AI Risk Management in Emerging Growth Companies

Justin PIerce: 00:13

If you're a business leader or general counsel, you already know AI isn't just another tech trend. It's the next frontier reimagining and reshaping how companies operate and compete. With that transformation comes complexity around intellectual property, data rights, regulatory oversight, litigation exposure, and brand integrity. This podcast is designed to give you clarity. I'm Justin Pierce, cochair of Venable's intellectual property division.

Justin PIerce: 00:43

In this season, I'll talk with colleagues and industry leaders about how AI is reshaping business, ecommerce platforms, toy companies, industrial automation, luxury brands, beyond, and the legal strategies companies need to protect innovation while moving fast. Our goal is simple, to help you turn our legal insight into your competitive advantage. Welcome to season two of AI and IP, the Legal Frontier. This week, we're talking about AI risk management in emerging companies. Hi, I'm Justin Pierce, a partner at Venable and co chair of the firm's intellectual property division.

Justin PIerce: 01:29

As AI tools move from novelty to daily workflow, in house legal teams are pressure testing where they add real value and where they introduce new risk. From contract review and issue spotting to brainstorming and governance, AI is changing how legal departments prioritize time, manage information, and partner with the business. In this episode, we talk with CSC Leasing, general counsel, Chris Crook, and Venable's Calvin Nelson about practical real world AI adoption inside a fast moving company, including how to set smart guardrails before habits and risks get baked in. We'll also explore why responsible use often comes down to keeping humans in the loop, even as automation accelerates. Chris, Calvin, welcome.

Justin PIerce: 02:22

Chris, you and I have known each other for quite a while. Your legal career, as far as I understand it, started at Venable many years ago. Since then, you've held a lot of different roles. Would you talk to us a little bit about your background and what all you've done in the field of law?

Chris Crook: 02:37

Sure. Absolutely. And and good seeing you again, Justin and Calvin. Thank you very much for having me on my inaugural podcast debut here. Yeah.

Chris Crook: 02:46

So I started at Venable as a summer associate back in 2008, so long, long time ago. And had a wonderful career at Venable for a little over 11 years as an IP litigator. Made the transition in house to Element Fleet Management where I served as assistant general counsel, focusing on mainly negotiating lease documents and service documents, but also managing the litigation docket, IP docket, and other various, you know, fire drills that come up as you're in house with a company of about 3,000 people. And then recently, I made the switch over to CSC Leasing, which is a little bit different than what I've been used to in that it is a 84 person company, but a company that punches well above its weight in terms of the volume of business it does and the level of clients that it has. So that has been a really fun transition.

Chris Crook: 03:50

It is a role that enables me to sort of get my hands into a little bit of everything that legal has to offer rather than larger firms or larger companies where you tend to be siloed into certain practice areas. So AI has been a tremendous help in that regard where I have to do things that I'm not normally accustomed to doing, and I need something to sort of guide me and send me in the right direction before I reach out to outside counsel so I actually know what I'm asking and what my concern should be. So this should be a pretty fun discussion of of AI in that regard.

Justin PIerce: 04:31

Can you tell us a little bit about what CSC Leasing does?

Chris Crook: 04:35

Sure. So CSC Leasing is a leasing company that focuses on venture backed startup companies for the most part, and that we lease mission critical assets to those startups. So if you picture yourself as a as a founder of a company, you get your your angel investment or other investments, and you're ready to buy the equipment that's gonna help you build the next big thing, you particularly don't want you to take that investment and spend it all on one piece of equipment. Right? There's a lot of things that you need to spend your money on as a startup.

Justin PIerce: 05:12

Right.

Chris Crook: 05:12

Well, CSC gives you the opportunity to lease some of that more expensive equipment that's critical to what it is that you're going to be doing so that you don't have to spend all your CapEx from the jump. It also provides financing that is non dilutive, in that you don't have to give CSC any equity or or warrants or anything like that. You're just purely paying for the financing.

Justin PIerce: 05:41

Excellent. That non dilutive piece sounds distinctive. Is that something that is a distinguisher for you all in the industry? Are others doing that?

Chris Crook: 05:50

Yeah. It it distinguishes us for sure. I know some of CSC's competitors do require warrants and things like that, but that's one thing that sets us apart from the competition.

Justin PIerce: 06:04

So Chris, as general counsel at CSC Leasing, do you oversee or manage any AI issues in your role or position?

Chris Crook: 06:12

I do. So I manage really all of the AI issues that touch on Legal. So we have a very talented innovations team that is developing AI tools for the company, and they help me identify AI tools that'll be helpful for Legal. But to the extent any of the AI tools touch on data privacy, security, any sort of regulatory issues, We don't have it yet in The US, but over in Europe, there's legislation on what can and can't be decided by AI. All of those things would fall under my management.

