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Episode 78

AI In Marketing: Navigating Legal & Compliance

Sharon Toerek
Owner & Founder of Legal+Creative | Toerek Law

Grab your earbuds and settle in for a conversation with Sharon Toerek, an expert in intellectual property and marketing law. She talks about legal and compliance issues with emerging technologies, with a special focus on generative AI.

“I think every service firm should have an internal policy around using generative AI to create client work.”

Host Tessa Burg joins Sharon to discuss how AI is reshaping the services agencies can offer. Together, they explore how set up the right policies, use AI responsibly and have transparent conversations with clients to manage risks.

While legal topics might not usually grab your attention, Sharon makes them interesting while delivering important information for anyone in the marketing field.

Highlights From This Episode:

  • Updating agency legal and compliance for AI
  • Navigating risk in the AI tech landscape
  • Adaptation to AI tools
  • Crafting AI communication and policy
  • Key agency roles for AI oversight
  • AI as a catalyst for agency innovation
  • Training for AI-driven market changes
  • Strategies for AI risk and client relations
  • Future trends and opportunities

Watch the Live Recording

Full Episode Transcripts

Tessa Burg: Hello and welcome to another episode of Leader Generation, brought to you by Mod Op. Today, I’m joined by Sharon Toerek, the CEO and founder of Legal + Creative, to talk about how compliance and legal programs have evolved for us at agencies and in the overall marketing and advertising world. Sharon, thank you so much for joining us today.

Sharon Toerek: Hi, Tessa. Thanks for having me. I’m looking forward to our conversation.

Tessa Burg: I don’t think we could have imagined a time like we’re in right now where we’d be talking about legal and compliance quite as much as we have. I can even say for myself, you know, being at an agency and running the tech group, I always had the understanding that our client’s policies and what our client’s legal terms are, are the Bible and we need to adjust and follow those. But now with the proliferation of generative AI and the use of AI and ML in basically every tool we have in our marketing tech stack, it’s really important for us on the agency side to recognize how our programs have to evolve as well in this brand new world that we find ourselves in.

Sharon Toerek: It is, it feels like every few years we say that about some, you know, technical development in the industry. And I always like to say, you know, technology leads and then business scrambles to keep up, and then we lawyers sort of run around with a push broom after everybody, you know, cleaning up the messes left behind. But, you know, the use of generative AI by marketing services firms and the clients who engage them is a game changer in a way that I think a lot of other tech developments have not quite been to this degree. So there’s a lot to unpack. And, you know, we need to pace ourselves, in my opinion, and not get too far ahead of ourselves and not fall too far behind.

Tessa Burg: Yeah, and I think you’re the perfect person to have this conversation with because you’ve been in the marketing and creative services space for almost your entire career. Tell us a little bit about yourself and the background of Legal and Creative.

Sharon Toerek: Yeah, well, I founded this law firm, which isn’t my first firm, but I founded this firm specifically to deal with agencies and other professional services firms that serve marketers because I am an IP lawyer by education and training, spent my earlier years in legal practice doing intellectual property law, and I saw the application of it so frequently to the marketing space in branding, in content protection, and those issues continue to weave through the industry no matter what the tech advances are, no matter how the businesses change. And we just really love working with them. I mean, it gives us a front-row seat to creativity that we wouldn’t see perhaps serving other industries. And so we serve agencies nationwide in IP, and in contract development and negotiation, and in marketing regulation compliance. And so this firm is about nine years old this year, and prior to that I sort of ran the practice in a silo in a small business focus or more entrepreneurial business focus, more general business law firm. But yeah, we doubled down on this industry. I’m so glad we did. I’ve learned as much I think as we’ve taught, and we continue to get challenges every year that keep it fresh.

– Yeah, I had a similar experience being drawn to focusing on marketing coming out of more of a pure tech play because marketers love new technology and they love to test and they love to try and they’re okay with making mistakes and failing. So if you’re a person who loves to be on top of like what’s next, and for me, for data, what’s the power of the experience, marketing and marketing tech is an awesome field. So tell me a little bit about what did you see from your clients and from the space in general after ChatGPT launched, and all these marketers who love to test sort of jumped in in testing furiously?

