AI in Business: The Commercial Litigation Risks Companies Should Be Watching

With artificial intelligence (“AI”) at the forefront of corporate innovation, businesses are incorporating AI throughout their operations to keep pace with the competition. Businesses will inevitably be required either to develop their own AI solutions or to incorporate existing AI technologies into their operations. This increasing reliance on AI is expected to bring emerging litigation risks and legal challenges.

According to a recent Bank of Canada survey, over the next three years, nearly 40% of businesses expect higher capital spending due to AI.[1] Canadian businesses reported mixed results regarding AI use and anticipated future use, and the Bank of Canada indicated that broad adoption of AI across business operations remains limited.[2] The survey results suggest that Canadian businesses are only beginning to utilize AI technologies.[3] Though Canadian businesses’ use of AI may be limited, disputes are starting to develop surrounding AI, including topics such as intellectual property, privacy laws, and human rights.

The increasing reliance on AI has the potential to create complex legal issues, including copyright infringement, ownership rights, and access to information. Patents, copyrights, licences, and trademarks are often used to protect businesses’ assets and goodwill; however, AI systems often draw information from online sources including news outlets, websites, articles, and published documents to generate information.

In the recent decision of Toronto Star Newspaper Limited v OpenAI Inc, 2025 ONSC 4685, an issue arose after the AI platform, OpenAI, was allegedly scraping news outlets to provide users with information. The plaintiff brought an action against the AI platform claiming copyright infringement, breach of their standard “Terms of Use”, and circumvention of technological protection measures. In this decision, the Court dealt with a partial sealing order. Although the merits of the copyright claims are still before the Court, this action highlights a potential commercial risk for businesses utilizing AI-generated material, or businesses whose information may be used. The use of AI-generated material may result in disputes concerning ownership, licencing rights, copyright infringement, and unauthorized use of protected works. Caution should always be used when using AI-generated content for business purposes.

Given that AI is a recent tool being implemented by Canadian businesses, case law is limited at this time. While AI can be helpful for business operations, there are likely increased litigation risks that businesses must be aware of while implementing AI. With this in mind, we expect that litigation will develop or continue to develop in some of the following areas:

  1. copyright infringement claims arising from data scraping and the training of large language models;

  2. ownership disputes over material generated by AI and AI-based product development;

  3. contractual disputes regarding contracts or terms generated by AI without human oversight and review;

  4. privacy and data-related disputes regarding the collection and use of personal information for the training of large language models or for use by third-party processes;

  5. product liability and tort claims from algorithmic failures or defective software design, including malfunctions of AI systems or unexpected outputs from autonomous systems;

  6. employment disputes and human rights claims regarding screening biases or employment loss resulting from workplace automation;

  7. professional negligence claims against, for example, healthcare professionals, lawyers, financial professionals, engineers, architects, and applied sciences professionals, resulting from the use of incorrect and unverified AI outputs; and

  8. insurance coverage issues concerning exclusions related to AI use.

The potential litigation areas identified above are not intended to be exhaustive, but they identify possible risks for businesses to consider when implementing and utilizing AI.

Businesses and professionals should not wait for legislation or judicial decisions to assess and manage legal exposure. The implementation and use of AI should occur methodically, with consideration given to all potential legal risks. Organizations should proactively establish governance policies, implement appropriate human oversight, consult legal professionals to conduct legal and privacy reviews, and ensure that intellectual property, contractual, privacy, employment, professional obligations, and insurance considerations are addressed before AI tools are integrated into business operations.

Adopting AI without proper governance, oversight, privacy controls, and legal review may create short-term efficiencies for businesses, but it is also likely to fuel commercial disputes and litigation.

Stay tuned for updates on AI decisions, as well as any regulatory updates.

For more information on commercial disputes regarding AI or general litigation questions, please contact Aaron Mann or any member of our Litigation Practice Group.

[1] https://www.bankofcanada.ca/2026/08/sparks-at-bank-article-2026-20/

[2] Ibid.

[3] Ibid.

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