Justin PIerce: 06:53

I suspect Calvin, who's with us here as well, and I know Calvin represents you, he's outside counsel, probably knows a thing or two about some of the issues that you're looking into in AI. Calvin, any thoughts in general about some of the issues that might be particularly pertinent to a company like CSC Leasing?

Calvin Nelson: 07:12

I think from a general standpoint, it's with with respect to AI, it's really about responsible use of AI and kind of making the determination of what tasks you want to give to the AI or which tasks you want to retain for yourself as a human as a human as opposed to just handing it over to an automated process. So I think those are that's kind of where we are in the life cycle of all this. We're still at the very beginning, I would say. And I think everyone's trying to figure that out right now.

Justin PIerce: 07:40

Right. I'd agree. So Chris, what are some of the exciting or interesting ways in which you've seen AI being adopted or used in your industry?

Chris Crook: 07:50

Yeah. And so far as legal goes, the ability to get repetitive tasks off my plate quickly has been a tremendous advantage of AI. And I've I've reviewed quite a number of AI platforms, and the one I'm using now has a legal extension as a part of it that has been incredibly helpful at taking first passes of certain types of contracts that come into my email box. I'm able to train that model on my particular playbook for those types of documents. And rather than starting at a place where I'm looking at a a document for the first time, I'm looking at a document that's already been reviewed according to a playbook that I've put together and uploaded into the AI.

Chris Crook: 08:44

And the AI can learn from that as we go. I'll take my red lines on top of the red lines the AI created and say, learn from what I did differently.

Justin PIerce: 08:57

That's actually a really good skill and a really good output of an AI tool like that. I've also heard that, AI tools like that can be a good thinking partner. What do you think about that?

Chris Crook: 09:08

I brainstorm with AI constantly. And more times than not, it comes up with some really good ideas, but what I really like it for is sort of a validator of my own ideas. But at the same time, you gotta be careful that you you don't get stuck in a echo chamber with the AI because a lot of times when you ask it a question, the first response to that question is, oh, man. That's a great question.

Chris Crook: 09:35

Or, oh, you're thinking about it the right way. It's like, well, you know, Calvin will tell you, I don't always think about things the right way. That's why I need good outside counsel to to, you know, help me out. But it is good for challenging certain opinions or certain ways of acting in response to a legal issue. So I I definitely use it for that.

Justin PIerce: 09:56

That's great. And Calvin, similar question to you. What are some of the exciting and interesting ways you've seen AI being adopted, whether it's by CSC Leasing or just in general in the industry you represent?

Calvin Nelson: 10:08

What I'm seeing is a lot of what Chris has already described where clients are using it as like a kind of a first pass for issue spotting, things like that. I know I use it in my own work for, you know, things like proofreading, maybe some brainstorming, on some issues, that sort of thing. But I think one of the things that Chris really highlighted in his workflow was the fact that he is constantly involved in that process. And I think AI is somewhat akin to, like, autonomous driving, right, where, you know, you get in a a car that can self drive while, you know, you can keep your hand on the wheel or you can, like, just crawl back in the back seat and let the car drive for you.

Calvin Nelson: 10:48

And I think that's where you really run into problems. And especially in some of these early cases that we've seen where, you know, attorneys are handing in briefs with hallucinated cases. I think those are certainly cases where they probably popped in the back seat and didn't have their hand on the wheel the whole time.

Justin PIerce: 11:04

So Chris, how is AI being adopted in your industry to do the following? And in particular, increase engagement with your customers. How's AI being used to maybe enhance productivity and grow whether it's revenue, grow market share or just enhance the effectiveness of the of the teams that you're responsible for?

Chris Crook: 11:27

So I think across the board, and this isn't limited to Legal, this is just across the company for CSC similar to Legal, it's it's taking those time consuming repetitive tasks off the table. So now folks within CSC are able to spend more substantive time on the business. It's sort of the in the business on the business dichotomy. Right. The more time you're spending in the business, the less you're looking at strategy and how to, you know, move the business forward, how to grow the business.

Chris Crook: 12:04

And the the tool that we're using now, provides extensions for various parts of the business. So there's a marketing extension. There's legal extension. There's other extensions within, the skill set of the tool. So it's it's helping to reduce some of the repetition that is required to keep a business running.

Justin PIerce: 12:26

One other question to follow-up on that. With all the talk regarding AI, you certainly have talked about how it's being used at your company. How important is AI governance?

Chris Crook: 12:38

Incredibly. Because and and it this sort of goes with any new tool within a company. Once people start using it, it's hard to change behavior. But it's easy to affect behavior at the beginning, especially with something that has the ability to use existing data, to generate its own data, to send data outside of the company without human interaction, you really need those rules locked down from the beginning before there's a pattern in practice of use that people are going to be adverse to changing.

