It's Not Looking Good For AI's "Fair Use" Defense
The Copyright Office & Courts Just Gave Big Tech a 1-2 Gut Punch!
Good morning readers, it’s time again for your Monday morning “brAIn” dump (yes, by popular demand, I’m back to my usual date and time). WOW! What a week! My “mAIn event” features two major developments that don’t bode well for Big Tech’s reliance on “fair use” to defend their mass unlicensed taking of copyrighted works to fuel their AI dreams. Then, my “AI video of the week” — featuring a new “ethically sourced” AI studio’s promo reel (because “ethical sourcing” deserves spotlighting). Next, the “mosAIc” — a collage of curated AI stories, events and podcasts. Finally, the “AI Litigation Tracker” — updates on key generative AI-media copyright infringement cases by Partner Avery Williams of McKool Smith (access the “Tracker” here via this link). So, LET’s GO!
I. The mAIn Event — Wow, What A Week For Copyright Owners! (Not So Much For AI’s “Fair Use” Defense)
(1) The U.S. Copyright Office Just Dropped A Bombshell!
This past Friday, the Copyright Office dropped a bombshell — releasing a pre-publication version of its long-anticipated Report on generative AI training (read a great detailed analysis of it here). And I won’t bury the lead. On balance, the Copyright Office came out heavily in favor of copyright owners and against AI developers’ reliance on “fair use” as a defense to their mass unlicensed training on copyrighted works. And, as I’ve always expected, market dilution and substitution are at the core of much of the Office’s reasoning — which is as it should be, since it’s in line with the Supreme Court’s most recent rejection of “fair use” on “market replacement” grounds in the seminal “Andy Warhol/Prince” case (here’s my earlier detailed analysis of that decision)
Here’s just one of many fairly damning quotes from the Copyright Office’s Report:
“given the volume, speed and sophistication with which AI systems can generate outputs, and the vast number of works that may be used in training, the impact on the markets for copyrighted works could be of unprecedented scale.“
The Office pulled absolutely no punches when it comes to AI training on “pirate sources” and AI chatbot search — both of which are almost certainly now sunk, drowned by the “fair use” test. Here’s what the Copyright Office wrote about that:
“[t]he copying of expressive works from pirate sources in order to generate unrestricted content that competes in the marketplace, when licensing is reasonably available, is unlikely to qualify as fair use.”
Can’t get much clearer than that!
While it’s still early — and the Copyright Office’s pre-publication analysis is ultimately fact-dependent (in the Report’s words, “it is not possible to prejudge litigation outcomes”), the anti-“fair use” writing on the wall is becoming ever clearer.
That doesn’t bode well for AI developers. Outright “taking” of copyrighted works is “out.” Content licensing — with fair consent and compensation — is “in.” That’s what I’ve always advocated for (you can read my proposed 3-tier AI content licensing system here). So, expect the AI content licensing market to heat up. Significantly.
CRITICAL WEEKEND POST-SCRIPT: On Saturday, just one day after the Copyright Office issued this Report, Trump fired the Registrar of Copyrights Shira Perlmutter. “Cause and effect” due to its potential massive ramifications on AI developers (especially when his “VP” Elon Musk advocates getting rid of copyright laws)? You be the judge. We know what’s coming next. A final Report that will be very different than this one.
But we — and the Courts — know better.
(NOTE: I’m heavily involved in that world right now — representing several media companies to license their content with major AI developers. Reach out to learn more at peter@creativemedia.biz).
(2) And Then There’s This. I Predict Judge Chhabria Will Reject Fair Use On “Market Replacement” Grounds In The Pivotal Kadrey v. Meta Case.
“Market replacement,” anyone? I’ll go out on a limb here. Federal Judge Chhabria — who is likely to make his pivotal decision soon on the fundamental issue of “fair use” in the closely watched Kadrey v. Meta generative AI training case — will reject Meta’s “fair use” defense. Instead, he’ll find Meta liable for massive copyright infringement on “market replacement” grounds, consistent with the rationale and language used by both the Copyright Office and the Supreme Court.
This is what Judge Chhabria said to Meta’s lawyers in his recent summary judgment hearing:
"You have companies using copyright-protected material to create a product that is capable of producing an infinite number of competing products. You are dramatically changing, you might even say obliterating, the market for that person's work, and you're saying that you don't even have to pay a license to that person. I just don't understand how that can be fair use.”
