California Court Issues Mixed Order in Pivotal AI Copyright Case

On Monday, the U.S. District Court for the Northern District of California filed an order granting in part and denying in part motions to dismiss the first amended complaint in Andersen v. Stability AI LTD, a critical lawsuit which may pin down several issues relating to artificial intelligence (AI) platforms.

The allegations stem from a complaint against four technology companies for incorporating the AI software product Stable Diffusion into their individual platforms. The Plaintiffs, consisting of several artists, alleged that their copyrighted works were scraped in a large-scale dataset to be used as “training images” for the software, which then outputted images “in the style” of those copyrighted works.

In October 2023, Judge William H. Orrick dismissed with leave most of the original claims presented against different Defendants so the Plaintiffs could provide clarity as to who infringed upon which work.

When the amended complaint was filed with updated arguments, each Defendant moved to dismiss on multiple grounds.

STABILITY AI

The court first addressed the Defendant Stability AI’s (“Stability”) motion to dismiss. The Plaintiffs alleged that Stability induced copyright infringement by distributing the models to a third-party user. Stability contended that the Plaintiffs were instead referencing an issue of direct infringement, but the district court disagreed:

“Whether this is a direct infringement claim … or more properly characterized as an inducement claim … depends on how Stable Diffusion works and is implemented by users other than Stability itself. Any potential overlap – or potential requirement for plaintiffs to elect one claim or another – is better addressed on summary judgment, after discovery.”

In denying this part of Stability’s motion, the district court also compared the case to Metro-Goldwyn-Mayer Studios Inc. v. Grokster, where the plaintiff had no evidence of intent to induce infringement by the sale of VCRs after discovery. Here, the CEO of Stability had made comments which could plausibly show the intent to induce infringement, but that would be an issue that could only be resolved after discovery, like in Grokster.

The District Court did, however, dismiss with prejudice the Plaintiffs’ claims under the Digital Millennium Copyright Act (DMCA). Citing the recent case Doe 1 v. GitHub, Inc., the District Court applied the “identicality” requirement – since the output images were not identical to the training images used, there could not be liability for any removal of copyright management information.

Lastly, the District Court dismissed with leave the Plaintiffs’ unjust enrichment claim. The Plaintiffs attempted and failed to identify an extra element to distinguish California’s Unfair Competition Law or common law from the Copyright Act. As such, the claim was preempted.

RUNWAY AI

The court next addressed the Defendant Runway AI’s (“Runway”) motions to dismiss. Runway theorized that the comments from Stability’s CEO, which had previously been deemed sufficient to demonstrate a plausible claim, were made separate from its company, and therefore could not tie the direct infringement nor induced infringement claims to Runway. The court rejected this argument, instead ruling that the Plaintiffs – by showing, among other things, that they could use their names as prompts in the Runway products to create outputs mimicking their respective works, had provided additional evidence to support a plausible claim. Thus, the motions to dismiss were denied.

MIDJOURNEY

Defendant Midjourney, Inc. (“Midjourney”) ventured a different route in its motions. It first asserted that three of the Plaintiffs did not have valid copyright protections of their works, an argument which if successful would diffuse their individual copyright infringement claims. Midjourney claimed the three Plaintiffs had works incorporated into the dataset that were part of a compilation, and since they had failed to specifically name which material was new, they were not subject to copyright protection. In dismissing the motion, the District Court rejected this argument, instead ruling that each Plaintiff had at least one work whose registration was facially valid.

The Plaintiffs’ first amended complaint also replaced the original right of publicity claims with claims under the Lanham Act based on theories of false endorsement and trade dress. While Midjourney claimed that the Plaintiffs failed to allege ‘falsity’, the District Court clarified that a false designation of origin required a showing of a likelihood of consumer confusion, an issue properly determined at summary judgment.

The same reasoning applied to the trade dress claim – since it was plausible that consumers could associate Midjourney’s use of the software with actual endorsements by the artists, there could be a possible finding of confusion. Midjourney argued that some alleged protected elements of the artists’ work were overbroad for trade dress protection, but the District Court quickly countered:

“Plaintiffs have no protection over ‘simple, cartoony drawings’ or ‘gritty fantasy paintings.’ But their trade dress claims must be considered viewing all identified elements as well as the nature of the use of the CLIP model and their names.”

DEVIANTART

The final Defendant, DeviantArt, Inc. (“DeviantArt”), attempted to distance itself from the other Defendants. It argued that it merely implemented and used AI tools provided by Stability. By subjecting it to liability as no more than a user of the AI tools, this would subject countless individuals and corporations to liability. But the District Court rejected the argument, once again finding that by alleging how copies or protected elements of their respective works remained in all versions of Stable Diffusion, including those used by DeviantArt, the Plaintiffs had met the threshold to survive the motion to dismiss.

Two additional motions were presented by DeviantArt, resulting in the dismissal with prejudice of a breach of contract claim and the dismissal with leave of an unjust enrichment claim (on identical grounds to Stability’s argument).

Image Source: Deposit Photos
Author: rafapress
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