Justin PIerce: 13:19

Calvin, your thoughts on that as outside counsel?

Calvin Nelson: 13:23

Yeah. I completely agree with Chris. I mean, the governance is critical, both in terms of shaping behaviors, getting people in good habits, you know, around the use of AI, but also just to protect the company. You know, just like in any litigation, your your policies and procedures could come into issue.

Calvin Nelson: 13:43

If you have a general policy of how to use AI and there's a say for example, a privilege issue and you have an established policy of how it should be used responsibly, that could be a helpful factor in making that that ultimate determination.

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Justin PIerce: 14:36

So Chris, back to you. Who should own AI risk decisions inside an organization company?

Chris Crook: 14:43

That's a great question. And I think it would be debated depending upon the organization. For for my organization, of course, I would like to own it, but I would like to own it with a very heavy partnership with our chief operating officer. Because our chief operating officer is in charge of how things work day to day, how AI is being integrated within the company, and and he has a view that I just don't have, in that regard. So I I think no one person can own it even though the knee jerk reaction from any lawyer is going to be, if there is risk, I wanna know about it.

Justin PIerce: 15:29

Right. Surprise, surprise.

Chris Crook: 15:30

Yeah. Exactly.

Justin PIerce: 15:33

And with that, my follow-up to that ownership is given that you've worked at a big company and now a smaller company, you're used to the world where there's different functions. It might not just be one executive, it may be multitasking teams. So in bigger companies, have legal, you've got IT, you've got a group that might be responsible for privacy. They all might be separate teams. Does your answer change in that construct or that context?

Chris Crook: 16:01

A little bit in the sense that I think that's where your policies become very important, and it's important to get those teams involved in crafting those policies because now everybody's got skin in the game. And it's not Legal saying that use of this world changing technology has to be done a certain way, which frankly isn't good for anybody when Legal's controlling that type of technology. But if everybody has some buy in in determining, yeah, it's probably better if we we do it this way or that way, then I think enforcement becomes easier. Everybody believes in what you're doing. But the policy there is is really important because no one especially as you get into a bigger organization, legal doesn't have visibility into what the day to day is in all of these different departments.

Chris Crook: 16:54

It's impossible. Right. So you need those departments to play ball in terms of acting accordingly.

Justin PIerce: 17:02

Right. And Calvin, same question. What have you seen with your array of different clients that are in different industries in terms of where responsibility for AI risk sits?

Calvin Nelson: 17:14

I think it it it varies because I think the risk profile is different depending on the business unit. For example, traditionally folks in the marketing group, you're looking at kind of, well, are there some IP litigation risk that's being created by them using AI to create some sort of content of some sort. Right? In the legal department, maybe you have a different risk profile. We you're discussing, like, keeping those legal discussions confidential and privileged. So in an organization, you may have different policies that govern different areas of the organization based on that that risk profile. Right. And I'm certainly seeing that.

Calvin Nelson: 17:51

You know, that's an emerging issue for many many of my clients already. They're questioning the use of AI generally and then, you know, to what extent they wanna have give everyone access. Because once you open that open that bottle, it's hard to put it back in.

Calvin Nelson: 18:08

And then as Chris said, you don't know what you don't know. If you're if you're in legal, you don't know what the other arms of the the organization are doing necessarily on a day to day basis.

Chris Crook: 18:17

And and I would add that you should assume that the other arms of the organization, if they aren't using AI, are trying to. So if you don't have a policy and you aren't already ahead of it, you could be behind the eight ball in a sense that your employees could be putting your company information out on the public version, not necessarily a private instance. So it's very important to at least have a policy in place of what your employees can and can't do to avoid that trap.

Calvin Nelson: 18:46

That's exactly right, Chris. I mean, I think many of my clients are dealing with that right now where they're like, well, let's just give them the enterprise version of it to avoid the personal use and, you know, having corporate data get exported to someone's iPhone somewhere or worse yet in the cloud unprotected.

Justin PIerce: 19:03

This is a good discussion. It really is a good segue to my next question. You've already answered part of it, which is what are some of the AI related challenges and risks that concern you the most? Certainly, as you guys just discussed, both of you in different ways, making sure there's AI policies, governance in place to sort of limit and manage risk certainly is something that's contemplated here. But beyond that, are there particular risk or challenges that concern you, Chris, in your industry or company?

Chris Crook: 19:31

Just the changing landscape of AI and and, you know, what it can do now is compared to eighteen months from now, which is gonna look very, very different and staying on top of that. Also, the regulatory environment that is going to trail as it always does in technology as to what can and can't be done with AI. You're seeing some of that over in Europe now as to what decisions can be made in terms of credit and health care and those sorts of things in the AI act. You know, if AI has treated anything like privacy here, we could end up with 50 different AI laws on the books.

