Intellectual Property
Generative
Intellectual AI Has
Property an Problem
by Gil Appel, Juliana Neelbauer, and David A. Schweidel
April 07, 2023
HBR Staff/Pexels
Summary. Generative AI, which uses data lakes and question snippets to recover
patterns and relationships, is becoming more prevalent in creative industries.
However, the legal implications of using generative AI are still unclear, particularly
in relation to copyright infringement,... more
Generative AI can seem like magic. Image generators such as
Stable Diffusion, Midjourney, or DALL·E 2 can produce
remarkable visuals in styles from aged photographs and water
colors to pencil drawings and Pointillism. The resulting products
can be fascinating — both quality and speed of creation are
elevated compared to average human performance. The Museum
of Modern Art in New York hosted an AI-generated installation
generated from the museum’s own collection, and the
Mauritshuis in The Hague hung an AI variant of Vermeer’s Girl
with a Pearl Earring while the original was away on loan.
The capabilities of text generators are perhaps even more striking,
as they write essays, poems, and summaries, and are proving
adept mimics of style and form (though they can take creative
license with facts).
While it may seem like these new AI tools can conjure new
material from the ether, that’s not quite the case. Generative AI
platforms are trained on data lakes and question snippets —
billions of parameters that are constructed by software processing
huge archives of images and text. The AI platforms recover
patterns and relationships, which they then use to create rules,
and then make judgments and predictions, when responding to a
prompt.
This process comes with legal risks, including intellectual
property infringement. In many cases, it also poses legal
questions that are still being resolved. For example, does
copyright, patent, trademark infringement apply to AI creations?
Is it clear who owns the content that generative AI platforms
create for you, or your customers? Before businesses can embrace
the benefits of generative AI, they need to understand the risks —
and how to protect themselves.
Where Generative AI Fits into Today’s Legal Landscape
Though generative AI may be new to the market, existing laws
have significant implications for its use. Now, courts are sorting
out how the laws on the books should be applied. There are
infringement and rights of use issues, uncertainty about
ownership of AI-generated works, and questions about
unlicensed content in training data and whether users should be
able to prompt these tools with direct reference other creators’
copyrighted and trademarked works by name without their
permission.
These claims are already being litigated. In a case filed in late
2022, Andersen v. Stability AI et al., three artists formed a class to
sue multiple generative AI platforms on the basis of the AI using
their original works without license to train their AI in their
styles, allowing users to generate works that may be insufficiently
transformative from their existing, protected works, and, as a
result, would be unauthorized derivative works. If a court finds
that the AI’s works are unauthorized and derivative, substantial
infringement penalties can apply.
Similar cases filed in 2023 bring claims that companies trained AI
tools using data lakes with thousands — or even many millions —
of unlicensed works. Getty, an image licensing service, filed a
lawsuit against the creators of Stable Diffusion alleging the
improper use of its photos, both violating copyright and
trademark rights it has in its watermarked photograph collection.
In each of these cases, the legal system is being asked to clarify
the bounds of what is a “derivative work” under intellectual
property laws — and depending upon the jurisdiction, different
federal circuit courts may respond with different interpretations.
The outcome of these cases is expected to hinge on the
interpretation of the fair use doctrine, which allows copyrighted
work to be used without the owner’s permission “for purposes
such as criticism (including satire), comment, news reporting,
teaching (including multiple copies for classroom use),
scholarship, or research,” and for a transformative use of the
copyrighted material in a manner for which it was not intended.
This isn’t the first time technology and copyright law have
crashed into each other. Google successfully defended itself
against a lawsuit by arguing that transformative use allowed for
the scraping of text from books to create its search engine, and for
the time being, this decision remains precedential.
But there are other, non-technological cases that could shape how
the products of generative AI are treated. A case before the U.S.
