Hollywood Studios' First Lawsuit on AI Sends a Warning to Tech Giants: ‘Piracy Is Piracy'

It seemed like only a matter of time before Hollywood's studios fired their own legal salvo in the battle over IP protection in a time of technological upheaval, and on Wednesday they did. Disney and Universal sued Midjourney, the company behind one of the most popular generative AI software programs used today, for copyright infringement.
The 143-page lawsuit is filled with dozens of pictures comparing screenshots of popular films and TV shows, ranging from 'Frozen' and 'Kung Fu Panda' to 'Deadpool' and 'Star Wars,' to Midjourney-generated AI images of characters from those franchises.
'By helping itself to Plaintiffs' copyrighted works […] Midjourney is the quintessential copyright free-rider and a bottomless pit of plagiarism,' Disney and NBCU said in the lawsuit. 'Piracy is piracy, and whether an infringing image or video is made with AI or another technology does not make it any less infringing. Midjourney's conduct […] threatens to upend the bedrock incentives of U.S. copyright law.'
Representatives for Midjourney did not respond to multiple requests for comment from TheWrap.
The new lawsuit shows that even as companies like Disney look for ways that it can embrace AI, they share similar concerns about its abuse with the artists who create the work that lies at the foundation of their profits. Legal experts tell TheWrap that Disney and Universal's move signals a new era in the already-uneasy relationship between Hollywood and AI companies, and it will likely set the ground rules for how the two sides work together — if that is possible — moving forward.
'There is a clear path forward through partnerships that both further AI innovation and foster human artistry. Unfortunately, some bad actors – like Midjourney – see only a zero-sum, winner-take-all game,' RIAA chairman/CEO Mitch Glazier said in a statement.
Bryn Mooser, the head of Asteria, a generative AI film studio that says it is 'powered by the first clean and ethical AI model,' told TheWrap he sides with Disney and Universal after reading the lawsuit.
'There's no question to me that the studios are right,' the Emmy-winning filmmaker said. 'Disney and Universal are absolutely right to be demanding that AI models have consent.'
Midjourney is a San Francisco-based AI company founded in 2021. The company offers a text-to-image tool, similar to other AI companies, that allows users to create images based on what they type into its prompt. Midjourney had $300 million in sales last year, according to the Disney-Universal lawsuit, which is driven by user subscriptions. That makes it relatively small compared to other AI companies like OpenAI, the parent company of ChatGPT, which hit $10 billion in annual recurring revenue, CNBC reported this week.
The lawsuit claims Midjourney has committed 'countless' copyright violations against Disney and Universal. The studios are 'entitled to damages and Midjourney's profits in an amount according to proof,' the lawsuit said, as well as statutory damages up to $150,000 per infringed work. Disney and Universal's filing listed 199 titles that the studios claim had been infringed upon, which would equal $29.9 million in statutory damages.
'Midjourney's large-scale infringement is systemic, ongoing and willful,' the lawsuit claimed. 'And plaintiffs have been, and continue to be, substantially and irreparably harmed by it.'
So why target Midjourney in the lawsuit? While it's not as big as ChatGPT, image-generating software like Midjourney is a particular thorn in Hollywood's side. That has been the case even as studios have begun researching ways to use AI to make their production processes and business practices more efficient, as Disney did when it established a new Office of Technology Enablement last November to oversee those efforts.
As the lawsuit notes, Midjourney has more than 21 million users that have generated images using the AI software based on copyrighted material. The lawsuit also accuses Midjourney of training its developing image-to-video software on copyrighted material, as well as its upcoming text-to-video model. While not yet capable of producing video at feature-quality 4K resolution, AI experts have told TheWrap that they predict, at its current rate of development, that generative AI software will be capable of creating consistent, 2K-resolution video by the end of the year.
If Midjourney is capable of producing mass quantities of artwork of copyrighted characters that are consistent with the art style of the actual films and TV shows they come from, a future where anyone can produce fake clips of 'The Simpsons' or 'Shrek' with a few prompts and clicks is the last thing studios want.
Lily Li, a tech-focused attorney for Metaverse Law in Newport Beach, California, said the Disney and Universal lawsuit falls in a legal 'gray area' that will come down to two key factors:
How 'transformative' Midjourney's AI-generated content is. In other words, does its text-to-image generator create characters that are too similar in appearance to Disney and Universal characters without consent? The studios, in their lawsuit, argued that is the case, saying Midjourney 'blatantly' ripped off characters like Homer Simpson and Elsa from 'Frozen,' among many others.
