Author Archives: Yuanxiao Xu

Revived Class Action Against McGraw Hill: the Importance of Publishing Contracts

Posted November 15, 2024

open book with glasses on top

On November 6th, the 2nd Circuit Court of Appeals overturned the lower court’s dismissal in Flynn v. McGraw Hill, and allowed the plaintiffs’ breach of contract claim to move forward. 

The breach of contract claim involves McGraw Hill’s alleged practice of reducing or ceasing royalty payments on revenues generated through McGraw Hill’s online platform, Connect, which hosts electronic textbooks and related course materials since its launch in 2009. The publishing contracts at issue specified that McGraw Hill would publish the plaintiffs’ textbooks “at its own expense” and that royalties would be based on “Publisher’s net receipts”—defined mostly as “the Publisher’s selling price, less discounts, credits, and returns, or a reasonable reserve for returns;” although the initially signed contracts only covered print works, McGraw Hill later amended the contracts to cover electronic works under the same royalties structure. McGraw Hill paid royalties based on the entire revenue from ebook sales through Connect, which included both the ebook and its accompanying materials such as PowerPoint lesson plans and test banks.

This changed in 2020, according to the plaintiffs, when McGraw Hill started paying royalties solely on sales attributed to the ebooks, excluding the revenue derived from the accompanying materials, despite the fact that the accompanying materials cannot be bought independent of the ebook. Under the new practice, McGraw Hill would unilaterally determine which part of the revenue is attributable to the ebooks, their accompanying materials, or the Connect platform, even though the sales are always based on a “single unitary price”.

The plaintiffs argue that this new arrangement violated McGraw Hill’s promise to publish the works “at its own expense,” a provision that should have meant authors wouldn’t be charged for the cost of operating or maintaining the publisher’s infrastructure; this claim is now allowed to go forward. The claim related to “net receipts” was again dismissed.

While the ongoing developments in this case are worth watching closely, it also serves as a timely reminder—especially in light of publishers’ licensing content for AI training—for authors to carefully review and negotiate their publishing agreements, and to rely on the contractual terms that hold publishers accountable to their promises.

Let’s take this opportunity to quickly remind ourselves of a couple of less-discussed contractual terms that may in fact be too important to ignore.

1. “…media now known and may be developed in the future”

The harm plaintiffs are claiming, in this case, is a whopping 25% to 35% drop in royalties when works are published on McGraw Hill’s online platform. Although this case only arose out of the electronic rights of textbooks, it reminds us how the advent of new technology could easily undermine instead of boost the income of authors.

Barely a decade ago, most experts of the publishing industry believed that the economics of e-book publishing were more favorable to publishers, as e-books are cheaper to produce than print books. As a result, authors should expect to receive a much larger share of the revenue—well above the typical 10-15% of the retail price for trade books.

The Flynn case confirms many authors’ suspicion that authors may not necessarily share in the financial boon brought by new technologies. It is thus important for authors to be wary of a broad copyright license that allows all future technology for disseminating the authors’ works. 

It’s worth reviewing terms that address the publisher’s ability to license your works in specific contexts, including digital platforms and emerging technology that are not named. Instead of “media now known and may be developed in the future,” authors should consider limiting the publication of their works to specific, enumerated media, such as print books or ebooks. Failing that, authors should propose alternative terms that could safeguard their interests, such as a clause that allows for rights reversion if royalties fall below a certain level.

2. Royalty Audit

A common feature of publishing contracts is a clause that allows authors to audit the publisher’s accounting. While it may not seem like a top priority at first glance, authors should absolutely take advantage of this provision if it’s included in their agreement. An audit right provides authors with the legal right to review the publisher’s financial records to verify whether they are being compensated fairly and according to the terms of the contract.

Authors in the Flynn case learned about the new royalties arrangement through an email from the publisher. It is of course important for authors to monitor any communications sent by their publishers. However, it is not certain that publishers will always disclose it when they adopt a new method of calculating royalties, and certainly not a given that their accounting never makes any mistake. When authors become suspicious of their publisher’s deductions or other financial practices, the ability to audit can be crucial. Publishers may make deductions or shift expenses that are not immediately obvious to authors based on the royalties they receive. An audit can help uncover if a publisher is deducting expenses that are unjustified (such as fees for maintaining online systems, as in this case). The audit right can be an essential tool for discovering accounting discrepancies and ensuring the publisher is acting in good faith.

