The Legal Risks of AI in Agency Work, with Sharon Toerek — Ep.213

About this Episode

In this episode of the Agency Profit Podcast, Marcel is joined by long-time agency legal expert and Innovative Agency host Sharon Toerek to unpack one of the most urgent but confusing topics facing firms right now: the legal and business implications of AI. Drawing on decades of experience representing creative and digital agencies, Sharon breaks down the real risk areas around generative AI, from IP ownership and infringement to data privacy, contractor usage, and client expectations. Together, she and Marcel explore how fast-moving AI tools are colliding with slow-moving law, what little case law we do have, and why clear contracts, internal AI policies, and a basic grasp of tool terms are now table stakes for operators. They also zoom out to talk about how AI, economic volatility, and founder fatigue are reshaping the M&A market, and why building your own IP gives you options whether you want to sell, stay, or spin off your expertise. If you’re trying to embrace AI without stepping on a legal landmine — and future-proof the value of your agency in a shifting market — this conversation offers a pragmatic roadmap for managing risk while still moving fast.

Watch this Episode

Points of Interest

• 00:00 – 01:38 – Introduction: Marcel welcomes agency legal specialist Sharon Toerek, highlighting her long track record in the industry and setting the stage with a discussion about how quickly the agency world is changing.
• 01:38 – 02:45 – Framing the AI Legal Conversation for Agencies: They position the core topic of the episode as the legal implications of AI adoption inside agencies, especially when serving enterprise clients with sensitive data and heightened risk concerns.
• 02:45 – 05:03 – The Two Biggest AI Risk Buckets: IP and Data Privacy: Sharon identifies intellectual property and data privacy as the top two legal risk areas agencies must consider when using generative AI in strategy, creation, and data manipulation.
• 05:03 – 08:11 – IP Infringement, Ownership, and Contract Clarity: She explains how generative AI can inadvertently infringe on others’ IP, complicate ownership of deliverables, and increase the need for explicit AI usage and ownership language in MSAs and SOWs.
• 08:11 – 10:23 – Agency-Created IP and Contractor Use of AI: Sharon explores the risks of building agency-owned IP with AI when ownership is uncertain, and stresses the importance of knowing how contractors use AI so their work aligns with promises made to clients.
• 10:23 – 15:11 – The State of Case Law and Fair Use Signals: They discuss how little case law exists around AI, what early decisions suggest about training data and fair use, and why we still do not know how much human contribution is needed to secure protectable IP.
• 15:11 – 18:26 – Blurring Lines Between Human and Machine-Created Work: Marcel and Sharon reflect on how modern creative tools embed AI in everyday workflows, making it harder to distinguish human-made from machine-generated content for legal and practical purposes.
• 18:26 – 22:40 – A Practical Playbook for Reducing AI Legal Risk: Sharon outlines concrete steps agencies can take now: have AI conversations with clients, update contracts, understand tool terms, set internal and external AI policies, and right-size risk based on audience scale.
• 22:40 – 26:05 – Where Insurance Fits in the AI Risk Equation: They examine how general liability, E&O, and cyber policies currently treat AI-related issues, and why insurers are likely to carve out or slowly add AI-specific coverage as risks and profits emerge.
• 26:05 – 30:31 – Market Volatility, AI Shock, and Rising Agency M&A: Sharon connects AI disruption, economic uncertainty, and geopolitical tension to a surge in small and mid-size agency deals, noting many founders are simply tired of reinventing their businesses again.
• 30:31 – 35:40 – IP as a Lever in Exits and Next Career Moves: She makes the case that agencies who develop and package their own IP create more options in M&A, whether selling IP separately, splitting the business, or using it to launch the next chapter of their careers.

Show Notes

• Innovative Agency Podcast
• Website: legalandcreative.com
• LinkedIn – Sharon Toerek
• M&A Webinar Replay with Sharon

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