Will intellectual property insurance become crucial with the rise of artificial intelligence?

A question has started to crop up from early adopters of artificial intelligence in UK business, particularly those who produce and design anything lasting. 

In the last few weeks, I have had the question, “Will I be covered if I unknowingly infringe upon someone else’s intellectual property (IP) because of the use of AI in our development processes?”

This is particularly pertinent for businesses that might develop coding, or product designs which are publicly available. We saw a spate of something similar in recent years, when companies were using photographs of clothing designs that were publicly available online.

Tesco apologises over student image used on clothes - BBC News

It’s evident that the availability of widespread sources online (especially for generative AI), and often unchecked systems to produce new and original products or content, have hit a challenging crossroads. I remember the example above which occurred in 2012, and thought ‘How could Tesco, a massive organisation, have such a calamity on a product which must have gone through several pairs of hands before production?’.

While I find myself wondering what organisations are thinking when they do   something like this, there are further questions that come to mind:

• How far can large organisations push the boundaries of fair use?
• Do claimants have the resources and expertise to challenge the user?
• Will the original producer ever find out?
• And, is the original producer motivated enough to take action against the user?

Why is the problem different now?

The development of AI has changed the game, because it’s not typically just large organisations that are using these resources to aid with their production and creative processes. It’s everyone.

This means that large organisations might be more likely to pursue smaller organisations for the use of their own intellectual property. Or worse, all businesses  turn on each other with legal cases against the use of some intellectual property, which the defendant might have no idea they have infringed upon.

Fortunately, there is already some legal precedent for these cases. 

“Google successfully defended itself against a lawsuit by arguing that transformative use allowed for the scraping of text from books to create its search engine, and for the time being, this decision remains precedential.” – Harvard Business Review

https://hbr.org/2023/04/generative-ai-has-an-intellectual-property-problem 

The precedent  may be good news for users of IP, because it could mean that AI use follows a similar route and that the fair use doctrine would mean that derivative work of copyright-free sources would have defence against litigation. However, AI could also set its own precedent. 

Many of the market-leading AI platforms have tended to use copyright-free sources to build out their data lakes and therefore should have derivative works clear of fair use.

However, there have been breaches of fair use, with certain AI platforms falling foul of Getty Images rights, for example.

What does insurance have to do with this?

In the midst of all of this, I will firmly state  that IP insurance has its place within many businesses who design and produce goods, or even software, so there’s nothing new there. However, my belief that the AI revolution will really change the landscape both for litigation and for IP infringement – as well as for original content creators (particularly larger organisations such as Getty Images). 

With more publicity in this sector, it’s likely that there will be a significant focus on the opportunity to act against others who may have used works to create something derivative. The risk will increase both with the frequency of IP litigation, and with the unknown precedent set for AI property infringement/fair use/authorised derivative works.

There is currently an ongoing court battle, debating this topic, which has not yet been ruled upon: Andersen v. Stability AI et al.

However, this is nuanced because it’s suggested that the AI company encouraged users to produce materials in the style of artists and generated income purely based on their ability to infringe upon their artistic style. 

As always, there is so much subtle distinction with these cases, and there will certainly be a firmer line drawn at some point pertaining to infringement law and AI. Until this becomes a reality, the ambiguity is a risk for many businesses already entrenched with AI usage, and no-one wants a piece of mail to drop through their letterbox or into their inbox with a cease and desist for selling a critical product which cost hours of development time and is a key revenue point for the business.

Intellectual Property insurance cover does a lot of the heavy lifting for you and, depending on the types of cover you take, it can help with defending your use of IP or even help with the pursuit of others infringing upon your IP. This is important for things like legal expenses or damages awarded, especially where your revenue sources might be diminished by embargoes to sell your ‘at risk’ products.

This is particularly helpful with AI because many people could be subject to receiving threats of legal pursuit for unknowingly utilising licensed intellectual property through generative AI. 

As always, the insurance side comes down to a couple of things – frequency and severity. The frequency of IP litigation, I believe, will increase over the next few years, because of the media attention brought about by generative AI. The severity is currently unknown for damages awards (but will inherently be linked to the profits made by businesses found guilty of the infringement) and potentially could be massive when there’s currently no precedent set. Meanwhile, businesses are potentially making money unknowingly and unlawfully based upon derivative unfair usage from AI data lakes unbound by legal precedent. 

The other factor to consider is legal costs (and time), which in any form of litigation can be arduous and expensive. IP cover could be a key component of your insurance portfolio to protect your business from unknowingly exposing your business to unfair usage claims for IP.

If you’d like to learn more about how to protect your IP in the era of AI, speak to our team via the buttons below to find out more.