We’ve already seen the first federal judge to face the “fair use” issue — in the context of AI — reject “fair use” as a defense to unlicensed AI scraping (in the Thomson Reuters v. Ross Intelligence case). Yes, that was a non generative AI case. But the Thomson Reuters Judge’s core rationale was, once again, the same as the Supreme Court’s and the Copyright Office’s — “market replacement.”
Sense a pattern here?
And so, all eyes are on federal district court Judge Chhabria — now the single most interesting and powerful man in the worlds of media and tech.
II. Video of the Week - Asteria’s “Ethically Sourced” Sizzle Reel
AI filmmaker Paul Trillo — whose work I frequently feature here in my newsletter — recently partnered up to create Asteria, a new kind of “ethically sourced” AI video production company. “Our partners have trained a clean foundational model called Marey on completely paid and licensed data,” Paul tells me. “The idea is that we are working with artists to make our own custom prompts.” (Check out Asteria’s “sizzle reel” via this link or button below. It’s fascinating.)
III. The mosAIc — A Collage of Curated “Stuff”
(1) Did the Oscars Just Embrace AI? Well, Sort Of …
In the words of The New York Times, and in response to new rules issued a few weeks back by the Motion Picture Academy for next year’s Academy Awards, “The Oscar gods embraced A.I. Sort of.” The Academy’s new rules — which ultimately reflect one big punt — say that AI will “neither help nor harm the chances of achieving a nomination.” The Academy did manage to throw one bone to the creative community, essentially saying that the more human involvement in the filmmaking process, the better (whatever that means). “I’d like to thank the Academy for their, um, support?”
(2) Did Mark Zuckerberg Just Declare War On The Entire Advertising Industry?
Niley Patel of The Verge thinks so. And his analysis is worth reading — and pondering.
(3) “AI on the Lot” Is Only 2 Weeks Away! (I’ll Be There … You Should Be Too)
LA’s biggest AI media and entertainment event of the year — AI on the Lot — takes place on May 28th-30th. It’s one of those rare “must attend” conferences and overall shmooze-fests, and I’ll definitely be there. Reach out to me at peter@creativemedia.biz if you’d like to get together. Tickets are still available — you get an extra $100 off by using the discount code “PETER” via this link.
(4) Westside Digital Mix Hosts Great Networking Events
Another great resource for you is Westside Digital Mix. This great group of media and tech experts (like my friend, Spence Bovee) host an ongoing series of great LA-based media, entertainment, AI and tech networking events. Their newsletter is also a helpful resource for all major media/tech events in the LA area. Check it out here.
Want to Work Together?
Reach out to me at peter@creativemedia.biz.
IV. AI Litigation Tracker: Updates on Key Generative AI/Media Cases (by McKool Smith)
Partner Avery Williams and the team at McKool Smith (named “Plaintiff IP Firm of the Year” by The National Law Journal) lay out the facts of — and latest critical developments in — the key GenAI-focused IP litigations below. All those detailed updates can be accessed via this link to the “AI Litigation Tracker”. McKool is a leader in both copyright and patent-related AI litigation — and all IP matters.
(1) Kadrey v. Meta
(2) Ziff-Davis v. OpenAI
(3) The New York Times v. Microsoft & OpenAI
(4) Thomson Reuters v. Ross Intelligence
(5) In re OpenAI Litigation (class action)
(6) Dow Jones, et al. v. Perplexity AI
(7) UMG Recordings v. Suno
(8) UMG Recordings v. Uncharted Labs (d/b/a Udio)
(9) Getty Images v. Stability AI and Midjourney
(10) Universal Music Group, et al. v. Anthropic
(11) Sarah Anderson v. Stability AI
(12) Raw Story Media v. OpenAI
(13) The Center for Investigative Reporting v. OpenAI
(14) Authors Guild et al. v. OpenAI
NOTE: Go to the “AI Litigation Tracker” tab at the top of “the brAIn” website for the full discussions and analyses of these and other key generative AI/media litigations. And reach out to me, Peter Csathy (peter@creativemedia.biz), if you would like to be connected to McKool Smith) to discuss legal and litigation issues. I’ll make the introduction.
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