AI in legal research – can you trust it?

Posted on by influence legal.

Australian courts have been dealing with the consequences of lawyers turning to AI to draft legal submissions, only to find out the AI had entirely made up case citations. One widely reported case involved an immigration lawyer who filed court documents containing 17 non-existent authorities, all generated by ChatGPT. The Federal Circuit and Family Court referred the matter to the NSW Office of the Legal Services Commissioner, with the judge warning about the risks of relying on “unverified” AI-generated content without proper checks or independent verification (The Guardian). This case and others like it have sparked broader discussion within the legal profession about the role of generative AI in legal practice, and the importance of lawyers upholding their professional obligations, particularly the duty of competence and the duty to the court.

An AI-generated image of a robot writing
How useful are AI tools for legal work? (An AI-generated image …)

A simple test

To test these issues, we asked ChatGPT to generate a short 150-word summary explaining the Australian copyright law principle of “substantial part” in copyright infringement cases, including case references. Here’s what it produced:

“In Australian copyright law, infringement can occur even where only a portion of the work has been reproduced, provided that the portion amounts to a “substantial part.” The test focuses on quality over quantity—even a small excerpt may infringe if it captures essential elements of the original work. The question is whether the part taken embodies the author’s skill, labour, or originality.

This principle was applied in Autodesk Inc v Dyason (No 2) (1993) 176 CLR 300, where the High Court held that copying even a small section of computer code constituted infringement because it replicated a critical component of the program. Similarly, in EMI Songs Australia Pty Ltd v Larrikin Music Publishing Pty Ltd (2011) 191 FCR 444, the court held that a short musical phrase from Kookaburra reproduced in Men at Work’s Down Under was a substantial part, despite its brevity.”

In this instance, the AI performed relatively well. Both cases are real and correctly cited:

  • Autodesk Inc v Dyason (No 2) is a complex High Court decision involving copyright in computer software where the High Court ultimately reaffirmed their ruling in Autodesk Inc v Dyason (No 1) and determined that copying a functional but original look-up table amounted to reproducing a substantial part of the computer program.
  • The key issue in EMI Songs v Larrikin Music was whether Down Under, the iconic Australian anthem by Men at Work, infringed the copyright in the song Kookaburra. The court determined that the Down Under recordings reproduced a substantial part of the song, which constituted copyright infringement.

The summary itself was fairly accurate. It explained the core principle clearly (within the limits of 150 words): that Australian courts focus more on the quality than the quantity of what has been copied when assessing whether a “substantial part” has been taken. This was at the heart of the controversy in Autodesk, where the High Court wrestled with the tension between originality and whether something’s functional importance could also make it substantial, albeit minimal. ChatGPT correctly pointed to two of the most well-known cases in this area.

However, this was a relatively safe topic, relying on well-known cases. AI tools tend to produce far more errors and even fabricate cases when asked about more obscure areas of law or lesser-known precedents.

A more complex test

We decided to try ChatGPT on another question: “Write 100 words with case citations on the recoverability of pure economic loss in NSW law”. The response was:

“Under New South Wales (NSW) law, the recoverability of pure economic loss is generally limited. Pure economic loss refers to financial loss not resulting from physical damage to a person or property. In Demerara Distillers Ltd v. Fair Trading [2018] NSWCA 266, the Court held that pure economic loss is typically not recoverable in negligence unless there is a special relationship between the parties, as seen in Sullivan v. Moody [2001] HCA 59. Courts apply a restrictive approach to prevent indeterminate liability, adhering to the principle that recovery for economic loss should be confined to situations with proximity or reliance.”

Looks plausible? As far as we can tell, the first cited case doesn’t exist, and the case citation belongs to an unrelated case – though there is an interesting-looking Jamaica Fair Trading complaint involving Demerara Distillers and the geographical indication for “Jamaican Rum”.

The second case does exist at its citation, but the run-on sentence suggests that it includes a determination on pure economic loss, which is not the case – it’s about the existence of a duty of care. In the relevant recent High Court decision Mallonland Pty Ltd v Advanta Seeds Pty Ltd [2024] HCA 25, the first case is not mentioned, and Sullivan is mentioned in the context of evaluating the existence and scope of the duty, rather than in the context of pure economic loss.

What does ChatGPT itself say about its legal knowledge?

When asking ChatGPT what its general legal knowledge was on Australian case law, this is what came up:

“My legal knowledge is current up to mid 2024, including Australian law. However, it can access the most recent legal cases, news, or legislative updates through web search in real time.”

That is one of the risks that courts and regulators have been warning about. Anything newer would still need to be researched on legal databases to ensure accuracy.

What about client confidentiality?

AI tools are certainly useful for summarising documents and even creating plain-language versions of advices. But the warning is on the label: “Don’t share sensitive info. Chats may be reviewed and used to train our models.” So, lawyers and consultants must take care not to upload material without first redacting anything that is confidential to the client.

AI can be useful as a starting point for legal research, or early drafting, but human review remains non-negotiable. While these tools can offer a starting point, they should not replace thorough legal analysis or proper source-checking, no matter how convenient the technology might seem.

Author: Ashna Govil, graduate lawyer.

Can I protect my business when an employee leaves?

Posted on by influence legal.

When running a business, you will inherently find yourself in competition with other businesses and companies in your industry or market area.

However, it is not uncommon to find your best employee has decided to move on to work for a competitor; nor is it rare for an employee to resign with ambitions to start their own business in direct competition to you.

So, what can you do when a valuable employee suddenly becomes the competition?

Restraint of trade clauses

To protect themselves in the event of an employee’s exit, many Australian businesses regularly include restraint of trade clauses in their employment agreements.

Employers may use these clauses to try to prevent former employees, as well as contractors or suppliers, from:

  • Competing against the former employer;
  • Soliciting clients; or
  • Poaching other employees.