How was the content that Midjourney used for its model obtained? If Midjourney scraped Disney and Universal content that was behind a paywall and/or without consent from the studios, that could be another major problem for the AI company, Li said. Midjourney, according to the lawsuit, 'never sought any copyright content holders' consent to copy and exploit their works.'
Attorney Dustin Taylor, an IP expert with Husch Blackwell, told TheWrap he agreed with Li the 'transformative' nature of the AI-generated content will be a critical point — and he said the pictures Disney and Universal included in their lawsuit to back up that claim are fairly damning: 'The similarity is so strong there.'
How will the lawsuit shake out? Both Li and Taylor said that will ultimately come down to what a courtroom decides on the two points above. The 'cutting edge' nature of the case makes it difficult to predict how it will be resolved, Taylor said. But in the near term, Taylor said Disney and Universal's lawsuit has a 'good chance to move past' a likely attempt to dismiss the case from Midjourney, based largely on the strength of its photo examples.
And Li said this case will likely spur a wave of similar lawsuits, akin to how The New York Times' copyright infringement lawsuit against OpenAI in late 2023 has led to copycat lawsuits since.
'Studios are more likely to take action in the future' against AI companies using their content, Li said. Why? Because if their material is used to create AI-generated content that promotes 'harmful conduct,' they could be sued. One example: Characters.ai is being sued in Florida because its model encouraged a 14-year-old boy to kill himself, according to a lawsuit filed by the boy's mother. Studios will not want to see AI-generated characters that were inspired by their content, without consent, being tied to similar tragedies, Li explained.
'If I were an attorney for these studios, I'd go, 'Wait a second, now there is potential liability that we have, because one of our characters is being used by an AI company to create harmful content,'' Li said.
News of this lawsuit will be welcomed by Hollywood's artists. The Writers Guild of America openly called on studios to take action this past December, citing a story in The Atlantic that revealed that a data set used by Apple, Meta, Nvidia and other top tech companies to train their AI contained the full scripts of thousands of films and television shows, showing that the spread of copyrighted material in generative AI output was farther than previously confirmed.
'It's time for the studios to come off the sidelines. After this industry has spent decades fighting piracy, it cannot stand idly by while tech companies steal full libraries of content for their own financial gain,' WGA wrote.
ChatGPT and other large AI models like Claude and X's Grok were not referenced in Wednesday's lawsuit, though. Disney and Universal said they sued Midjourney because it has been so brazen in its unapproved lifting of their content. The lawsuit included a screenshot of Midjourney's website showcasing how its model created images remarkably similar to Homer Simpson as one clear example of its 'disdain' for copyright laws.
As the lawsuit unfolds, the adoption of AI in the entertainment industry is still moving forward. Along with Bryn Mooser's Asteria, there are other independent studios like Toonstar, creator of the YouTube cartoon series 'StEvEn & Parker,' which uses AI throughout its production process. Toonstar uses a bespoke AI engine for each of its productions based on data sets from art created by human artists expressly for the project and with full compensation and consent.
'We've worked with a lot of creatives and storytellers, and we are interested in creating new franchises. That means these shows need to be copyrightable, and that means they can't use copyrighted material,' co-founder and CEO John Attanasio said.
A big test of whether their efforts to adhere to copyright were fruitful came when Random House approached Toonstar for a series of graphic novels based on 'StEvEn & Parker,' which required the company's legal team to review the show to make sure it didn't violate any copyrights.
'There's probably no business that cares more about copyright than publishing, so to be able to clear that process shows that what we are doing is compliant,' he said.
There's a long history of cases of new technology running afoul of copyright law, and the entertainment industry has turned to the courts for protection time and again. In late 1999, A&M Records sued Napster for pirating its music, which was followed by a larger suit by the industry's trade group RIAA.
However the lawsuit turns out, Mooser said this is a legal battle that needed to happen sooner than later, as companies like OpenAI lobby for looser copyright restrictions in order to make it easier to train their models — and stay ahead of foreign adversaries like China. Mooser said the argument for less-strict copyright laws to enable AI growth and keep the U.S. at the forefront of the AI arms race is 'really convoluted' and ignores what should be at the foundation of any relationship between rights holders and AI companies: consent to use copyrighted material.
'I think it's the most important issue of our time in AI,' Mooser added.
The post Hollywood Studios' First Lawsuit on AI Sends a Warning to Tech Giants: 'Piracy Is Piracy' appeared first on TheWrap.

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