Businesses Bracing for Potential Legal Battles over Implementation of Generative AI Technology
Headline: Businesses Using Generative AI Face Copyright and Defamation Risks: Mitigation Strategies and Key Considerations
In the rapidly evolving world of artificial intelligence (AI), businesses that employ generative AI for public-facing communications should be aware of significant legal risks related to copyright infringement and defamation. To navigate these potential pitfalls, a combination of human oversight, legal guidance, policy development, and understanding of AI tool limitations is crucial.
Copyright Infringement
The use of AI tools that train on copyrighted material without clear licensing raises the risk of generating content that inadvertently replicates protected elements. For instance, creating logos, promotional copy, or images that substantially duplicate copyrighted characters or designs could trigger infringement claims. This risk is heightened when AI systems generate content that closely resembles existing copyrighted works, such as images of studios' characters, as claimed by Midjourney[1].
Defamation
Public-facing AI-created texts or images can potentially defame individuals or entities if they incorporate false or misleading information. To prevent this, careful review and fact-checking by humans are essential[2]. AI systems may produce erroneous or fabricated ("hallucinated") content that could harm reputations.
Confidentiality and Data Protection
Using generative AI, especially cloud-based or third-party tools, may risk disclosing confidential or sensitive business information. To prevent unauthorized sharing or data leakage, businesses must understand the AI platform’s terms of use and data handling policies[3].
Ethical and Supervisory Obligations
Organizations should maintain human oversight, ideally through collaboration with legal counsel, to ensure AI-generated materials comply with legal and ethical standards. Neglecting this oversight can lead to liability for AI errors or improper content[4].
Recommended Strategies
To avoid these risks, businesses should:
- Develop a comprehensive legal AI policy, consulted with general counsel, explicitly addressing use cases, copyright clearance, fact verification, and defamation risk management[2].
- Require human review and approval of all AI-generated public-facing materials before publication to catch potential copyright or defamatory issues[2].
- Understand AI platform terms and data policies to prevent confidential data exposure and assess legal compliance with privacy regulations[3].
- Train staff and supervisors to understand AI limitations and developments, fulfilling duties of technological competence and ethical standards relevant to their industry[4].
Case Study
In June of 2025, Disney and Universal filed a lawsuit against Midjourney for direct infringement of their copyrighted works[5]. Midjourney, however, argues that it shouldn't have to automatically prevent users from generating images with the plaintiffs' intellectual property because it doesn't know how the customers are going to use it[6].
Trademark Protection
Trademarking a logo or slogan may be enough to protect a brand, as trademarks don't require human authorship[7].
OpenAI's Terms of Service
OpenAI's Terms of Service indemnify businesses from legal liability over copyright infringement, but only under certain conditions and with caveats[8]. Indemnifications can be challenged and are not always rock-solid, leaving businesses potentially vulnerable to copyright infringement lawsuits.
In conclusion, businesses should integrate real human creativity in final materials, thoroughly vet their outputs for existing works, document the creative process, and be aware of licensing terms for any AI tools they use to minimize legal risks. By prioritizing human oversight, legal guidance, policy development, and understanding of AI tool limitations, businesses can navigate the complex landscape of copyright infringement and defamation risks associated with generative AI.
[1] Midjourney claims training on images of studios' characters is a form of transformative fair use. [2] It is important to have a human check anything generated by AI to see if it's too similar to an existing, copyrighted work. [3] AI vendors' Terms of Service often disclaim responsibility for lawsuits caused by businesses or individuals using their tools. [4] The real harm from copyright infringement often comes from legal fees, which can be much higher than the cost of a license for using the material. [5] If some parts of work are AI-generated, only the human-made portions can get copyright protection. [6] Indemnifications can be challenged and are not always rock-solid, leaving businesses potentially vulnerable to copyright infringement lawsuits. [7] Trademarking a logo or slogan may be enough to protect a brand, as trademarks don't require human authorship. [8] Courts have affirmed that AI-generated content is not copyrightable because it lacks a human author to take credit. [9] If a small business infringes on a large company's copyright, they may receive a cease and desist letter and have the opportunity to stop using the infringing materials before being sued. [10] US companies using generative AI for public-facing communications may face copyright infringement lawsuits if the materials produced are substantially similar to copyrighted works. [11] According to Title 17 of the US Code, Chapter 5, the copyright holder can seek either actual damages or statutory damages, which are up to $30K per infringed work or up to $150K if the infringement was willful. [12] It is important for businesses using generative AI to have a legal AI policy to avoid legal risks, including copyright infringement and defamation, and to always have human review of AI-generated materials.
Read also:
- U Power's strategic collaborator UNEX EV has inked a Letter of Intent with Didi Mobility to deploy UOTTA(TM) battery-swapping electric vehicles in Mexico.
- Global Gaming Company, LINEUP Games, Moves Into Extensive Global Web3 Multi-Platform Gaming Network
- Gold nanorod market to reach a value of USD 573.3 million by 2034, expanding at a compound annual growth rate (CAGR) of 11.7%
- Enhanced Financial Incentives for Electric Vehicles Set to Launch in Italy