California’s AI Transparency Act (SB 942): A New Era of Accountability in AI

California is leading the charge toward greater transparency and consumer protection with the AI Transparency Act (SB 942), signed into law on September 19, 2024. This groundbreaking legislation sets out clear rules for AI providers with over 1 million monthly users or visitors, making transparency a priority to safeguard users from AI-generated misinformation, like deepfakes. Here are the key provisions of this landmark bill and why it matters:

AI providers with over 1 million monthly visitors are now required to offer free, publicly accessible AI detection tools. These tools allow users to check whether digital content—images, videos, or audio—was created or altered by AI.

a) Manifest Disclosures: Providers must clearly label any AI-generated content with a permanent and conspicuous tag, ensuring that users know upfront that the content is not authentic.

b) Latent Disclosures: The law also requires embedded metadata that includes essential information, such as the AI provider’s name, the version of the system used, and the time and date of creation.

Covered providers must collect user feedback to continuously improve the AI detection tools, ensuring that these tools remain effective over time. However, providers are prohibited from collecting or retaining personal information or submitted content beyond what is necessary to enhance the tools.

If third parties modify AI systems to remove the mandatory disclosures, providers must revoke their license within 96 hours, holding AI creators accountable for how their tools are used.

Non-compliance with these regulations will result in a $5,000 fine per violation, with each day of continued violation counting as a separate offense.

With AI advancing at an unprecedented rate, this bill addresses growing concerns around the manipulation of digital content, especially with deepfakes. Transparency is a legal requirement, and it’s also essential for maintaining public trust and protecting consumers from deceptive practices in the digital age.

Connect with Ajay Mago or any member of EM³’s Artificial Intelligence practice for professional support.

Ajay Mago is a former AmLaw 100 partner, with more than 16 years of experience in technology transactions, including at Jones Day, Mayer Brown, and Duane Morris. Mr. Mago advises on a wide array of sourcing, technology and other commercial transactions and helps companies navigate legal issues raised by data, emerging technologies, and digital transformation, both on the buyer and provider side. He routinely advises clients on IP strategy, management, and monetization arrangements, leveraging his technology background and business experience.