Restraints are often also used to protect the employer’s or customer’s confidential information, in conjunction with standalone confidentiality clauses.

A reasonable restraint of trade clause can help protect your business

Validity of restraint clauses

Restraint clauses are legally presumed to be void, as it is considered contrary to public policy to unreasonably prevent a person from lawfully obtaining gainful employment.

However, there are some circumstances in which the court may override this presumption and find a restraint clause to be valid and enforceable. The key principle is reasonableness.

Reasonableness

A restraint clause will be considered ‘reasonable’ when it restricts no more than is reasonably necessary to protect the employer’s legitimate commercial interests.

An employer does not have a legitimate interest in merely protecting themselves against competition as such. Instead, the employer must demonstrate special circumstances that justify the need for the restraint.

These circumstances may include:

  • The scope of the employment;
  • The nature of the employer’s business;
  • An employee’s connection to clients;
  • Access to confidential informational or trade secrets; and
  • Whether the employee received any compensation or remuneration for the restraint.

Employers will also often specify both a restraint period and a geographical area for which the clause applies. However, the court will consider whether the duration and reach of the restraint goes beyond what is adequate in protecting the employer’s interest.

In Pearson v HRX Holdings, the Federal Court found that a lengthy restraint against HRX co-founder, Mr Pearson, was reasonable.

HRX, an HR company, sought to enforce a restraint on Mr Pearson preventing him from working within the HR industry for 2 years.

The court held the restraint was reasonable because:

  • Pearson was vital in building and retaining the company’s client base, and was considered the ‘human face’ of the company;
  • He had access to all the company’s confidential information;
  • The two-year period reflected the average client contract length and gave the company reasonable opportunity to renew these without competition from Mr. Pearson; and
  • The clause was negotiated and specifically tailored to Mr. Pearson, and in exchange for the restraint, Mr. Pearson would receive his salary for the restraint period as well as an 8% shareholding.

By comparison, in Just Group v Peck, the restraint clause was determined to be unreasonable.

Just Group attempted to enforce a restraint preventing Ms Peck, former CFO, from working with their competitor, Cotton On.

The clause attempted to restrain Ms Peck for 2 years from carrying on “any activity, the same or similar to” her role with Just Group in Australia and New Zealand. The clause also referred to a list of 50 brands Ms Peck would be prevented from working with.

The court determined that this restrained went beyond what was required to protect Just Group’s legitimate business interests, considering that:

  • “Any activity” undertaken by Ms Peck as CFO was likely to be similar in any CFO role or similar position;
  • The clause was too broad and prevented Ms Peck from working with any other fashion brand or retailer, including non-competitors; and
  • The list of 50 brands included a majority that were not in competition with Just Group.

Just Group had given enough evidence proving Cotton On was a competitor, and if the clause had been more specific towards the brand, the restraint may have been enforceable. However, the court held the annexure was to be read as a whole and could not be re-written later in attempt to restrain Ms Peck from working with a specific competitor.

These cases highlight the importance of restraint clauses being drafted to be specific to an organisation’s precise business interests.

Summary

If you are an employer or customer wanting to include restraint of trade clauses in your agreements, it is important to remember that the reasonableness of a restraint of trade clause is determined by the specific nature and circumstances of your business and the individual employee or contractor.

If you would like more information on restraint of trade and confidentiality clauses to protect your business, contact us.

Author: Blake Motbey, Paralegal.

My business idea is being copied – what can I do?

Posted on by influence legal.

You’ve put time and thought into a great idea, invested in R&D, brought your idea to market – and now you find a competitor marketing the same idea.  What can you do?


How can you protect your idea?

The different aspects of intellectual property can help to an extent, but the issue of copying a concept can become complex.

Copyright protects the original material expression of an idea, rather than the idea itself. Unless your competitor copied your original artwork, wording or code, copyright won’t assist – for example, if you have had an idea for a scheduling program, and a competitor saw your idea and released a scheduling program which doesn’t use any of the original coding or graphical elements of your program, you won’t be able to make a copyright claim.

What about trade marks? Have you applied for trade mark protection of your product’s distinctive name? If the competitor used your name or a substantially similar name to promote similar products, you can make a claim based on your registered trade mark.

Patents protect inventions. They must be new to the market. If you think that your idea may be patentable, consult a patent attorney – but you must keep your idea confidential until the patent application is filed. If you have publicised it yourself, it may no longer be patentable. You can use confidentiality agreements where you need third parties to develop your invention. Also, take practical steps to protect confidentiality – limit distribution and keep information in secure files.

The law of passing off and consumer protection law can help where the competitor is making their offering look like it is, or is associated with, yours. For example, your competitor might be marketing compatible goods which have the look and feel of your brand, or suggesting that they are your authorised distributor or licensee.

If none of these will help in your specific situation, there are still practical steps you can take:

– make sure that you have all the relevant variations of your domain name so that there is no chance that an unscrupulous competitor can pick up similar names to direct traffic to their own website;

– make sure you have your domains set to auto-renew, or diarise renewal dates, so that you don’t accidentally drop your domain and have it picked up by your competitor;

– ensure that your website security is strong so that you reduce the risk of losing customers if your website is offline;

– make sure you are actively marketing on all relevant social media channels;

– if you are using a name or logo that is distinctive, apply for a trade mark, including in relevant overseas markets you plan to expand to;

– once you have your trade mark, ensure you diarise renewal dates;

– keep a record of your marketing activities, including promotions, press releases and media coverage, in case you need to demonstrate your reputation in the market in future years; and

– ensure that your concepts are kept confidential, including using effective confidentiality agreements, until they are ready for release.

If you have any questions about how to protect your ideas, contact us.