Sharon Toerek: Yeah, I think you saw a variety of things when ChatGPT first sort of hit the collective consciousness of consumers if you will. And by that, I mean, you know, average businesspeople who were starting to think in a fresh way about how they could use this in their own day-to-day work. And I think we saw a couple of things in the early days, you know, first of all amongst agency owners and leaders. Concern, in a few cases, panic, about what was this gonna mean about their core offerings. Were they gonna still be able to have profitable businesses, for example, if they were primarily content creation shops, or if they were app developers, or if they were primarily doing and selling the kinds of services and results that now generative AI can make so much faster and we think easier? I would argue it’s not exactly easier because the human guardrails remain so important. But anyway, that was sort of the first theme, a little bit of panic and concern about what is this gonna mean for our revenue model. And then secondly, I think we saw a little bit of glimmer of hope about what’s this gonna mean for our profitability. If we figure out how to use these tools well, can we do more with less? Or can we keep the core teams we have and scale faster or bigger? Or can we add some services that maybe we haven’t leaped into because we don’t have the bandwidth to do that? So from panic and concern, to start to see the possibilities, to then a more even-keeled like, “Okay, we’re gonna get our arms around having to adopt this for our businesses. What does that mean for us from a risk management perspective? What kind of liability are we taking on? What do we need to be concerned about? What do we need to tell our clients? What do we need to ask our clients?” And so the evolution’s kind of been in very quick succession from those three stages to my eyes.

Tessa Burg: Yeah, I would say we had a very similar experience, and we landed on that we want to be seen as an agency that’s leading what it means to be powered by AI and machine learning, and have realized a lot of benefits from incorporating it into some of our core processes.

Sharon Toerek: I think that I’m glad you said that, and I think that agencies need to own a little bit better, and consulting firms who, you know, provide content creation or marketing services need to own a little bit more and stand a little bit taller in terms of their potential to have an impact on their clients’ businesses because of their command of AI and what it means. I’ve had a lot of conversations with agency owners and leaders about this, and I promise you, if you’re listening to this, being concerned in this area about what you maybe don’t know or what your learning curve is, the fact that you’re listening to this podcast means you are way ahead on the curve of most of your clients. Enterprises in particular, they’re only starting to tip of the iceberg of what it means to integrate generative AI into their internal processes, to use it to create public-facing products, work, services, creative campaigns, whatever it might be. They need guidance, and you are in a uniquely privileged position to give it to them because they need your expertise. And you’ve been tinkering with this, and you’ve been talking with your peers about this, and you’ve been researching it probably for the better part of a year to 18 months already, whereas they’re just scratching the surface. So it is such an opportunity, and I think you should own that as an agency. It doesn’t come without risks, of course, but what does that’s worth pursuing?

Tessa Burg: Yeah, it has been fun hearing from clients who are very excited to get their arms around, “How can we benefit from AI and ML?” Or, “What’s in it for us? Since you are using it, how does that benefit us?” And they’re sometimes looking from, you know, “Can we cut our billings with you? Is this cutting the rate?” But what’s actually happened is it’s more an evolution of where you’re investing. So where there might have been a lot of time spent on data gathering, just getting, I’ll just use reporting as an example because it can be a very time-consuming activity for lots of companies, getting all the data into one sheet, well, now you’re able to automate some of those processes and spend more time on the insights, and richer insights means better strategy, means better results. So we’ve actually seen that it’s the investment going more into that strategy is powering the better results, not to mention the tools that you’re using in the campaigns themselves, to increase the click-through rates and they increase conversion rate. But there’s still, when it comes to that risk, what is the work that still needs to be done so that we as an agency or agencies have a better idea of where the risk lies, how we protect the data, and when and how that gets communicated to clients?