As generative AI tools become more prevalent, many authors are concerned about how their works may be used for AI training without their knowledge or consent. It’s important to remember that not all contracts automatically grant publishers or other entities the right to license works for use in AI training. If you have retained sublicensing rights, or your publishing contract offers a broader definition of net receipts or profits, you could be entitled to the revenue your publishers earned from selling your works to train AI. 

Just as with traditional royalties, income from AI licensing should be distributed according to the terms of the contract. If you’re uncertain about whether you are getting fairly compensated, don’t hesitate to utilize the auditing right to request detailed information from your publisher.

Final Thoughts: Be Proactive and Stay Informed

At the heart of the Flynn v. McGraw Hill case is a breach of contract claim. The plaintiffs argue that McGraw Hill’s royalty deductions for maintaining its online system violated the terms of the agreement. Central to the argument is the publisher’s promise to ‘publish at its own expense.’ This case serves as a prime example of how important it is to scrutinize the details of a publishing agreement, where the devil often lies.

Many publishing agreements are complex and may contain clauses that, while seemingly minor, can have significant financial and creative consequences. It’s essential that authors take the time to review their contracts thoroughly, ideally consulting with colleagues and mentors who have more extensive experience with similar situations, to fully understand—at the very least—how their income will be calculated and what rights they are granting to the publisher.

Artist Left with Heavy Fees by Copyright Troll Law Firm

Posted October 11, 2024

Facts of the Case & Fair Use

On September 18, the 5th Circuit decided in Keck v. Mix Creative Learning Center that using copyrighted artwork to teach children how to make art in a similar style does not constitute copyright infringement. The case adds to the well-developed jurisprudence that teaching with copyrighted materials is often protected by fair use.

This case was initially filed in 2021 by plaintiff’s counsel, Mathew Kidman Higbee, a known and prolific copyright litigation firm sometimes accused of troll-like behavior.  During the pandemic, the defendant sold a total of six art kits (out of the six kits sold, two were purchased by the plaintiff) that included images of the plaintiff’s dog-themed artworks, biographical information, and details on her artistic styles. Additionally, the kit included paint, paintbrushes, and collage paper. The plaintiff’s side argued that including the artworks in teaching kits constituted willful copyright infringement and therefore demanded $900,000 in damages—to make up for the $250 the defendant made in sales. 

The district court dismissed all infringement claims in 2022; and last month, the 5th Circuit court affirmed that including copies of plaintiff’s artwork in a teaching kit is fair use. 

The courts found the first and fourth fair use factors to favor the defendant. Under the first factor, even though the defendant’s use was commercial in nature, by accompanying the artworks with art theory and history, the teaching kit transformed the original decorative purpose of the dog-themed artworks. The 5th Circuit distinguished this case from Warhol by pointing out that, in the Warhol case, the infringing use served the same illustrative purpose as the original work, while in this case, “the art kits had educational objectives, while the original works had aesthetic or decorative objectives.”  

Under the fourth factor, courts explained that they cannot imagine how the market value of plaintiff’s dog-themed artworks could decrease when included in children’s art lesson kits. The 5th Circuit Court further pointed out that there was no evidence that a market for licensing artworks for similar teaching kits exists now or is ever likely to develop. 

Because these “two most important” factors favored the defendant, the defendant’s use was fair use.

Fee Shifting: Plaintiffs Beware of Copyright Troll Law Firms!

The final outcome of the case: the plaintiff was ordered to cover $102,404 in fees and $165.72 in costs for the defendant.

