Market Substitution: Generative AI's "Fair Use" Fail

In this episode, I feature a fascinating "deep dive" of my newsletter titled "Market Substitution: Generative AI's 'Fair Use' Fail" that I generated using Google NotebookLM (all prompts were mine, and I approve the episode's content). 

Here’s the headline: the Creative Community now has AI on its copyright litigation heels. That means that the “3 C’s” of so-called “ethical AI” — Consent, Credit and Compensation — are now taking hold via accelerating licensing deals and emerging “usage based” business models.

Here are the Key Take-Aways:

• 3 “fair use” decisions so far (Bartz v. Anthropic, Kadrey v. Meta, Thomson Reuters v. Ross Intelligence). Anthropic settled for $1.5 Billion due to court pressure. Other two cases pending (Thomson Reuters’ decision is on appeal).
• Both Judges in Kadrey & Thomson Reuters focused on “market substitution” as the key rationale to beat back AI’s “fair use” defense, following the Supreme Court’s most recent copyright case (Andy Warhol Foundation v. Goldsmith). 
• Meta prevailed on “fair use,” but the Judge made it clear that Meta would have lost if plaintiffs’ lawyers made the right “market substitution” arguments.
• Courts’ increased skepticism of AI’s “fair use” defense is fueling accelerating AI settlements and content licensing activity, which is good for both AI and media.
• New “usage based” AI content licensing models are being defined right now, following the same pattern as we’ve seen in past massive technology shifts impacting the entertainment industry. Napster’s music theft led to new streaming royalties. YouTube’s content IP theft led to its ContentID system.

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