Most lawyers perceive the complexity of AI as a technological hurdle. However, the real challenge lies in the legal field's inability to keep pace with rapid technological advancements. In-house counsels are particularly feeling the heat as businesses push for the deployment of new AI functionalities, buyers demand unprecedented commitments, and executives seek clear risk assessments in a regulatory environment that remains largely ambiguous.

In a revealing discussion with John Pavolotsky, a seasoned technology transactions attorney and co-head of the AI practice at Stoel Rives, it was emphasized that drafting AI contracts requires not only a grasp of the current legal landscape but also an anticipation of where it could be in the near future. For in-house legal teams, this creates a narrow window for action, pushing them to either adapt swiftly or risk falling behind.

The regulatory framework for AI is continuously evolving. For instance, California has introduced numerous AI-related bills, and the EU's AI Act has established risk tiers affecting many U.S. companies. Pavolotsky advises focusing on the subset of regulations that directly impact one's business rather than trying to track every legislative development. This approach necessitates ongoing internal discussions about AI's design, deployment, updates, and usage within the company.

One key insight shared is the identification of "high-risk" AI applications, such as those used in education, housing, financial services, and government services. In-house counsel should be proactive in identifying if their company’s AI initiatives touch these areas and ensure operational clarity within their organizations.

Pavolotsky also highlighted a significant shift in contracting for AI compared to traditional software as a service (SaaS). As AI systems become more autonomous, the entire risk model changes, demanding a new approach to contracting that accounts for AI's autonomous actions and the associated accountability.

Moreover, in-house legal teams are encouraged to actively use AI tools to better understand their capabilities and limitations. This hands-on experience is crucial for drafting effective AI contracts and developing robust legal frameworks that align with the actual use and behavior of AI technologies.

In conclusion, the key to effective AI contracting lies in continuous dialogue and adaptation. In-house counsels are urged to remain engaged, curious, and closely connected to the technological advancements within their organizations. By doing so, they can develop adaptable frameworks that reflect real-world applications and risks, staying ahead of the regulatory curve.