AI-generated content will be a game changer for experts when assessing economic damages claims in IP infringement cases

An Intellectual Property (IP) lawsuit filed against Microsoft may determine the future of economic damages where AI is at the center of IP infringement cases. The lawsuit, filed by a group of individuals and small businesses, alleges that Microsoft and its partners used open source code from GitHUb and other sources without permission or compensation, in non-compliance with user agreements and in violation of IP laws.
 
At the core of the lawsuit is the claim that Microsoft and its partners developed AI that uses code and data sets that were created by others, without obtaining the necessary licenses or permissions to do so. The plaintiffs argue that this constitutes copyright infringement and misappropriation of trade secrets, and that it has resulted in unfair competition and economic harm to their businesses.
 
Microsoft has denied the allegations stating that it did not use any code or data sets without permission, and that it has taken steps to ensure that its AI technology is developed in a responsible and ethical manner.
 
If the plaintiffs are successful, it could lead to changes in how AI technology is developed and licensed. It could also open the door to similar lawsuits against other companies that are using AI technology to develop their products and services, bringing new challenges to the IP legal framework.
 
Conversely, if Microsoft is successful, it could indicate that the current legal framework for IP is sufficient to handle the unique challenges presented by AI technology.
 
In March 2023, the U.S. Copyright Office issued guidance regarding the registration of works that contain material generated by AI technology. According to the Copyright Office, works generated by AI technology, without any human involvement in the creative process, are not eligible for copyright protection.
 
However, if the work contains a sufficient amount of original creative expression by a human author, it may be eligible for copyright protection, even if AI technology was used in the creation of the work. In such cases, the human author would be considered the copyright owner and would be responsible for registering the work with the Copyright Office.
 
The U.S. Copyright Office’s guidance arises on the back of Kristina Kashtanova’s case. Kashtanova used a text-to-image AI system to create illustrations for a comic book, going through thousands of descriptive prompts to create the images she envisioned.
 
However, the U.S. Copyright office canceled Kashtanova’s registration for the book and issued a new registration covering only the text and compilation of images in the work. Kashtanova's case highlights the fact that AI technology raises complex legal questions that have yet to be addressed by copyright law. For example, who owns the copyright in works created by AI technology? Can AI-generated works be considered original and creative enough to warrant copyright protection? These questions become even more complicated when multiple parties are involved in the creation of a work. Who and which party/parties can be held liable for the infringement?
 
Another challenging issue that arises in the context of IP infringement by AI-generated content is that of claims for economic damages. The rise of AI-generated content has created a host of complex challenges for experts when it comes to assessing economic damages claims, especially when having to determine the value of the content in issue and the economic harm caused by its unauthorized use.
 
Assuming that a copyright owner can establish copyright infringement, they would need to demonstrate that they have suffered damages as a result of the infringement. This may include lost profits, damage to reputation, and other economic and non-economic harms.
 
Economic damages claims in copyright infringement cases are usually based on the market value of the infringing content. However, this approach may not be suitable and reliable for AI-generated content, which may have no market value or may be difficult to value because of its unique and often unpredictable nature.
 
To address this challenge, experts may need to develop new methodologies for determining economic damages claims in cases involving AI-generated content. For example, they may need to consider factors such as the resources and effort required to create the content, the potential revenue or cost savings that could be realized through its use, and the extent to which the unauthorized use of the content harms the creator's reputation or competitive position.
 
 
The rise of AI-generated content is likely to be a game changer for accounting experts and other professionals involved in the assessment and valuation of economic damages claims in cases of IP infringement. It will require new approaches and methodologies to accurately value and assess the economic harm caused by the unauthorized use of this content, and will likely involve close collaboration between legal, technical, accounting and tech experts to develop effective solutions.
 
Additionally, the courts will need to assess the specific circumstances of each case to determine the appropriate method for calculating economic damages. Having regard to all of these issues and challenges, there is clearly a need for legislation and guidelines on AI-generated works in copyright and other IP infringement cases.
 
Moreover, it is critical for companies and individuals to be aware of the legal implications of using AI technology and to take steps to protect their IP rights.
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