only browser brand, countered the concern above and said that AI tools have become smarter. “Companies maintaining data lakes will ensure that one brand’s data lake doesn’t overlap the other. The training models for a lot of LLMs will become like that. Big clients will insist on individually trained data sets. The only thing that will change is the creation process.” 

As generative AI becomes more prevalent in creating brand creatives, concerns over copyright infringement and privacy breaches are on the rise. In this context, if brands include clauses addressing copyright infringement and privacy breaches by their agencies due to GenAI, the agency may find itself liable if the brand faces legal issues or public scrutiny due to such infringements.

Mehta remarked that currently, there is a lack of clarity regarding the legal implications and guidelines for the usage of AI. “Therefore, Putting that in a clause is a couple of degrees away from reality today,” he said.

Moumita Pal, Head of Creative at Enormous, told that the moment guidelines are put in place around the usage of AI, they will find their way into the agency contracts. 

In terms of legal implications, Kayalakal said that agencies will start demanding brands decide on LLM tools and training sets for the implementation of GenAI in the creative process. He added, “The bigger advertising networks can still have nuanced solutions and adopt more savvy AI tools, but the smaller agencies can’t afford the cost of indemnity. No agency will take an indemnity on their head.” 

Dasgupta asserted that even with the inclusion of AI-related clauses in agency contracts, whether within SOW or legal agreements, the ultimate authority for approving any creative piece lies with the brand.

She stated, "The final approval rests with the CMO or any authorised individual at the brand's end. Therefore, no brand should be absolved of responsibility in case of any mishap."

Another clause proposed by the brand consultant for inclusion in the contract involves informing clients when the agency employs generative AI in creating creatives. However, an agency head expressed concerns that this would only lead to increased bureaucracy and longer timelines for creative production.

To which Kayalakal said, “It’s a lame excuse. If you can click one button to generate AI, you can send a WhatsApp message to the client about making creative use of AI. Also, clients and agencies talk to each other daily.”

Even Pal from Enormous believes that the belief that AI clauses increase timelines and bureaucracy in the creative process is short-term thinking. 

She added, "When clients expect quick turnaround times for creatives, assuming their agencies will utilize GenAI for ease, clarifying the scope of work under AI will streamline processes without extending timelines or creating bureaucracy. These clauses will also remove the sea of sameness.”

Having a contrasting viewpoint, Dhruv Sachdeva, Founder of Humour Me, believes that incorporating clauses around AI in agency contracts without a thorough understanding of AI tools is not the appropriate approach. He contended that agencies are already transparent about when and how they integrate AI into creativity.

Furthermore, he notes that contract practices in India differ significantly from those in many developed regions. He remarked, "According to contracts, MSMEs should technically be paid within 45 days. However, I have never had a client, even the world's largest, pay me within that timeframe. Contracts hold little value, as it would cost me more to litigate than to pursue other options.

While the legal departments of brands may introduce clauses for their assurance, the reality often diverges. Until the advertising and marketing ecosystem comprehensively grasps AI tools, there is little point in including AI clauses in contracts."

Altogether, the implementation of AI in advertising and marketing is a learning process. There is no immediate answer to it. Kayalakal concluded that one can keep collaborating to find the best practices.