Even though we are happy for the defendant and her counsel that, after a prolonged legal battle, this well-deserved victory is finally won, it is nevertheless disheartening to see the plaintiff-artist left alone in the end to face the high legal fees of this ill-conceived lawsuit. The plaintiff’s counsel not only failed to advise the plaintiff to act in her own best interest (whether it is to settle the case at the right moment or to pursue more plausible claims), but also conjured up willful infringement claims that were clearly meritless to any trained eye. Even the 5th Circuit Court lamented over this in its opinion, as it begrudgingly upheld the district court’s decision based on the abuse of discretion standard it must follow:

It is troubling that Keck alone will be liable for the high fees incurred by Defendants largely because of Higbee & Associates’ overly aggressive litigation strategy. From our review of the record, the law firm lacked a firm evidentiary basis to pursue hundreds of thousands of dollars in statutory damages against Defendants for willful infringement. Nevertheless, we cannot say, on an abuse of discretion standard, that the district court erred by determining that there was insufficient evidence that the firm’s conduct was both unreasonable and vexatious. … But we warn Higbee & Associates that future conduct of this nature may well warrant sanctions, and nothing in this opinion prevents Higbee & Associates from compensating its client, if appropriate, for the fees that she is now obliged to pay Defendants.

This should serve as a cautionary tale for would-be plaintiffs: copyright lawsuits, like any other type of litigation, are primarily meant to address the damages plaintiffs actually suffered, and the final settlement should make plaintiffs whole again—that is, as if no infringement has ever occurred. Copyright lawsuits (or the threat to sue) should not be undertaken as a way to create brand new income streams, such as was the case in the lawsuit described above. 

When someone aggressively enforces dubious copyright claims with the sole purpose of collecting exorbitant fees rather than protecting any underlying copyrights, they are called a “copyright troll.” Regrettably, beyond the disreputable law firms that are enthused to pursue aggressive claims, many services now exist to tempt creators into troll-like behavior by promising “new licensing income.” The true aim of these services is solely to collect high representation charges from creators, when users of the creators’ works are harassed into paying exorbitant settlements. Many victims often agree to pay just for the nuisance to stop. This predatory business model has been repeatedly exposed by creators and authors, including famously by Cory Doctorow. 

Needless to say, copyright trolls are harmful to the copyright ecosystem. Obviously, innocent users are harmed when slapped with unreasonable demand letters or even frivolous lawsuits. Worse, creators are misled into supporting this unethical practice while deluded into believing they are doggedly following the spirit of the law—sometimes, as was in this case, they are left to face the inevitable consequences of bringing a frivolous lawsuit, while the lawyer or agent that originally led them into the mire gets off free, upward and onward to their next “representation.” 

It was very unfortunate that the district court did not fully study the plaintiff’s counsel’s track record and issue appropriate disciplinary orders against him. The problem of copyright trolls will have to be addressed soon in order to preserve a healthy copyright system. 

What is “Derivative Work” in the Digital Age?

Posted October 7, 2024
on the top, Seltzer v. Green Day; on the bottom, Kienitz v. Sconnie Nation

Part I: The Problem with “Derivative Work”

The right to prepare derivative works is one of the exclusive rights copyright holders have under §106 of the Copyright Act. Other copyright holders’ exclusive rights include the right to make and distribute copies, and to display or perform a work publicly. 

Lately, we’ve seen a congeries of novel conceptions about “derivative works.” For example, a reader of our blog stated that when looking at AI models and AI outputs, works should be considered infringing “derivatives” even when there is no substantial similarity between the infringing AI model/outputs and the ingested originals. Even in the courts, we’ve seen confusion, for example, Hachette v. Internet Archive presented us with the following statement about derivative works:

Changing the medium of a work is a derivative use rather than a transformative one. . . . In fact, we have characterized this exact use―“the recasting of a novel as an e-book”―as a “paradigmatic” example of a derivative work. [citation omitted; emphasis added]

These statements leave one to wonder—what is a copy, a derivative work, an infringing use, and a transformative fair use in the context of U.S. copyright law? In order to have some clarity on these questions, it’s helpful to juxtapose “derivative works” first with “copies” and then with “transformative uses.” We think the confusion about derivative work and its related concepts arises out of using the phrase to mean “a work that is substantially similar to the original work” as well as “a work that is so in an unauthorized way, not excused from liabilities.”

