Copyright Office Guidance Regarding Artificial Intelligence

Understanding copyright law in the age of artificial intelligence can be complex and confusing.  And it will continue to be complex and confusing.  But on March 16, 2023, the United States Copyright Office (the “Office”) published some guidance regarding its plans to handle copyright registration for works containing AI-generated materials.  The Office also intends to seek public input this year on additional topics, including how the law should apply to the use of copyrighted works in AI training.

The Office has identified three main questions to consider: (1) Is the output protectable under copyright? (2) Are generative works with human authorship elements eligible for registration? (3) What information should be disclosed to the Office when registering?

It is well-established that copyright can protect only material that is the product of human creativity. Most fundamentally, the term “author,” which is used in both the Constitution and the Copyright Act, excludes non-humans.

While the Office will examine works with AI-generated materials on a case-by-case basis, they have emphasized that the traditional human authorship requirement still stands. If a work’s authorship elements were produced entirely by a machine, without any human creative input, then the Office will not register it. However, if a human had creative control over the work’s expression and actually formed the traditional elements for an original work of creative authorship, then the work may be eligible for registration.

In the case of works containing AI-generated material, the Office will consider whether the AI contributions are the result of “mechanical reproduction” or if the human author gave visible form to their “own original mental conception.” In other words,  the extent of human creative control over the work’s expression will be a determining factor.  The Office provides this example:

[W]hen an AI technology receives solely a prompt from a human and produces complex written, visual, or musical works in response, the “traditional elements of authorship” are determined and executed by the technology—not the human user. Based on the Office’s understanding of the generative AI technologies currently available, users do not exercise ultimate creative control over how such systems interpret prompts and generate material. Instead, these prompts function more like instructions to a commissioned artist—they identify what the prompter wishes to have depicted, but the machine determines how those instructions are implemented in its output. […] When an AI technology determines the expressive elements of its output, the generated material is not the product of human authorship. As a result, that material is not protected by copyright and must be disclaimed in a registration application.

The Office also stresses that applicants have a duty to disclose any AI-generated content contained within their work. They advise applicants to use the “Limitation of Claim” section to exclude AI-generated content that is significant, more than “de minimis.” If an applicant is unsure, they can disclose as a general statement and the Office will contact them for more information.

Notably, previously registered works with AI-generated content must be updated. If a registration is found to contain AI-generated materials that were not previously disclosed, it may be cancelled.

*The author generated this text in part with Chat-GPT, OpenAI’s large-scale language-generation model. Upon generating draft language, the author reviewed, edited, and revised the language to conform to his own preferences and style and takes ultimate responsibility for the content of this publication

Critical Terms for Intellectual Property License Agreements (Part 2)

An audit provision is a clause in an intellectual property license agreement that provides the right for the licensee (the party receiving the license) or the licensor (the party granting the license) to inspect the records of the other party to verify compliance with the terms of the agreement. This provision is included in intellectual property license agreements to ensure that both parties are complying with the terms of the agreement.

One common reason for an audit is to ensure that the licensee is paying the correct royalty fee. The license agreement will typically specify the amount of royalties that the licensee must pay for the use of the intellectual property. An audit provision gives the licensor the right to inspect the licensee’s records to ensure that the correct royalty fees are being paid. This helps to prevent the licensee from underreporting the amount of royalties owed, which would be a breach of the agreement.

Another reason for an audit is to ensure that the licensee is using the intellectual property in accordance with the terms of the license agreement. For example, if the license agreement restricts the use of the intellectual property to a certain geographic area or market segment, an audit provision can help to ensure that the licensee is not using the intellectual property outside that area. This helps to prevent unauthorized use of the intellectual property.

In addition to protecting the interests of both parties, an audit provision can also help to avoid disputes that may arise under the license agreement. For example, if the licensee disputes the amount of royalties owed, an audit provides a legal right for licensee to review royalty reporting without resorting to a lawsuit. Similarly, if the licensor believes that the licensee is using the intellectual property outside the terms of the agreement, an audit can provide evidence about whether or not a violation is occurring.

It is also important to consider limitations on the use of the audit provision. For example, the audit provision may specify that audits can only be conducted during business hours and with reasonable advance notice. Additionally, the frequency of audits may be limited to prevent excessive intrusion into the licensee’s business.

An audit provision is another critical component of an intellectual property license agreement. It provides a means for verifying compliance with the terms of the agreement, resolving disputes, and preventing unauthorized use of the intellectual property. The inclusion of an audit provision in an intellectual property license agreement helps to protect the interests of both parties and ensures that the license agreement is properly enforced.

Critical Terms for Intellectual Property License Agreements (Part 1)

Intellectual property (“IP”) license agreements come in many shapes and flavors.  But all IP licenses boil down to one party giving another party permission to use some IP.

IP may include patents, trademarks, copyrights, trade secrets, and rights of publicity.  Some license agreements cover one type of IP like a single trademark, or copyrights for a single song, or maybe a single valuable data set.  But often a single license agreement covers multiple types of IP.

