AI & Infringement: How the Supreme Court Will Decide & What It Means for Media, Entertainment & Creators (New York Times v. OpenAI & Microsoft)

The “Google Books” Case Doesn't End The Issue. It Never Made It To the Supreme Court & Is Not Precedent. But the Andy Warhol/Prince Case Did (& Will Rule the Day).

This year promises an onslaught of AI-related copyright infringement cases filed by the largest and most influential media and entertainment companies on the planet.

Case in point: The New York Times’ multi-dimensional case against Microsoft and OpenAI for both unlawful scraping of its journalistic content and infringing competition, which it filed just before the ball dropped in Times Square. That lawsuit, together with others before and after it, will define the basic rules of copyright that will transform the media and entertainment business. They will define what can and cannot be done without consent and compensation both on the AI “input” and “output” sides of the equation. 

Most people with whom I’ve spoken believe that the U.S. Supreme Court will ultimately decide the issue, and many industry insiders (and I’ve spoken with a lot of them) believe the Justices will rule in favor of Big Tech and find “fair use” consistent with what is commonly referred to as the landmark “Google Books” case.

But that case wasn’t decided by the Supreme Court. It was decided by the 2^nd Circuit Court of Appeals in 2015, when it ruled in Google’s favor against authors who had claimed mass infringement by Google’s “Book Search Project” – where the behemoth vacuumed the entirety of text from the libraries of the world to make it all searchable. The Supreme Court refused to review the 2nd Circuit’s decision when it denied certiorari. That means that “Google Books” is not precedent it must follow. 

Let’s not forget that today’s Supreme Court is also fundamentally different today than it was in 2015. Three new Justices, all Trump appointees, have joined since then, and the Court has also directly ruled on pivotal copyright cases since then. Two particularly relevant cases are Google v. Oracle decided in 2021 (yes, Google again in the infringer hot seat) and last year’s surprising Andy Warhol-Prince ruling. 

In Google v. Oracle, in a 6-2 decision (there was an open seat at the time), the Justices ruled that Google’s direct copying of 11,500 lines of Oracle software code — copying Google had conceded — was a fair use. In the Warhol case, the Court went the other way in a 7-2 decision, rejecting Warhol’s fair use defense based on a new kind of economic “harm to creator” element it defined for the first time. Interestingly, two of the most liberal Justices — Sonia Sotomayor and Elena Kagan — split on that decision with strongly worded rebukes of each other’s reasoning. 

So what do these rulings portend for how the Justices will decide between infringement and “fair use” in the realm of generative AI when there is mass non-consensual training on the input side AND direct adverse market impact to creators on the output side? Well, let’s first look to the lower federal courts and where they seem to be heading. 

So far, as I’ve written previously, the few federal judges who have ruled on those issues have concluded “fair use” when confronted with Big Tech’s mass scraping of copyrighted works. Those judges — including in the high-profile Sarah Silverman case — rationalized that the eventual AI outputs bore no direct relation to any specific creative work that had been sucked into the AI’s training vortex. In other words, Silverman and others could prove no adverse market impact. And at first blush, that reaction seems to make some sense and is consistent with “Google Books,” a case which the Silverman court cited in fact.

But let’s step back a bit, as the The New York Times case presents a master class in pleading and litigation. Unlike other media-related AI infringement cases before it, The New York Times goes further and makes the case for direct market harm, seeking “billions of dollars in statutory and actual damages.” The Times contends that Big Tech’s AI-focused efforts serve no “Google Books”-like service to its journalists and brand. 

In “Google Books,” the 2^nd Circuit found “fair use” because Google ultimately displayed only snippets of the scraped books rather than the whole enchilada. So - the 2^nd Circuit reasoned - Google’s “revelations do not provide a significant market substitute for the protected aspects of the originals.” Instead, the Court concluded that Google directly benefited authors by shining more light on their writings.

The Times points out that Big Tech’s mass copying in this specific AI context is entirely different. Here, Microsoft and its rambunctious nephew OpenAI arguably are directly copying tens of thousands of its articles precisely to offer a market substitute and compete with it. In essence, The Times contends that they are looking to build trillions of dollars of future value on the backs of the creative community by using their AI algorithms to do what they could not do itself — create the content that fuels their synthetic output-spitting machine.

The Times has a point here — and the U.S. Supreme Court may be quite open to hearing it. First, once again, remember that the Court never ruled on the specific “Google Books” case, so it’s not precedent it must follow (although that’s not necessarily a prerequisite for the Court anymore in any event). Second, its 2021 Google vs. Oracle case dealt with purported infringement of computer code, not creative works, a distinction that the Court itself noted. And finally, in Andy Warhol-Prince, the freshest ruling of the bunch,  the Court defined a new “economic harm to creator” test when rejecting Warhol’s “fair use” defense. Seven of the nine Justices were on board with that ruling, including both the most conservative and most liberal of Justices, in a rare moment of bench-wide solidarity.

In The New York Times case and others before it (including Getty Images, which also focuses on AI market substitution), it’s hard to challenge the contention that real economic harm flows directly from the non-consensual and non-compensated direct wholesale copying of copyrighted works. Subjective creative works are entirely different than the objective computer code at issue in Google v. Oracle. 

Moreover, AI outputs ultimately can — and in many cases are intended to — serve as direct market substitutes for the works that have been scraped, even if those outputs don’t bear any direct relation to the works at hand. Make no mistake, at least some generative AI companies ultimately hope to use their AI as our source of news instead of The Times. Unlike in “Google Books,” that shines no light on The Times that draws readers in. Instead, it casts a glare that pushes them away.

For all these reasons, my bet is that the Supreme Court ultimately will be sympathetic to The Times - and to the creative community in general - and rely most on its recent Andy Warhol ruling.

Big Tech AI faces a very real - and very significant - crisis due to this potential outcome, and its best bet is to stop The Times’ and other litigation dead in their tracks. Microsoft and OpenAI should settle with The Times and proactively work with creators to define both compensation schemes and some real guardrails that benefit them so that Big Tech can deliver on the promise of its AI in the world of media and entertainment, fairly. Such negotiations are, in fact, happening now, even as Big Tech litigates onward.  

One way or another, creators and their works must be respected, protected and compensated. Perhaps that compensation will be in the form of a YouTube-like Content ID system. Google has already developed something called SynthID that identifies creative works scraped by its AI. Perhaps that compensation will come from Spotify-like royalties to artists. Perhaps it will be akin to Adobe Firefly’s scheme that pays participating “opt in” artists based on the amount of their visual works included in the AI’s training data set. 

But there should be no free lunch. Human creativity must be respected, so long as we humans still rule the day.

What do you think? Send me your feedback at peter@creativemedia.biz.

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