The Rise of the “Prompt Economy”
AI Prompts that your company refines and develops over time may be more valuable and proprietary than you think. Information, instructions, or commands given to an AI can be “proprietary assets” that businesses may not assign the value that they deserve. That’s especially true when businesses develop and use master prompts that tailor how an AI responds to requests in terms of workflow, tone, likelihood of a given result, and similar reactions.
Master prompts, unlike casual queries, can be thought of as functionally equivalent to trade secrets because they constitute a proprietary technique for communicating with an artificial intelligence. In our practice, we include AI prompts among the assets included in an asset-based business acquisition.
Why Prompts Have Value
Using well-formulated prompts with AI should provide superior, consistent, and highly relevant outputs by supplying the AI with comprehensive context—such as goals, constraints, business backgroun,d and structure in a single, initial instruction. The more layered the information you give an AI in your prompt instructions, the better chance you have of getting a sophisticated result that is consistent with your style of communication and relevant to your company and your industry. Further, good prompts reduce errors, eliminate repetitive, vague, or trial-and-error prompting scenarios, and ensure that the AI adheres to specific formatting and tone requirements.
A well-designed master prompt can contain important institutional knowledge. For example, a prompt could embed:
- The company’s market positioning and customer personas
- Proprietary processes
- Guidance to the AI with respect to the company’s desired tone, culture, and strategy
- Non-identifiable information about the company’s personnel and customers
These are all pieces of information that a business would not want to fall into its competitors’ hands, but could nonetheless form the prompt bedrock for more layered communication with an AI.
Are Prompts Protected by IP Law?
Copyright
Copyright does not protect ideas, methods, or systems – only their “expression.” Prompts are often deemed “functional instructions” designed to achieve a specific, utilitarian result .
Where copyright protection may apply is to extremely detailed and creative prompts. For example, a long paragraph detailing lighting, camera angles, specific artistic styles and character backstories for the creation of an image might be protected as a unique expression of an idea. Also, highly stylized poetic or literary prompts may be protectable under copyright.
Patents
A patent is not a practical way to protect prompts. A prompt is probably not a patentable idea or invention. Also, the patent application process takes too long. To be eligible for a patent, you need to have a specific new application or improvement, a requirement that doesn’t fit AI prompts. Even if it did, you would have to publicly reveal the patented innovation during the application process, which would defeat the whole purpose.
Trade Secrets
Trade secret protection is the most logical category for protecting prompts. The concept is similar to the use of trade secrets to protect source code, formulas, client lists, or “secret sauce” ingredients. Business methods, techniques, and processes are eligible for trade secret protection if they contain a proprietary method of communication with an AI, gain economic value from not being generally known, are not readily ascertainable by competitors, and the company takes “reasonable” efforts to keep them secret.
Practical Legal Implications
Because they can be valuable intellectual property, steps should be taken to protect the confidentiality of prompts. Situations where there’s a risk of exposure include:
- Employee Movement: Prompts could walk out the door when staff change jobs.
- Mergers & Acquisitions: Buyers may overlook prompts as assets to be acquired.
- Contract Language: Current confidentiality/IP provisions may not explicitly reference prompts.
Hence, consider adopting the following practices.
- Specify “AI prompts” in the confidentiality provisions of all your documents.
- Identify prompts as intellectual property.
- Ensure that employees understand that if they develop prompts for the company, the company owns them, and the employees must keep them confidential when they leave.
- Treat them as trade secrets in internal policies and employee handbooks.
- Evaluate whether you have “master prompts” and, if so, how they are being stored.
- Expect prompts to become standard in asset transfers and due diligence checklists.
Protecting Your Prompts from the AI Provider Itself
You should be aware of what happens when you or your employees enter a prompt into an AI system. Sometimes the provider saves the prompt and/or uses it to train future versions of the system. You could be inadvertently exposing pieces of your prompts in the output provided to other random users. Google even tried indexing prompts, for a while, to have them show up in regular Google search results, before dropping the project.
Whether an AI system uses prompts for training, by default, depends on a number of things: Which AI provider you’re using, whether your account is personal or business, and whether it is free or paid. For example, OpenAI says that ChatGPT “may” use individual user input to train its models, but by default, does not use input or output from its business users for training. Individual users who want to protect their prompt privacy on ChatGPT need to opt out through the system’s privacy portal.
Companies should:
- Know what level of privacy protection they have when using their AI provider and opt into maximum privacy protection if it’s not turned on by default.
- Train their employees on the concept of trade secrets and on what procedures and standards they should use for entering prompts, including whether you want to ban the use of employees’ individual accounts for work purposes.
- Best practice would be to use only company-controlled, enterprise-level AI accounts for all business uses.
- Professionals such as healthcare workers and lawyers who have a heightened responsibility to protect privacy should not enter confidential information into publicly available consumer AI tools at all. Companies that want maximum protection for their prompts should also avoid entering sensitive information into public tools. Alternatives are proprietary AI service providers that run on their own, closed systems, or running an in-house AI service on the company’s own servers.
Looking Ahead
Prompts are an emerging issue for businesses. They’re becoming a crucial part of how organizations operate. As the use of prompts matures and interactions with AI become increasingly significant, legal frameworks will evolve. For now, trade secret treatment is the most practical approach.