There are many immediate real world implications for confusion over the meaning of “derivative work.” In privately negotiated agreements, licensees who have a right to make reproductions but not derivative works may be confused as to what medium their use is restricted to. For example, a publisher of a book with a license that allows it to make reproductions but not derivatives might be confused as to whether, under the Hachette court’s reasoning, it is allowed to republish a print book in a digital format such as a simple PDF of a scan. Similarly, for public licenses, such as the CC ND licenses, where a licensor stipulates restriction on the creation of derivative works, it causes confusion for downstream users whether, say, changing a pdf into a Word document is allowed. 

This is also an important topic to explore both in the recent hot debates over Controlled Digital Lending and generative artificial intelligence, as well as in an author’s everyday work—for instance, would quoting someone else’s work make your article/book a derivative work of the original? 

Part II: “Copies” and “Derivatives”

Our basic understanding of derivative works comes from the 1976 Copyright Act. The §101 definition tells us:

A “derivative work” is a work based upon one or more preexisting works, such as a translation, musical arrangement, dramatization, fictionalization, motion picture version, sound recording, art reproduction, abridgment, condensation, or any other form in which a work may be recast, transformed, or adapted. A work consisting of editorial revisions, annotations, elaborations, or other modifications which, as a whole, represent an original work of authorship, is a “derivative work”.

The U.S. Copyright Office published Circular 14 gives some further helpful guidance as to what a §106 derivative work would look like:

To be copyrightable, a derivative work must incorporate some or all of a preexisting “work” and add new original copyrightable authorship to that work. The derivative work right is often referred to as the adaptation right. The following are examples of the many different types of derivative works: 

  • A motion picture based on a play or novel 
  • A translation of an novel written in English into another language
  • A revision of a previously published book 
  • A sculpture based on a drawing 
  • A drawing based on a photograph 
  • A lithograph based on a painting 
  • A drama about John Doe based on the letters and journal entries of John Doe 
  • A musical arrangement of a preexisting musical work 
  • A new version of an existing computer program 
  • An adaptation of a dramatic work 
  • A revision of a website

One immediate observation that can be made from reading these, is that “ebook” or “digitized version of a work” is not listed as, nor similar to any of the exemplary derivative works in the Copyright Act or the Copyright Office Circular. By contrast, “ebook” or “digitized version of a work” seems to fit much better under the § 101 definition of “copies”:

“Copies” are material objects, other than phonorecords, in which a work is fixed by any method now known or later developed, and from which the work can be perceived, reproduced, or otherwise communicated, either directly or with the aid of a machine or device. The term “copies” includes the material object, other than a phonorecord, in which the work is first fixed.

The most crucial difference between a “copy” and a “derivative work” is whether new authorship is added. If no new authorship is added, merely changing the material that the work is fixed on does not create a new copyrightable derivative work. This, in fact, is observed by many courts before Hachette. For example, in Corel v. Bridgeman Art Gallery, the court unequivocally held that there is no new copyright granted to photos of public domain paintings. 

Additionally, as we know from Feist v. Rural Tel., “[t]he mere fact that a work is copyrighted does not mean that every element of the work may be protected.” Copyright protection is only limited to the original elements of a work. We cannot call a work “derivative” of another if it does not incorporate any copyrightable elements from the original copyrighted work. For example, the “Game Genie” device, which let players change elements of a Nintendo game, was not found to be a derivative work by the court because it didn’t incorporate any part of the Nintendo game. 

It is clear from this examination that sometimes a later-created work is a copy, sometimes a derivative, and sometimes it may not implicate any of the exclusive rights of the original.

Part III: “Derivative” and “Transformative” Works

Let’s quickly recap the context in which courts are confusing “derivative” and “transformative” works—

A prima facie case of copyright infringement requires the copyright holder to prove (1) ownership of a valid copyright, and (2) inappropriate copying of original elements. We will not go into more details here, but essentially, the inappropriate copying prong requires plaintiffs to assert and prove defendant’s access to the plaintiff’s work as well as a level of similarity between the works in question that shows improper appropriation of the plaintiff’s work. If the similarity between the defendant’s work and protectable elements in the plaintiff’s work is minimal, then there is no infringement. As seen in the  “Game Genie” example above, courts can rely on substantial similarity analysis to determine whether a work is indeed a potentially-infringing copy or derivative of the plaintiff’s work.