Sharon Toerek: Right, right. You know, just to your former point, I wanna say, you know, the agency that gets ahead of this conversation with their client, or the consulting firm that gets ahead of this with their client, sits down and says, “Hey, we think we can create more capacity by using some of these tools. So with the investment you’re already making with us, we can deliver you additional value in the form of X or Y or Z.” Because you have more of a command of how these tools are gonna work and create bandwidth for you, be proactive. Before you have to be worried about whether or not the client’s gonna come to you and say, “We’d like to pay you less because we think you can gain some efficiencies using AI,” be the provider, the partner that goes to them and says, “Here are some different ways we think we can help you with the same investment you’re already making.” So I just wanted to throw that out there and segue into conversations, because we’re talking about what are some of the things that agencies should be doing on the risk mitigation side of the equation. The first thing is conversations, crucial conversations with your clients, first of all, so that they understand how your agency or your firm is using AI, generative AI. What platforms do you use? For what purposes do you suggest using them? Is it gonna be research, is it gonna be drafting of original, or, excuse me, is it gonna be drafting sample concepts or campaign assets that they can pick and choose from, and then you, you know, refine them? Is it gonna be to, you know, do a strategic deep dive? Whatever the uses are, talk about them. Ask your clients, “What have you provided us that you’ve generated using AI tools? What are your proprietary pieces of information that you’re gonna be providing to us, your partner so that we can help you create the result you want to achieve?” Because you need to know whether or not you can feed those into any AI generative platforms without breaching their confidentiality or destroying, for example, the status that they may have as a trade secret, right? Agencies are put in this position all the time where they’re provided with proprietary information subject to an NDA or non-disclosure clause in a contract. And what happens when you put that into a generative AI tool? You’re possibly destroying the secrecy of it. So conversations, that’s the first risk mitigation step to take as a partner to your client is asking a lot of questions. And guide your conversation, be ready for it. Have your checklist. One of the things that we’ve put in our agency AI legal toolkit is a discussion guide so that agencies can think about, what are some of the things we might need to know or we might need to tell our clients before we get involved in generating work using any sort of AI platform? That’s first. Second, what are our policies and what are our clients’ policies? This flows pretty organically from having the conversation. I think every service firm should have an internal policy around using generative AI to create client work, and I think you should have an external-facing policy. Maybe it will rise to the level of incorporating it into your services agreement. Maybe it’s something you simply share at the proposal phase with your clients. That’s really up to you and what your business looks like and how you model it. But a policy that discloses how you use it, what the human guardrails are around the work product that comes around it, and what the human interaction with the people who use it looks like. For example, who has to approve using generative AI for a different purpose than you’re not already using it for? Or using a new tool you haven’t used previously? Who needs to check in with the client to make sure that if they’ve given you a new piece of data or information, that it’s okay to feed it into generative AI or it’s absolutely not okay? So policies internal, policies external to the client. Those are the first two steps. And I think I’ll pause there for a second, take a breath, and we can talk about it.

Tessa Burg: Yeah, I love that you talked about the policy, both internal and external. I think that sometimes people tend to overthink that, and they’re like, “Well, we should just be not using it at all because there’s no way to get rid of all the risk, and everything we do is risky.” How do you help navigate that conversation of this? Like, having to run into that where there is some hesitation that once people begin to realize or better understand the tool, that, like, “Oh my gosh, I didn’t realize it’d be exposed.” Or, how can you help them find those use cases where you’re still getting a lot of value, but yes, there are things that you should not be doing, and how can we get started in creating a policy that we might not know all those things today, right, but we have to have an internal policy that supports our team in their use of these tools?

