The Legal Challenges of AI: Intellectual Property and Fair Use

By Gaby Meintjes | Director

In the 1980s, films like Blade Runner warned of a future where artificial intelligence blurred the line between human creativity and machine production. Fast-forward to today, and reality seems to be catching up. AI systems are not only reshaping industries but also prompting legal battles that challenge our understanding of creativity and ownership. As generative AI tools churn out text, images, and even voices, industries like publishing, journalism, and fashion are grappling with a fundamental question: who owns the output – and the input?

These challenges are more than theoretical. From New York Times v. Microsoft Corp. to Dow Jones & Co. v. Perplexity AI, creators and corporations alike are wrestling with the legal consequences of AI’s disruptive potential. At the heart of these disputes lie questions about copyright, trade marks, and the fairness of AI’s use of creative works to build billion-dollar businesses.

1. Copyright Infringement: The Foundation of Many Disputes

One of the most pressing issues is the unauthorised use of copyrighted material to train AI models. Plaintiffs, such as journalists and authors, argue that their work has been exploited without permission or compensation. For instance, in Andrea Bartz, et al. v. Anthropic PBC, authors alleged that Anthropic’s Claude AI model was trained on hundreds of thousands of pirated books, enabling it to generate outputs that dilute the market for the original works.

Similarly, lawsuits like Daily News, LP v. Microsoft Corp. highlight the economic impact of using high-quality content—such as articles from major news outlets—to fuel AI models without paying licensing fees. This raises questions about whether AI companies should be held accountable for the value derived from such data.

2. Trade mark Infringement: Brand Battles in the AI Age

Beyond copyright, AI platforms are also facing trade mark disputes. In Gemini Data v. Google, a smaller company alleged that Google deliberately hijacked its established “Gemini” trade mark when rebranding its AI chatbot Bard. The case highlights how smaller firms struggle to protect their brands against the dominance of tech giants. This misuse not only causes financial harm but also risks consumer confusion, tarnishing the goodwill associated with established brands.

3. Transformation vs. Fair Use: The Legal Grey Area

Tech companies often argue that their use of copyrighted material is protected under the doctrine of fair use, claiming that AI models transform the original works into something entirely new. However, lawsuits like New York Times v. Microsoft Corp. challenge this defence, arguing that using content to train generative AI tools—such as ChatGPT—does not transform it but rather creates derivative works that compete with the originals. The outcome of such cases could redefine the boundaries of fair use in the AI era.

4. Lack of Attribution and DMCA Violations

A recurring theme in these lawsuits is the removal of copyright management information, a violation of the Digital Millennium Copyright Act (DMCA). In Raw Story Media, Inc. v. OpenAI, Inc., plaintiffs claimed that OpenAI stripped away authorship and copyright details when training ChatGPT. Such practices undermine the creators’ rights and mislead users into believing the AI outputs are original.

5. Competitive Harm and Unfair Competition

Many plaintiffs argue that AI platforms directly compete with their original works. For example, Dow Jones & Co. v. Perplexity AI alleges that the defendant used copyrighted news articles to create a platform that diverts readers and revenue from publishers. This reflects a broader concern that generative AI models, by mimicking original works, may undermine industries dependent on original content.

Generative AI presents unprecedented challenges for intellectual property law. As creators seek to protect their rights, courts must grapple with questions of compensation, fair use, and attribution. These cases will shape how industries navigate the fine line between fostering innovation and respecting intellectual property.