Once the plaintiff establishes a prima facie infringement case—e.g., the defendant’s work is shown to be a derivative or a copy of the plaintiff’s registered work—the defendant may still nevertheless be free to make the use if the use falls outside the ambit of the copyright holder’s §106 rights, such as uses that are fair use. Whether a work is a derivative work under § 106 is no longer a relevant inquiry after establishing a prima facie case: this point is starkly obvious when looking at the many plausible defenses a defendant can raise (including fair use) where even the verbatim copying of a work is authorized by law. 

As the court stated in Authors Guild v. Hathitrust, “there are important limits to an author’s rights to control original and derivative works. One such limit is the doctrine of ‘fair use,’ which allows the public to draw upon copyrighted materials without the permission of the copyright holder in certain circumstances.” When a prima facie infringement case is already established, yet a court still discusses whether the defendant’s work is a “derivative work,” at a minimum, the court adds confusion by beyond the § 101  definition of a derivative work. 

In fact, a distinct new significance is being given to “derivative work” in recent years in the context of the “purpose and character” factor of fair use, specifically, when analyzing if a use has a transformative purpose. The shift in a word’s meaning or a concept is not per se unimaginable or objectionable. It is misguided to consider the copyright legal landscape static. As law professor Pamela Samuelson pointed out, before the mid-19th century, most courts did not even think copyright holders were entitled to demand compensation from others preparing derivative works. The 1976 Copyright Act finally codified copyright holders’ exclusive right to prepare derivative works. And, now, some rights holders want the courts to say there are categorical derivative uses that can never be considered fair use.

The Hachette court is among those that have unfortunately bought into this novel approach. The court seems not only to misconstrue the salient distinction between a ‘copy of a work’ and a ‘derivative work’, they appear to give heightened protections to works they now define as ‘derivative’. If this misconception becomes widespread, we will be living in a world where if a use is new-derivative, then it is never transformative (and, if it is not transformative, it is likely not fair). Ultimately, it is purely circular for a court to say that the reason for denying the fair use defense is that the use is derivative. When we buy into this setup of “derivative v.s. transformative,” it is difficult to ever say with confidence that a work is transformative, because at the same time we remember how a transformative use should often fit in the actual definition of derivative work under § 101, “derivative”—just like the Green Day rendition of the plaintiff’s art in Seltzer v. Green Day.  

Clearly, if we take “derivative work” at its true § 101 definition, out of all potentially infringing works, “transformative fair use” is not an absolute complement, but a possible subset, of derivative works. We know from Campbell v. Acuff-Rose that “transformativeness is a matter of degree, not a binary;” whereas no such sliding scale is plausible for derivative works. A work is either a derivative or it is not: there’s never a “somewhat derivative” work in copyright. All in all, it makes little sense to frame the issues as “transformative v.s. derivative work”—such discussions inevitably buy into the rhetorics of copyright expansionists. We have already warned the court in Warhol against the danger of speaking heedlessly about derivative works in the context of fair use. We must ensure that the “derivative v.s. transformative” dichotomy does not come to dominate future discussions of fair use, so that we conserve the utility and clarity of the fair use doctrine.

The expansion of the relevance of “derivative work” beyond the establishment of a prima facie infringement case not only creates a circular reasoning for denying fair use, but also makes it impossible to make sense of the case law we have accumulated on fair use. Take Seltzer v. Green Day for example, the court held that a work can be transformative even if that work “makes few physical changes to the original.” The Green Day concert background art with a red cross superimposed was found to be a fair use of the original street art—a classic example of how a prima facie infringing derivative work can nevertheless be a transformative, and thus fair, use. Similarly, in Kienitz v. Sconnie Nation, a derivative use of a photo on a tshirt was found to be a fair use. Ideas and concepts, including “derivative works,” are only important to the extent they elucidate our understanding of the world. When the use of “derivative works” leads to more confusion than clarity, we should be cautious in adopting the new meaning being superimposed on “derivative works.”