Sharon Toerek: Right, I think it’s an excellent question, and I think if you’re an agency owner or a consulting firm owner who’s either a little bit nervous about having this conversation because you’re concerned about getting asked questions that you can’t, I mean, you can’t absolutely ever provide your client assurances that there are no risks to any approach that you take. This is true regardless of whether you are hiring a freelance programmer or writer to contribute to a project. This is true every time you pop a digital asset into a campaign from a stock library. I mean, there are risks too. So the primary risks stem from IP ownership rights, correct? You know, owning what goes in, owning what comes out of generative AI. That’s the number one area of risk. And that is a function of having a conversation with your client about what your practices are. We, you know, verify as best as we can, or we use platforms that have enhanced security procedures or that have enhanced indemnification. Some of these platforms are starting to up their indemnification and hold harmful language so that if you get output from them and incorporate it into some public-facing asset and inadvertently infringe somebody’s copyright, you know, they claim to be stepping in and making you whole for that if it emerges. So, I mean, it’s assuming risk in the IP front just like you would using any third-party asset. What makes it feel scarier is the machine that you’re getting the output from is grabbing data from all sorts of inputs, all sorts of sources of data are training their models. And you can never know where it all comes from. You just can’t. And so your client has to be okay with that and you need to be in business together as far as that risks. And then your contract needs to reflect that balance of risk and disclosure between the two of you. That’s the first. The second is, you know, in the PR world, deepfakes are a particular concern right now. Reputation management of companies who are on the receiving end of deepfake content, whether it’s their executives appearing to say something or do something that they haven’t done, whatever it might be fake news stories, that’s a unique issue that that discipline in marketing has. So that is an area of concern we’re seeing more and more questions about. And then inaccurate information in general in the form of maybe product claims, right? Maybe you did research using an AI platform that gave you data that was bad. This has happened, unfortunately, in the legal world already, where lawyers who didn’t have human guardrails that were appropriate end up submitting legal briefs and legal arguments to courts of law that have case citations that are not legitimate. So obviously that’s not a prudent practice, but it does happen, and so those are the kind of risks you might see in a campaign that makes an inaccurate claim about a product’s effectiveness, for example. So those are kind of the top things we’re being asked about right now. And again, there are things that you can suss out in your conversations. Some of it you can design policy around. And then the third essential, you know, conversations, policies, contract language. What’s the contract language between you and your clients or you and your vendors, you and your contractors or freelancers around what the rules are for using AI, who’s responsible, and what the indemnification look like? Because I think it’s gonna be a while before the insurance industry catches up with the marketing services industry about insuring against any kind of loss that occurs as a result of an AI-generated mistake.

Tessa Burg: I think what’s interesting is you really emphasize that there still needs to be these human guardrails, and that gets into, once you have the policy and once you’ve had those conversations, it’s really important for business leaders to recognize there also has to be an element of training and change management. Like, I don’t know if everyone listening to this podcast understood everything that you just said. It requires some… And then that’s all of us. Like, we’re all in this same space together. This is all happening very quickly. But I don’t think anyone should feel ashamed of that, but I also think they should know that their clients may also not understand that. So we’re talking about, “Hey, we’re gonna put together these policies,” having sort of this accompanying, you know, what’s this joint training, and what are we doing as humans to continually measure and monitor and even maybe give you updates on what that looks like? Because it doesn’t seem like advancements in the AI/ML space are going to slow down. And the more that continues to advance, it’s going to introduce new areas of risk where the process will have to change and evolve.

Sharon Toerek: I am a huge fan of joint training between agency and client consultancy and client. I think it is a perfect tool. First of all, it is an awesome client retention tool. If you’re willing to bake it into the cost of the other services you’re providing, it is a way to demonstrate care, it is a way to demonstrate your thought leadership, and it’s a way to keep you sharp as a provider, as a partner to these folks. And so I’m a big fan of joint training, whether it is somebody at the agency conducting or leading the session for the benefit of the agency and the client department people, or whether you bring in a third party speaker to come in. I think that those are investments, again, that make agencies look like the thought leaders that they are and that they have the opportunity to be in this space. And so I’m a huge fan of it. It’s also an awesome risk mitigation tool for you as an agency. Your insurance carrier, I promise you, would love to hear that you’re devoting bandwidth to staying on top of the risk developments or the technology, right? The new tools. The possibilities are just amazing. And it is an investment, I’m not gonna lie, but think about the potential savings in bandwidth that you might create by using some of these tools and reinvesting it into the kind of sort of backend marketing, if you will, or education and thought leadership that you have the opportunity to provide as a result of being in a superior position to have access to these tools and understand what issues they might create.

Tessa Burg: Yeah, I’m so glad you said that, because that is something we’re looking at investing more is, you know, these joint trainings, because to your point, not only does it help us live our mission of leaning into AI and ML, but it builds the confidence that our clients need to see that they are our number one priority and we are making them, their data, and the content that we create on their behalf as a part of our use of the tools. Like, I feel like in 2024 it’s going beyond just being shiny and cool, and, “Hey, we wanna be more efficient,” to we really want to grow and be better together and see where this can take us as an industry.

