Takeaways from the Latest Copyright Drama: Film Studios Fight to Keep Their Creative Crown

In a moment that was both inevitable and seismic, Disney and Universal filed a high-profile copyright infringement lawsuit against Midjourney, a leading generative AI company specializing in image and video synthesis. The studios claim that Midjourney trained its generative models on copyrighted characters, including Yoda, Bart Simpson, Iron Man, Shrek, and others, without authorization, and facilitated public generation of derivative works through its platform.

This marks the first significant copyright litigation from Hollywood studios targeting AI developers, positioning the case as a watershed in the legal battle between intellectual property (IP) rights holders and artificial intelligence firms. Historically, the entertainment industry’s creative output has been tightly controlled by vertically integrated film studios with proprietary production pipelines. Disney and Universal functioned as centralized arbiters of what content reached audiences, owning the IP, the means of production, and the masterfully managed distribution networks worldwide.

Tools like Midjourney and Runway invite users, regardless of budget or professional background, to generate character designs, scenes, and now high-end videos in a fraction of the time and cost required by traditional film production. Midjourney alone reportedly earned $300 million in revenue in 2024, serving nearly 21 million users worldwide.

This rapid shift democratizes creative power, enabling individual artists and amateur enthusiasts  to participate in content generation at unprecedented scale.

The result? A profound shift in who controls cultural output.

At the heart of the Disney and Universal complaint is a tension between two competing legal principles: the right of copyright holders to control derivative uses of their work under the Copyright Act of 1976 (17 U.S. Code § 106), and the doctrine of “fair use” as codified under 17 U.S. Code § 107.

Midjourney, like many AI platforms, relies on training data sourced from publicly accessible internet content. The studios allege that this training corpus included copyrighted material scraped without consent and that Midjourney’s refusal to implement technical safeguards to prevent output resembling protected characters amounts to willful infringement.
The plaintiffs demand a jury trial and invoke the constitutional foundation of U.S. copyright law, which is designed to “promote the progress of science and the useful arts” (U.S. Const. Art. I, § 8, cl. 8). They argue that AI-generated mimicry undercuts this incentive structure.

Yet the AI industry counters with the claim that training models on large datasets, some of which may include copyrighted works, is transformative and non-commercial. Courts have not yet definitively resolved whether such practices fall within the fair use doctrine.

History Repeating?

United States v. Paramount Pictures (1948)

The current dispute bears an intriguing resemblance to United States v. Paramount Pictures, Inc. (334 U.S. 131, 1948) [5], in which the U.S. Supreme Court ruled against the vertically integrated studio system, declaring that major film studios could no longer control both production and exhibition. That antitrust decision effectively dismantled Hollywood’s monopoly over the entertainment pipeline and opened the door for independent producers and theater operators. In a similar spirit, the Disney v. Midjourney case challenges a legacy model. This time not of physical distribution, but of creative exclusivity. Just as the Paramount case forced studios to unbundle their vertical dominance, the current AI litigation may open a new era where the generation and dissemination of creative works is no longer centralized but democratized by emerging technologies. In both cases, legal scrutiny catalyzes a structural transformation in how creative industries operate and compete.

Several landmark intellectual property disputes offer perspective on the potential scope and impact of Disney’s lawsuit. For instance, in Gray v. Perry, rapper Marcus Gray alleged that Katy Perry’s hit “Dark Horse” copied elements from his song “Joyful Noise.” Although Perry initially lost and was ordered to pay $2.78 million in damages, the ruling was later overturned on appeal due to insufficient evidence of substantial similarity.

The music industry’s battle with Napster at the turn of the millennium also remains a key cautionary tale. Metallica and other artists sued the peer-to-peer file-sharing platform for copyright infringement, ultimately forcing it to shut down and pay $26 million in damages. It was the first time a major artist directly took legal action against digital distribution tech, setting a precedent for content control in the internet age.

In the trademark domain, Adidas America Inc. v. Payless Shoesource Inc. (1994–2008) saw Adidas sue Payless for producing lookalike shoes using two- and four-stripe designs. After a protracted legal battle involving 268 shoe designs, a jury awarded Adidas $305 million in damages. The case highlights how visual identity, and confusion therein, can form the basis for massive intellectual property judgments.

While studios file lawsuits to curb unauthorized AI use of their IP, they also invest heavily in AI tools to streamline their own production processes. From pre-visualization and script analysis to VFX automation and audience prediction, AI already plays a growing role in studio operations.

What studios appear to want is not the abolition of AI, but rather a system in which they are paid gatekeepers, licensing IP for model training, monetizing likenesses, and extracting royalties from AI-generated derivative works. They aim to evolve from content creators to rights licensors.

The implications are structural. If litigation fails or ends in favorable settlements for AI companies, traditional studios may be relegated to the role of IP portfolio managers, overseeing licensing agreements while independent creators and AI labs generate the bulk of new entertainment.

Technical Evolution Meets Legal Uncertainty

Midjourney’s legal challenges arrive just as the company expands into video synthesis. Its newly launched video model allows users to animate static images into 5- to 20-second clips, bridging the gap between still visuals and motion pictures. This product competes with offerings from OpenAI (Sora) and Google (Veo), all of which are racing to build multimodal, interactive content systems. What’s revolutionary is that users now have the power to sketch a rough concept on a napkin, snap a photo of it, upload it into an AI platform like Midjourney, and transform that crude sketch into a stylized character, animated scene, or short story… entirely on their own. The creative pipeline, once guarded by multimillion-dollar production studios, is now accessible to anyone with a spark of imagination and a smartphone.

The legal risk? AI video may more vividly replicate protected audiovisual characters and likenesses, increasing the likelihood of direct IP conflict. Disney and Universal’s complaint anticipates this, referencing Midjourney’s video tool as a likely avenue for further infringement.

Implications for Copyright Law and the Creative Economy

This litigation could reshape the legal framework governing AI and creativity. If courts side with studios, it may establish precedent requiring AI developers to obtain licenses for training on copyrighted data—a move that could limit open-source innovation but increase creator compensation. If the courts lean toward AI developers, the door remains open for broad fair use defenses in model training.

This will also have ripple effects under the Digital Millennium Copyright Act (DMCA) (17 U.S. Code § 512), particularly around the safe harbor provisions and how they might apply to generative content platforms.

Either way, the precedent set here will influence how content is created, who owns it, and how it is monetized. Studios must now decide: litigate the future, or license it.

Because the genie is not going back into the bottle.

Image Source: Deposit Photos
Author: baavli
Image ID: 7356780