Supreme Court against the Andy Warhol Foundation — brought
by photographer Lynn Goldsmith, who had licensed an image of
the late musician, Prince — could refine U.S. copyright law on the
issue of when a piece of art is sufficiently different from its source
material to become unequivocally “transformative,” and whether
a court can consider the meaning of the derivative work when it
evaluates that transformation. If the court finds that the Warhol
piece is not a fair use, it could mean trouble for AI-generated
works.
All this uncertainty presents a slew of challenges for companies
that use generative AI. There are risks regarding infringement —
direct or unintentional — in contracts that are silent on
generative AI usage by their vendors and customers. If a business
user is aware that training data might include unlicensed works or
that an AI can generate unauthorized derivative works not
covered by fair use, a business could be on the hook for willful
infringement, which can include damages up to $150,000 for each
instance of knowing use. There’s also the risk of accidentally
sharing confidential trade secrets or business information by
inputting data into generative AI tools.
Mitigating Risk and Building a Way Forward
This new paradigm means that companies need to take new steps
to protect themselves for both the short and long term.
AI developers, for one, should ensure that they are in compliance
with the law in regards to their acquisition of data being used to
train their models. This should involve licensing and
compensating those individuals who own the IP that developers
seek to add to their training data, whether by licensing it or
sharing in revenue generated by the AI tool. Customers of AI tools
should ask providers whether their models were trained with any
protected content, review the terms of service and privacy
policies, and avoid generative AI tools that cannot confirm that
their training data is properly licensed from content creators or
subject to open-source licenses with which the AI companies
comply.
Developers
In the long run, AI developers will need to take initiative about
the ways they source their data — and investors need to know the
origin of the data. Stable Diffusion, Midjourney and others have
created their models based on the LAION-5B dataset, which
contains almost six billion tagged images compiled from scraping
the web indiscriminately, and is known to include substantial
number of copyrighted creations.
Stability.AI, which developed Stable Diffusion, has announced
that artists will be able to opt out of the next generation of the
image generator. But this puts the onus on content creators to
actively protect their IP, rather than requiring the AI developers to
secure the IP to the work prior to using it — and even when artists
opt out, that decision will only be reflected in the next iteration of
the platform. Instead, companies should require the creator’s opt-
in rather opt-out.
Developers should also work on ways to maintain the provenance
of AI-generated content, which would increase transparency
about the works included in the training data. This would include
recording the platform that was used to develop the content,
details on the settings that were employed, tracking of seed-data’s
metadata, and tags to facilitate AI reporting, including the
generative seed, and the specific prompt that was used to create
the content. Such information would not only allow for the
reproduction of the image, allowing its veracity to be verified
easily, but it would also speak to the user’s intent, thereby
protecting business users that may need to overcome intellectual
property infringement claims, as well as demonstrate that the
output was not due to willful intent to copy or steal.
Developing these audit trails would assure companies are
prepared if (or, more likely, when) customers start including
demands for them in contracts as a form of insurance that the
vendor’s works aren’t willfully, or unintentionally, derivative
without authorization. Looking further into the future, insurance
companies may require these reports in order to extend
traditional insurance coverages to business users whose assets
include AI-generated works. Breaking down the contributions of
individual artists who were included in the training data to
produce an image would further support efforts to appropriately
compensate contributors, and even embed the copyright of the
original artist in the new creation.
Creators
Both individual content creators and brands that create content
should take steps to examine risk to their intellectual property
portfolios and protect them. This involves proactively looking for
their work in compiled datasets or large-scale data lakes,
including visual elements such as logos and artwork and textual
elements, such as image tags. Obviously, this could not be done
manually through terabytes or petabytes of content data, but
existing search tools should allow the cost-effective automation of
this task. New tools can even promise obfuscation from these
algorithms.