Sharon Toerek: We care about you and your goals and we want you to know this stuff. You know, this is what the sharp edge of the knife looks like, and we want you to understand how we’re employing these things for you and how the industry is changing in their use of these tools so that you’re all better informed too. And, you know, whisper, whisper, your other vendors probably aren’t doing this for you, and so it’s awesome backend marketing, I mean, to be mercenary about it for a second, but it’s risk mitigation too. So, you know, you are definitely ticking off two boxes with one activity, so I’m a huge fan of that. I guess you can slide it under the crucial conversations part of the triangle that I think of when I think of risk mitigation, you know, conversations, policies, contract language. But it could kind of fit in any of those points of the triangle in different places because the conversations you have, are probably gonna result in some policy shifting and might make their way into your agreement language as well eventually.

Tessa Burg: So that kind of brings my next question. What are the different roles that an agency has to have in-house or externally to help bring those three points of the triangle to life? Yeah, so I’m interested in your thoughts there.

Sharon Toerek: It’s a great question because, you know, I mean, our client base tends to be closely held independent firms, and so not a lot of layers of management in these companies. But you punch above your weight by, you need somebody who understands the technology, and a system for communicating that knowledge to the people who need to have it. You need someone who is in a position to centralize the contracts that you engage, that you execute with your clients. I’m a huge fan of centralization when it comes to service agreements for agencies, whether in people and in documents. I think your documents should be as similar to one another as possible. I recognize that a lot of you’re gonna be in positions with some of your clients where you’re gonna end up signing their paper, and how you keep things consistent there is you have checklists for what the agency will accept, won’t accept, et cetera, at all points. And then people. You should have the same department or the same individual depending on your size, you know, approving, eyeballing every contract the agency signs. So centralization, I think, is key to what those documents are gonna look like. So you’ve got the technology, you’ve got the contracting, and then I think your team, whoever’s on the leading edge of client communication, whether in the beginning, that’s your business development team, or as time goes on it’s your account team, those people need to be on the cutting edge of making sure that the crucial conversations happen, right? Because they’re the ones who are dealing with the client every day. And if it’s a leadership-to-leadership conversation that you’re trying to facilitate, then it’s your job to make sure the leader of your agency is talking to the right people in the client department about this. So I feel like those are the three steps that are scalable no matter what the size is of your firm at some level, and those are the things you should be paying attention to today to build the foundation that you need to have your act together in six months or 18 months from now in managing the risks that come along with the opportunity of using generative AI.

Tessa Burg: I love that. So we talked a lot about the functional aspects of what needs to be done. I know that you are very in tune in the changes in the market and what’s going on at different agency and professional services companies. What are some of the things that you’re excited about or excited to see your clients really embrace in 2024?

Sharon Toerek: Well, I have a personal philosophy of nerding out about agencies who use what they’re good at to standardize and productize what they do in as many areas as possible, because I love to see them use their IP for creating multiple revenue streams. So I’m excited about agencies using generative AI internally to create either more standardized offerings that can be easily customized to clients, but that have a basic underpinning that is their own IP. I’m excited about agencies who are able to think of other ways they can, for very little additional cost because agency margins are always razor thin or they always feel like they are, how can you add additional value to your clients for no additional fee and still keep your margins where they need to be, or even increase them? So I’m excited about that. I think it’s too early to know which tools I’m most excited about. I frankly don’t focus on that as much as I do on what are the possibilities for creation or for creating new things. I think we’re all creators in some way, shape, or form, you know, and our clients are, and you and your business and your clients, are in a very creative industry. And so I think the opportunity to use some of these tools to create some internal efficiencies, first of all, and then maybe to create some replicable offerings that can be offered repetitively to more than one client, those are kind of what I’m paying attention to right now.

Tessa Burg: That is really exciting, and I would say that I feel like a lot of our initiatives this year are moving into that how space. Like, last year was a lot about the what. What is this? What’s going on? What’s the value? What do we want to deliver? And this year is how are we gonna do it? How are we gonna be there in partnership with the client? As you’ve seen other agencies and professional services companies make that transition, are there any areas where they need to be cautious or they didn’t know what they didn’t know and there was a risk or vulnerability that popped up?

