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AI for EntrepreneursLesson 8 of 12

8 · The legal and ethical basics every founder must know

Using AI doesn't lower the legal bar — in some areas it raises it. You don't need to be a lawyer, but you must know these four basics, because getting them wrong can mean fines, lawsuits, or a dead brand. (This is general education, not legal advice — for your specific situation, ask a real lawyer.)

1 · Don't deceive customers about your product. Marketing claims have to be truthful and backed up. The FTC has been explicit that AI performance claims must be substantiated — you can't say your product "uses AI" if it doesn't, or exaggerate what it does (FTC, 2023). "The AI said so" is not a defense.

2 · No fake reviews, fake testimonials, or fake hype. It is now illegal under an FTC rule to create, buy, or sell fake reviews and testimonials, or fake indicators of social-media influence like bought followers — with civil penalties per violation (FTC, 2024). AI makes generating fake reviews trivially easy; that doesn't make it legal. Don't.

3 · Disclose paid endorsements and material connections. If someone endorses your product and has a material connection to you (you paid them, gave free product, or they're family or staff), that connection must be disclosed clearly and conspicuously — "difficult to miss and easily understandable" (FTC, n.d.). The same applies to you endorsing things. Burying "#ad" where no one sees it doesn't count.

4 · Know the copyright limits on AI output. The U.S. Copyright Office has stated that purely AI-generated material is not protected by copyright — copyright requires human authorship, and prompting alone is not enough to make an AI's output yours (U.S. Copyright Office, 2025). Practical meaning for a founder: a logo or jingle you got from a single prompt may not be something you can legally own or stop others from copying. Your human creative contributions are what's protectable. Also: respect others' copyrights and your AI tools' terms of use.

And always: privacy. Don't paste customers' personal data into public AI tools (it may be stored or used to train the model), and tell customers honestly how you use their data.

Check yourself. A friend offers to post a glowing review of your product in exchange for a free unit. Name two FTC problems with treating that as an ordinary "real" review.

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