Content creators actively should monitor digital and social
channels for the appearance of works that may be derived from
their own. For brands with valuable trademarks to protect, it’s not
simply a matter of looking for specific elements such as the Nike
Swoosh or Tiffany Blue. Rather, there may be a need for
trademark and trade dress monitoring to evolve in order to
examine the style of derivative works, which may have arisen
from being trained on a specific set of a brand’s images. Even
though critical elements such as a logo or specific color may not
be present in an AI-generated image, other stylistic elements may
suggest that salient elements of a brand’s content were used to
produce a derivative work. Such similarities may suggest the
intent to appropriate the average consumer’s goodwill for the
brand by using recognizable visual or auditory elements. Mimicry
may be seen as the sincerest form of flattery, but it also can
suggest the purposeful misuse of a brand.
The good news regarding trademark infringement for business
owners is that trademark attorneys have well-established how to
notify and enforce trademark rights against an infringer, such as
by sending strongly worded cease-and-desist notice or licensing
demand letter, or moving directly to filing a trademark
infringement claim, regardless of whether an AI platform
generated the unauthorized branding, or a human did.
Businesses
Businesses should evaluate their transaction terms to write
protections into contracts. As a starting point, they should
demand terms of service from generative AI platforms that
confirm proper licensure of the training data that feed their AI.
They should also demand broad indemnification for potential
intellectual property infringement caused by a failure of the AI
companies to properly license data input or self-reporting by the
AI itself of its outputs to flag for potential infringement.
At minimum, businesses should add disclosures in their vendor
and customer agreements (for custom services and products
delivery), if either party is using generative AI to ensure that
intellectual property rights are understood and protected on both
sides of the table as well as how each party will support
registration of authorship and ownership of those works. Vendor
and customer contracts can include AI-related language added to
confidentiality provisions in order to bar receiving parties from
inputting confidential information of the information-disclosing
parties into text prompts of AI tools.
Some leading firms have created generative AI check lists for
contract modifications for their clients that assess each clause for
AI implications in order to reduce unintended risks of use.
Organizations that use generative AI, or work with vendors that
do, should keep their legal counsel abreast of the scope and
nature of that use as the law will continue to evolve rapidly.
•••
Going forward, content creators that have a sufficient library of
their own intellectual property upon which to draw may consider
building their own datasets to train and mature AI platforms. The
resulting generative AI models need not be trained from scratch
but can build upon open-source generative AI that has used
lawfully sourced content. This would enable content creators to
produce content in the same style as their own work with an audit
trail to their own data lake, or to license the use of such tools to
interested parties with cleared title in both the AI’s training data
and its outputs. In this same spirit, content creators that have
developed an online following may consider co-creation with
followers as another means by which to source training data,
recognizing that these co-creators should be asked for their
permission to make use of their content in terms of service and
privacy policies that are updated as the law changes.
Generative AI will change the nature of content creation, enabling
many to do what, until now, only a few had the skills or advanced
technology to accomplish at high speed. As this burgeoning
technology develops, users must respect the rights of those who
have enabled its creation – those very content creators who may
be displaced by it. And while we understand the real threat of
generative AI to part of the livelihood of members of the creative
class, it also poses a risk to brands that have used visuals to
meticulously craft their identity. At the same time both creatives
and corporate interests have a dramatic opportunity to build
portfolios of their works and branded materials, meta-tag them,
and train their own generative-AI platforms that can produce
authorized, proprietary, (paid-up or royalty-bearing) goods as
sources of instant revenue streams.
GA
Gil Appel is an Assistant Professor of
Marketing at the GW School of Business. His
research uncovers insights driven by consumer
interactions with digital technologies, such as
big data, social media, NFTs, and AI.
JN
Juliana Neelbauer is a partner at Fox
Rothschild LLP in the corporate, intellectual
property, emerging markets, and
entertainment and sports law groups. She is a
lecturer at the University of Maryland and
Georgetown University regarding securities
law, negotiations, digital assets, and business
law.
DS
David A. Schweidel is Rebecca Cheney
McGreevy Endowed Chair and Professor of
Marketing at Emory University’s Goizueta
Business School. His research focuses on
consumer interactions with technology, and
how this shapes marketing practice.