Because each type of intellectual property differs from other types, agreements covering multiple types of IP require different contract provisions.  A trade secret license requires airtight confidentiality terms, for example, while a typical copyright license may not.  So it’s a good idea to hire an experienced IP lawyer to make sure the contract handles each type of IP correctly.  Regardless of the subject IP, well-drafted IP license agreements address certain critical terms.  This series of blog posts will discuss critical considerations for all IP license agreements.

First, all IP license agreements must identify the correct parties.

Although this might seem obvious, it is worth confirming that key parties are correctly identified, consistent with the purpose of the license.  Licensor grants the rights — so does the identified licensor really own or have the right to license all the IP in the agreement?  Or is some of the IP legally owned by someone else?  Should a subsidiary or other party be licensing this IP instead?  It is critical to confirm the IP owner and understand licensor’s chain of title before entering the agreement.  If a licensor cannot legally license the intended IP, the entire deal could collapse.

Conversely, is the licensee (the one receiving the rights) the correct party to be granted the license?  Or should there be a different licensee?  Sometimes additional parties need to use the licensed IP, beyond the initial licensee, to realize the economic benefit of the deal.  But the parties negotiating the deal might not identify all those additional parties at the outset.  If the licensee has a family of related entities, subsidiaries, or key contractors, are they allowed to exercise the licensed rights too?

Typically, the licensee wants open sublicense rights, meaning the licensee can share the IP rights with other parties.  But the licensor wants control over parties who use the IP.  If the licensee and licensor are sharing profits, both parties may benefit from allowing other entities to use the rights, balancing licensor control with licensee’s right to easily sublicense.

If the parties don’t know all the entities that will need to use the rights, they can specify groups of acceptable sublicensees in advance, define what makes a sublicensee acceptable, or list other pre-approval criteria to qualify additional sublicensees.

Unless the agreement specifically prohibits it, basic contract law presumes that the parties can assign a contract to a third party.  Licensors typically want control over assignments, so they aren’t surprised by some new third party using their IP.  At the same time a licensee will want flexible assignability provisions to account for the possibility of reorganization, merger, or other transfers.

For more on IP licensing agreements, stay tuned for Part 2.

Writing Requirements for Copyright Transfers

By default, the author of an original work of creative authorship owns the copyright to that work upon creation.  And under Section 204 of the Copyright Act a transfer of copyright ownership is not valid unless it’s in writing.

That means, with some specific exceptions, an independent contractor who creates an original work of creative authorship fixed in any tangible medium of expression (e.g. written words, musical works, dramatic works, graphic works, pictures, designs, architectural drawings, sculptures, websites, software or computer code etc.) owns the copyright to that work unless a transfer of ownership has been agreed upon in writing.

If you’re an independent contractor, this can create substantial negotiating leverage during (or after) the course of a project because you own the copyright to the work until you sign it away.

If you’re hiring independent contractors, you probably want to ensure that your contractors have signed off to transfer copyright ownership. Otherwise you might find that you don’t actually own the creative work you thought you paid for.

We have seen both sides of it, even among sophisticated people: both contractors and businesses that hire them sometimes neglect the fundamental issue of copyright ownership when they agree to work together.  Clients have showed us invoices, email correspondence, text messages, detailed scopes of work, and even formal contracts with assertive language about payment timing, recordkeeping, portfolio rights, warranties, indemnification, and limitations of liability.  Yet they sometimes overlook the critical concept of copyright ownership of the work product.  It doesn’t need to be complicated — a simple one page contract (or a single boilerplate phrase) identifying and transferring the work can do the trick.

A few important notes and caveats:

A well-known exception to this writing requirement applies to copyrightable works prepared by an employee “within the scope of his or her employment” (not acting as an independent contractor).  Copyright ownership for such work automatically vests with the employer as “works made for hire.”  Critically, this exception requires (a) employment status and (b) acting within the scope of employment.  Employment status is often (but not always) fairly clear (think W-2, payroll).  But sometimes an employee’s scope of employment is not clear if it isn’t written down in their job description or employment contract.  Software code from a salaried computer programmer or an employee manual from a human resources director are clearly works within the scope of their employment — but what if those employees took photos for their employer’s website while on the clock?  Created logo designs?  It isn’t always clear whether or not creative works fall within an employee’s job description.  Whenever there’s doubt, it is safest to have a signed contract.

And we’re talking about copyright ownership here, which is different from permission to use the copyright (also known as a license).  Oregon sits within the 9th Circuit where courts can find an implied license under the right circumstance, where permission to use the materials is understood although ownership does not transfer.  But relying on such implied licenses is risky and uncertain because the parameters of implied licenses aren’t always clear.  How long does the license last?  Does it cover all types of uses of the work?  Is it transferrable?  Can the license be terminated?  Without a clear written understanding, material disagreements can develop later.  So despite the possibility of implied licenses, it is best to have a written document in place, even a short one, to ensure that everyone understands who owns the copyright.