Sharon Toerek: You know, fortunately, and I’m sure this is a function of it being early days, but we have yet to have a client come to us and say, “We’ve used generative AI to,” I don’t know, I’m pulling this example out of the air, “create some written content, and we’ve inadvertently infringed on, or someone says we’ve infringed on some third party’s IP.” Hasn’t happened yet so far, but I won’t be surprised if it does. I think most of them are focused right now on how to use this to gain internal efficiencies. And I’ve told anybody who’s asked me about this that I think that’s a great proving ground because the fewer potential eyeballs on the end product, the lower the risk. It’s a lot less risky to use AI, at least right now, to use AI to create something that is gonna help you gain internal efficiency, help you do something more profitably, than it is to use it to create work that the world will see, like a creative campaign, for example, or a commercially made, a commercially available piece of software. So, you know, start where your risk is lower based on your audience and the potential eyeballs, and then move from there is what I’m telling them. So that’s what we’re seeing more of is some internal experimentation. Or some sort of laboratory work that the agency and the client agree on in advance is, “We’re gonna just devote a sliver of some budget and we’re gonna see how this goes before we dip in, you know, more toes.”

Tessa Burg: Yeah, I agree with that. I feel like gen AI got a ton of buzz, and rightfully so, and so there’s a lot of risk there, but there has been AI and ML in marketing for over a decade, and a lot of agencies that want to realize internal efficiencies and even start to create a more personalized experience for their clients and their client’s customers really benefit from starting with, you know, “Where can we just use the AI and ML that’s always been available in a different way,” and to gather more data that then powers a unique way to use GenAI that can be your own, and then you start to have that as your own data. Then you don’t have to worry about where this comes from. It came from you. It came from the experiences that you were building. This has been an incredibly insightful conversation, and you have so many great nuggets that I feel like people listening to this podcast, you know, starting where there’s the lowest risk, making sure you’re hitting all three points of that triangle, that alone sets you up for a really successful 2024, and doing it in a way where you bring your clients along and that you’re transparent in having those conversations and continuously refreshing. If the listeners want to continue this conversation and find you, how can they reach you, Sharon?

Sharon Toerek: Well, first of all, thank you, Tessa, for having me. It’s been a really enjoyable conversation, and I applaud you for getting knowledge out there to people who are interested in having it to see how they can do better and more in the new year. And so I’m always reachable on LinkedIn, very active there. Happy to give my email out, it’s [email protected]. And we’ll also drop some information in the show notes to our AI resource center for agencies, and there’s some free stuff there, and then there’s our AI legal toolkit for agencies, which addresses the conversations, the policies, and the contract language all kind of in one package. So if that’s something that would be helpful to you, we’re happy to talk about that too.

Tessa Burg: Yeah, no, this has been great. I know part of our audience is agencies, part of our audiences are our clients and prospective clients, and I think it’s good to have these conversations out in the open so that our clients also know how important they are to us and that we’re putting these programs in place. And then also for agencies, for our entire industry, to all be brought along to use these tools responsibly to help advance where we’re going as marketers and technologists.

Sharon Toerek: Yeah, that’s you being a thought leader for your clients, so good on you for that. That’s great.

Tessa Burg: Thanks. If you wanna hear more episodes of Leader Generation, you can visit us at modop.com, that’s modop.com, and click on Podcast. Until next time, thanks for joining us. And Sharon, thank you again, and we’ll be talking to you again soon.

Sharon Toerek: Thanks, Tessa. Happy New Year. Have a great 2024.

Tessa Burg: You too.

Sharon Toerek

Owner & Founder of Legal+Creative | Toerek Law
Sharon Toerek black-and-white image in a circle

Sharon Toerek is an intellectual property and marketing law attorney who devotes her legal practice to clients in the advertising, marketing and creative services industries. Sharon helps clients protect, enforce and monetize their creative assets, and manage the legal implications of their marketing and advertising work. Sharon also writes and lectures frequently on the legal issues marketers face every day, such as intellectual property protection, social media marketing compliance and more.

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