The AI Copyright Hype: Legal Claims That Didn’t Hold Up

Posted September 3, 2024

Over the past year, two dozen AI-related lawsuits and their myriad infringement claims have been winding their way through the court system. None have yet reached a jury trial. While we all anxiously await court rulings that can inform our future interaction with generative AI models, in the past few weeks, we are suddenly flooded by news reports with titles such as “US Artists Score Victory in Landmark AI Copyright Case,” “Artists Land a Win in Class Action Lawsuit Against A.I. Companies,” “Artists Score Major Win in Copyright Case Against AI Art Generators”—and the list goes on. The exuberant mood in these headlines mirror the enthusiasm of people actually involved in this particular case (Andersen v. Stability AI). The plaintiffs’ lawyer calls the court’s decision “a significant step forward for the case.” “We won BIG,” writes the plaintiff on X. 

In this blog post, we’ll explore the reality behind these headlines and statements. The “BIG” win in fact describes a portion of the plaintiffs’ claims surviving a pretrial motion to dismiss. If you are already familiar with the motion to dismiss per Federal Rules of Civil Procedure Rule 12(b)(6), please refer to Part II to find out what types of claims have been dismissed early on in the AI lawsuits. 

Part I: What is a motion to dismiss?

In the AI lawsuits filed over the last year, the majority of the plaintiffs’ claims have struggled to survive pretrial motions to dismiss. That may lead one to believe that claims made by plaintiffs are scrutinized harshly at this stage. But that is far from the truth. In fact, when looking at the broader legal landscape beyond the AI lawsuits, Rule 12(b)(6) motions are rarely successful.

In order to survive a Rule 12(b)(6) motion to dismiss filed by AI companies, plaintiffs in these lawsuits must make “plausible” claims in their complaint. At this stage, the court will assume that all of the factual allegations made by the plaintiffs are true and interpret everything in a way most favorable to plaintiffs. This allows the court to focus on the key legal questions without getting caught up in disputes about facts. When courts look at plaintiffs’ factual claims in the best possible light, if the defendant AI companies’ liability can plausibly be inferred based on facts stated by plaintiffs, then the claims will survive a motion to dismiss. Notably, the most important issues at the core of these AI lawsuits—namely, whether there has been direct copyright infringement and what may count as a fair use—are rarely decided at this stage, because these claims raise questions about facts as well as the law. 

On the other hand, if the AI companies will prevail as a matter of law even when the plaintiffs’ well-pleaded claims are taken as entirely true, then the plaintiffs’ claims will be dismissed by court. Merely stating that it is possible that the AI companies have done something unlawful, for instance, will not survive a motion to dismiss; there must be some reasonable expectation that evidence can be found later during discovery to support the plaintiffs’ claims. 

Procedurally, when a claim is dismissed, the court will often allow the plaintiffs to amend their complaint. That is exactly what happened with Andersen v. Stability AI (the case mentioned at the beginning of this blog post): the plaintiffs’ claims were first dismissed in October last year, and the court allowed the plaintiffs to amend their complaint to address the deficiencies in their allegations. The newly amended complaint contains infringement claims that survived new motions to dismiss, as well as other breach of contract, unjust enrichment, and DMCA claims that again were dismissed.

As you may have guessed, including something like the “motion to dismiss” in our court system can help save time and money, so parties don’t waste precious resources on meritless claims at trial. One judge dismissed a case against OpenAI earlier this year, stating that “the plaintiffs need to understand that they are in a court of law, not a town hall meeting.” The takeaway: plaintiffs need to bring claims that can plausibly entitle them to relief.

Part II: What claims are dismissed so far?

Most of the AI lawsuits are still at an early stage, and most of the court rulings we have seen so far are in response to the defendants’ motions to dismiss. From these rulings, we have learned which claims are viewed as meritless by courts. 