Chris Crook: 20:11

So that that gives me a little bit of concern go forward. That being said, it's not enough concern to say AI is something that shouldn't be used because of the risk. I'm actually, if you couldn't tell already, quite in the other camp that AI is a fantastic tool, and all of my colleagues that are in house should be taking advantage of the tools that are out there because they really do free up some time and allow you to focus on more substantive issues.

Justin PIerce: 20:42

That's a great way to frame it too, because obviously there's some big risk and challenges, but there's an opportunity as well. Calvin, your thoughts?

Calvin Nelson: 20:50

I think as an as an outside counsel, my biggest challenge is probably the same challenge that many of our physicians have been facing for the past, I don't know, 15 to maybe even 20 years is when you have patients coming in fully armed with all the knowledge of the Internet regarding their own diagnoses. And I'm definitely starting to see that in my field now where clients are coming into meetings or sending emails, and you can tell they've been jamming away on some of these, these AI chatbots. And, sometimes that makes life a little bit more difficult because now you had to, convince them or talk them off of a position they already come into the that interaction with. But in some ways, it's helpful. I've seen it where because they've done a little bit of that initial self research that now we're we're kind of speaking the same language. We have a shared vocabulary because they've already done a little bit of the issue spotting on their own, and that could be a helpful thing. But, you know, to to a certain point, I think.

Justin PIerce: 21:48

It was put to me not long ago that sometimes that phenomenon where someone comes in after having used one of the public AI chatbots and has now learned or become an expert in a particular area. What you've really done is just made sure that you're confidently wrong.

Chris Crook: 22:04

Right. I mean, that's true and and that's something to be aware of is AI will present an answer as the answer. And there's been many times where I've looked at the results and said, did you consider this case or did you consider this statute? And the response is, oh, great point. I'll consider that one now.

Chris Crook: 22:26

It's like, well, that was kind of the the core and and maybe it was my drafting of the prompt to begin with that was problematic, but it still needs to be checked. Like, that's the AI is not to the point yet where it's replacing attorneys. Like I said, it gives you a great starting place.

Calvin Nelson: 22:45

Yeah. And it goes back to your initial point, Chris, where it's, like, a very junior associate who's very eager to impress you with all the knowledge that they have, and they're giving you a whole readout on one issue and it looks very impressive. I you know, I've seen some of these results and it looks very authoritative and and it looks right. And and then we but when you dig deeper, maybe, you know, there may could be some flaws there.

Justin PIerce: 23:10

Right. So as we close our discussion today, we've touched on a lot of different issues. One takeaway I have that's been a combination of both your insights is that while AI presents some great opportunities, there certainly are some challenges and risks to be concerned about. You're gonna have to tackle both of them to really get the most out of the tool. It's a bit of a work in progress, but I think working in tandem the same way the two of you all have worked is in house and outside counsel together, you can get to the right answer.

Justin PIerce: 23:39

Chris, a takeaway?

Chris Crook: 23:41

I'm not sure I can say it better than you just did. But again, I would echo to my colleagues out there that are in house. This is something that you really should be taking advantage of if you haven't already. And if you have any questions, give me a call. Happy to talk about it.

Chris Crook: 23:59

I talk with other general counsels out there regularly about what they're doing and how they're doing it. It's the only way to stay on top of these things. There's no way one person can try all that there is to offer within AI. So, you know, stay educated and and just dive in.

Justin PIerce: 24:18

Great point. Calvin?

Calvin Nelson: 24:19

Yeah. I'll just go back to my, Alan Jays a while back. Just stay in the front seat and keep a hand on the wheel.

Justin PIerce: 24:25

Thank you. I enjoyed the conversation today.

Chris Crook: 24:30

Likewise, thank you so much for having me. I really appreciate it.

Calvin Nelson: 24:32

Thanks for having me.

Justin PIerce: 24:34

That's about all we have time for today. I want to thank Chris Crook and Calvin Nelson for helping us understand how in house teams are using AI to work smarter, why governance needs to come early, and how companies can capture the upside of AI while keeping a steady hand on the wheel. You can read more about how Venable is helping businesses navigate the AI frontier by visiting venable.com/ai. Please join us next week when I talk to my colleague, Venable partner, Meaghan Kent, and Kalvin Sie, vice president and associate general counsel at Spin Master, about what responsible AI governance looks like in practice and how creative companies can innovate without falling off the cliff.

Justin PIerce: 25:22

I'm Justin Pierce. Thanks for listening to AI and IP, the Legal Frontier.