Update on AI – Business Valuation Resources

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The issues regarding the shake up at OpenAI settled down, seemingly, as quickly as they fired up. The parent not-for-profit governing organization replaced most or all of its board of directors, but it remains to be seen what structural changes will ultimately result from the shake-up. For now, things seem to be quiet on the OpenAI front from an internal standpoint. The same cannot be said for outside events impacting OpenAI as we will see.

That cannot be said for AI as a whole. There are so many things going on that it is next to impossible even to gather them all together, let alone make any cohesive sense of them. I do my best to keep track of them and will try to use these blog posts going forward to focus on a particular AI activity or event that is of particular interest to our blog readers.

Keeping that in mind, this post will focus on litigation regarding AI. Specifically, the New York Times has filed suit against Microsoft and OpenAI alleging copyright infringement. Three paragraphs from the complaint1 the Times filed provide a summary of the issues in the case:

The Times objected after it discovered that Defendants were using Times content without permission to develop their models and tools. For months, The Times has attempted to reach a negotiated agreement with Defendants, in accordance with its history of working productively with large technology platforms to permit the use of its content in new digital products (including the news products developed by Google, Meta, and Apple). The Times’s goal during these negotiations was to ensure it received fair value for the use of its content, facilitate the continuation of a healthy news ecosystem, and help develop GenAI technology in a responsible way that benefits society and supports a well-informed public.

These negotiations have not led to a resolution. Publicly, Defendants insist that their conduct is protected as “fair use” because their unlicensed use of copyrighted content to train GenAI models serves a new “transformative” purpose. But there is nothing “transformative” about using The Times’s content without payment to create products that substitute for The Times and steal audiences away from it. Because the outputs of Defendants’ GenAI models compete with and closely mimic the inputs used to train them, copying Times works for that purpose is not fair use.

The law does not permit the kind of systematic and competitive infringement that Defendants have committed. This action seeks to hold them responsible for the billions of dollars in statutory and actual damages that they owe for the unlawful copying and use of The Times’s uniquely valuable works.

BV Resources Chief Content Officer, Elizabeth Petersen, who has 20 years of experience in the publishing industry, gave her thoughts on the matter: “Artificial intelligence will certainly change how we parse, analyze, and consume information. But the question of copyright, intellectual property, and content ownership is a significant one and will require new legal precedence. In my mind, ‘transformation’ of content shouldn’t automatically grant fair use, and far more work needs to be done to protect intellectual property. But we may be in for a new definition of content ownership and creation.”

This case will be a landmark case relative to what AI can and cannot use. We have stated previously that tools such as ChatGPT cannot go behind pay walls. I reviewed the 69-page complaint briefly. It did not seem to talk about pay walls at all but emphasizes that the defendants collected volumes of data from the New York Times website. I went on that website and found that, while one might be able to get some articles for free, they are limited, and then you have to subscribe. I did not see any indication in the complaint that the defendants subscribed and then copied subscribed information in its memory banks. So we will see as the case progresses what the reality is.

As Elizabeth Petersen noted above, “we may be in for a new definition of content ownership and creation.” Stay tuned.

The New York Times Company Civil Action No. ________ Complaint Jury Trial Demanded Plaintiff v. Microsoft Corporation, OpenAI, INC., OpenAI LP, OpenAI GP, LLC, OpenAI, LLC, OpenAI OPCO LLC, OpenAI Global LLC, OAI Corporation, LLC, and OpenAI Holdings, LLC, Defendants; United States District Court Southern District of New York; Filed Dec. 27, 2023.

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