The removal of copyright management information (“CMI,” which includes information such as the title, the copyright holder, and other identifying information in a copyright notice) is a claim included in almost all plaintiffs’ complaints in the AI lawsuits, and this claim has failed to survive motions to dismiss without exception. DMCA Section 1202(b) restricts the intentional, unauthorized removal of CMI. Experts initially considered DMCA 1202(b) one of the biggest hurdles for non-licensed AI training. But courts so far have dismissed all DMCA 1202(b) claims, including in J. Doe 1 v. GitHub, Tremblay v. OpenAI, Andersen v. Stability AI, Kadrey v. Meta Platforms, and Silverman v. OpenAI. The plaintiffs’ DMCA Section 1202(b)(1) claims have failed because plaintiffs were not able to offer any evidence showing their CMI has been intentionally removed by the AI companies. For example, in Tremblay v. OpenAI and Silverman v. OpenAI, the courts held that the plaintiffs did not argue plausibly that OpenAI has intentionally removed CMI when ingesting plaintiffs’ works for training. Additionally, plaintiffs’ DMCA Section 1202(b)(3) have failed thus far because the plaintiffs’ claims did not fulfill the identicality requirement. For example, in J. Doe 1 v. GitHub, the court pointed out that Copilot’s output did not tend to represent verbatim copies of the original ingested code. We now see plaintiffs voluntarily dropping the DMCA claims in their amended complaints, such as in Leovy v Google (formerly J.L. vs Alphabet). 

Another claim that has been consistently dismissed by courts is that AI models are infringing derivative works of the training materials. The law defines a derivative work as “a work based upon one or more preexisting works, such as a translation, musical arrangement, … art reproduction, abridgment, condensation, or any other form in which a work may be recast, transformed, or adapted.” To most of us, the idea that the model itself (as opposed to, say, outputs generated by the model) can be considered a derivative work seems to be a stretch. The courts have so far agreed. On November 20, 2023, the court in Kadrey v. Meta Platforms said it is “nonsensical” to consider an AI model a derivative work of a book just because the book is used for training. 

Similarly, claims that all AI outputs should be automatically considered infringing derivative works have been dismissed by courts, because the claims cannot point to specific evidence that an instance of output is substantially similar to an ingested work. In Andersen v. Stability AI, plaintiffs tried to argue “that all elements of [] Anderson’s copyrighted works [] were copied wholesale as Training Images and therefore the Output Images are necessarily derivative;” the court dismissed the argument because—besides the fact that plaintiffs are unlikely able to show substantial similarity—“it is simply not plausible that every Training Image used to train Stable Diffusion was copyrighted [] or that all [] Output Images rely upon (theoretically) copyrighted Training Images and therefore all Output images are derivative images. … [The argument for dismissing these claims is strong] especially in light of plaintiffs’ admission that Output Images are unlikely to look like the Training Images.”

Several of these AI cases have raised claims of vicarious liability—that is, liability for the service provider based on the actions of others, such as users of the AI models. Because a vicarious infringement claim must be based on a showing of direct infringement, the vicarious infringement claims are also dismissed in Tremblay v. OpenAI and Silverman v. OpenAI, when plaintiffs cannot point to any infringing similarity between AI output and the ingested books.

Many plaintiffs have also raised a number of non-copyright, state law claims (such as negligence or unfair competition) that have largely been dismissed based on copyright preemption. Copyright preemption prevents duplicitous state law claims when those state law claims are based on an exercise of rights that are equivalent to those provided for under the federal Copyright Act. In Andersen v. Stability AI, for example, the court dismissed the plaintiffs’ unjust enrichment claim because the plaintiffs failed to add any new elements that would distinguish their claim based on California’s Unfair Competition Law or common law from rights under the Copyright Act.

It is interesting to note that many of the dismissed claims in different AI lawsuits closely mimic one another, such as in Kadrey v. Meta Platforms, Andersen v. Stability AI, Tremblay v. OpenAI, and Silverman v. OpenAI. It turns out that the similarities are no coincidence—all these lawsuits are filed by the same law firm. These mass-produced complaints not only contain overbroad claims that are prone to dismissal, they also have overbroad class designations. In the next blog post, we will delve deeper into the class action aspect of the AI lawsuits.