AI and the Future of Creativity: Navigating Intellectual Property Challenges

AI is transforming the ways content is created and consumed, but it raises many intellectual property concerns: who owns AI-generated works, and how do IP laws protect copyright owners?

The U.S. Copyright Office’s 2025 Report and their guidance emphasize that US copyright law protects only works created by humans. Content generated entirely by an AI system without meaningful human input is ineligible for copyright protection and likely belongs to the public domain. But how do we treat AI-assisted works? If a human utilizes AI-generated elements in a creative way, the human contribution is eligible for protection, while the raw AI output itself is not. However, the human input must be substantial and creative.

Another major copyright issue concerns the use of copyrighted materials in the training of AI models. Many generative AI models are trained on vast datasets taken directly from the internet, often without permission from copyright owners. AI companies have evoked the fair use doctrine in their defense. Numerous copyright infringement lawsuits against these companies are ongoing.

The high-profile lawsuit between The New York Times and OpenAI will set a landmark precedent in this area. The locus of contention is the doctrine of fair use that permits limited use of copyrighted content without the owner's permission. Four factors are considered: 1) the purpose and character of the use; 2) the nature of the copyrighted work; 3) the amount and substantiality of the portion used; 4) and the impact on the market for the original work. Criticism, parody, commentary, research, and news reporting are classic examples of fair use. A central aspect of fair use analysis is whether the work is a transformative use. To qualify as a transformative use, the new work must add a different purpose or character and alter the original work with new meaning, expression, or message.

OpenAI and its main backer Microsoft contend that their generative AI is transformative because the models do not simply regurgitate the news articles, but rather learn linguistic patterns from them to produce original transformed responses. Their defense is that this process is akin to how humans digest and learn from reading and then develop new ideas and content. The Times, however, argue that the AI’s responses are similar to or sometimes even outright replicate verbatim its articles and that the AI platform has become a direct market competitor that allows users to access The Times' content without paying subscription fees, reducing its market share and diverting revenue.

The result of this lawsuit will hinge on how the court interprets fair use and transformative use. If the court finds that AI models' outputs are transformative and therefore a fair use, it could set a precedent that will allow AI companies to use copyrighted materials en masse, reorganizing the economics of content creation and AI development. If the court rules in favor of The Times, AI companies could be obligated to secure licenses or remit royalties. The outcome will profoundly impact both the trajectory of AI innovation and the progression of copyright law in our digital age.