The release of America’s AI Action Plan in July 2025 marks a watershed moment for businesses operating in the artificial intelligence space. With over 90 federal policy actions targeting AI innovation, infrastructure development, and international competitiveness, companies face both unprecedented opportunities and significant legal exposure. For business leaders, general counsel, and compliance officers, understanding the regulatory landscape—and the litigation risks that come with it—has never been more critical.
The Shifting Regulatory Landscape: What Every Company Must Know
The Trump Administration’s plan, Removing Barriers to American Leadership in Artificial Intelligence, emphasizes removing perceived policy barriers and incentivizing innovation while preventing advanced technologies from being misused or stolen. This deregulatory push creates a complex environment where companies must balance aggressive innovation with emerging compliance obligations. Our firm has identified several critical areas where businesses face heightened legal risk.
- Federal-State Compliance Tensions: A Litigation Minefield
One of the most pressing concerns involves the collision between federal deregulation and state-level AI governance. The Office of Management and Budget is expected to consider a state’s AI regulatory climate when making funding decisions, potentially penalizing companies operating in states with robust AI consumer protection laws. Organizations doing business across multiple jurisdictions now face a patchwork of potentially conflicting requirements—a scenario that historically generates significant litigation exposure.
Companies must navigate existing state laws like Colorado’s AI Act while anticipating federal policies that may clash with these frameworks. This regulatory fragmentation creates substantial risks including breach of contract claims, securities litigation from misstatements about compliance capabilities, and governmental enforcement actions from both state and federal authorities.
- Intellectual Property and Trade Secret Vulnerabilities
The Action Plan’s strong endorsement of open-source AI development introduces complex intellectual property challenges. While open-weight models may accelerate innovation, they also create new vectors for trade secret misappropriation, copyright infringement disputes, and patent litigation. Companies developing proprietary AI systems alongside open-source initiatives face particular exposure, especially when employee mobility and collaborative development blur traditional IP boundaries.
Our transactional practice assists clients in drafting robust licensing agreements, employment contracts with carefully structured IP assignment clauses, and contribution agreements that protect proprietary interests while enabling open-source collaboration. These preventive measures are essential in an environment where AI-related IP litigation is escalating rapidly.
Cybersecurity and Data Protection: The New Compliance Imperative
The Department of Homeland Security is expected to issue guidance to private sector entities on remediating and responding to AI-specific vulnerabilities and threats. This signals an era of heightened scrutiny around AI system security, with significant implications for corporate liability.
Data breach litigation has already proven costly for companies with inadequate security protocols. AI systems that process sensitive information—whether customer data, healthcare records, or proprietary business intelligence—represent attractive targets for sophisticated cyber threats. Companies deploying AI without robust security frameworks face potential exposure including class action lawsuits, regulatory fines under existing data protection regimes, and reputational damage that can devastate market valuation.
Our cybersecurity and privacy team works with clients to conduct comprehensive AI security audits, implement incident response protocols tailored to AI-specific threats, and develop defensible data governance frameworks that withstand regulatory scrutiny and support favorable litigation positions if breaches occur.
Export Controls and Supply Chain Compliance: Hidden Litigation Triggers
The Action Plan significantly expands export control enforcement for advanced AI compute capabilities. Companies will need to reassess supply chains, partnership structures, and compliance programs to ensure they do not inadvertently facilitate access to controlled technologies by adversaries.
The consequences of export control violations extend far beyond administrative penalties. Companies face potential criminal prosecution, suspension or debarment from government contracting, shareholder derivative suits alleging breach of fiduciary duty, and third-party claims from business partners harmed by compliance failures.
International businesses particularly face exposure when working with partners in regions subject to enhanced scrutiny. Even inadvertent violations—resulting from inadequate due diligence on suppliers, distributors, or joint venture partners—can trigger devastating legal consequences.
Our international trade and compliance practice assists clients with comprehensive export control audits, vendor screening and due diligence protocols, contractual protections including indemnification and warranty provisions, and training programs that create documented evidence of good-faith compliance efforts—critical for minimizing penalties if violations occur.
Government Contracting: Navigating New Procurement Standards
For government contractors, the Action Plan introduces significant new compliance obligations. Federal procurement standards will emphasize requirements around ideological bias while the General Services Administration is tasked with managing an AI procurement toolbox.
These evolving standards create substantial risk for contractors who fail to adapt quickly. Challenges include potential bid protests from competitors alleging non-compliance, False Claims Act exposure for misrepresentations about AI system capabilities or bias mitigation measures, contract disputes over technical specifications and performance standards, and suspension or debarment proceedings for systemic compliance failures.
Our government contracts team provides strategic counsel on proposal development incorporating new AI requirements, compliance program design demonstrating good-faith adherence to evolving standards, dispute resolution when contracting officers challenge system performance, and representation in bid protests and claims litigation.
Workforce and Employment Law Implications
The Action Plan’s focus on American workers and AI upskilling creates new employment law considerations. Companies implementing AI systems face potential litigation from displaced workers alleging age discrimination or other protected class bias, employees claiming AI-driven personnel decisions violate anti-discrimination laws, and wage and hour disputes when AI changes job classifications or productivity expectations.
Organizations must proactively address these risks through carefully documented implementation plans that demonstrate consideration of workforce impacts, transparent communication about AI deployment and its employment implications, and bias testing protocols for AI systems used in hiring, promotion, or termination decisions.
Biosecurity and Emerging Technology Risks
For companies in biotechnology and related sectors, the Plan recommends robust risk evaluations of frontier AI models and screening protocols for biotechnology research. Organizations receiving federal funding will face enhanced biosecurity mandates with significant compliance obligations.
Failure to implement adequate screening and risk assessment protocols could result in loss of federal funding and contracts, civil and criminal penalties under biosecurity regulations, tort litigation if research results in public health consequences, and reputational harm that undermines investor confidence and business relationships.
Conclusion
The AI Action Plan represents a fundamental shift in how artificial intelligence is regulated and deployed across the American economy. Companies that proactively address legal and compliance challenges will gain competitive advantages, while those that adopt a wait-and-see approach face mounting legal exposure.
Don’t wait for a lawsuit, enforcement action, or compliance crisis to address these critical issues. Contact our firm today for a comprehensive assessment of your AI-related legal risks and a strategic plan tailored to your business objectives. In this rapidly evolving landscape, informed legal counsel isn’t just prudent—it’s essential for sustainable success.
Schedule a consultation with our AI practice group to discuss how we can help your organization navigate America’s AI Action Plan and protect your business from emerging legal risks.