Does Your SaaS Vendor Train AI on Your Customer Data?

Ownership is not the operative clause

Most SaaS agreements state clearly that the customer owns its data, and customers read that and move on. Ownership answers who the data belongs to. What the vendor may do with it is answered by the licence you grant them, which usually sits a paragraph or two later.

That licence has to exist, because a vendor cannot host and process your data without permission to do so. The question is scope. A licence limited to providing the service to you is narrow and appropriate. A licence extending to improving, developing or enhancing the vendor products and services is considerably wider, and it is the standard drafting.

Where AI training sits

Contracts rarely say training a machine learning model in those words, particularly older ones. The language that carries it is improvement of the services, development of new features, or analytics and product research. Whether that language extends to training a model on your data is a question of construction, and a customer who assumed it did not may find the vendor reads it differently.

Newer agreements are more explicit in both directions. Some vendors now state affirmatively that customer data is not used for model training, because enough customers have asked. Others have added express training rights. Either way the position is easier to establish than it was, and the absence of any statement is itself informative.

Aggregated and anonymised

The common carve-out permits use of aggregated or anonymised data derived from customer data, on the basis that it is no longer identifiable. That is a legitimate concept and it does real work.

Two things are worth checking. First, what the contract means by anonymised, since the term is used loosely and true anonymisation is a higher bar than removing obvious identifiers. Second, whether the carve-out is drafted so broadly that essentially anything derived from your data qualifies, which turns a narrow exception into a general permission.

The DPDP overlay

Where the data includes personal data, the Digital Personal Data Protection Act, 2023 adds a layer. The Act is built around processing for stated purposes, and a vendor processing personal data on your behalf is expected to be bound by contract as to what it may do.

That makes a broad improvement right harder to leave unexamined. If you are the fiduciary and your vendor is processing on your behalf, a licence permitting them to use that data for their own product development is a term worth reconciling with the purpose you told the individual about.

What to ask for

• An express statement that customer data will not be used to train AI or machine learning models without written consent.
• The licence narrowed to providing and supporting the service to you.
• A definition of anonymised that is meaningful rather than circular.
• Notice, or a right to object, if the vendor changes its position on this in future.
• Confirmation of what happens to data already ingested if you later opt out.