Client Alert: AI Copyright Showdown: Can Hollywood Challenge AI While Using It?

Client Alert: AI Copyright Showdown: Can Hollywood Challenge AI While Using It?

The battle between Hollywood and generative artificial intelligence (AI) took an important procedural turn this month in one of the most closely watched AI copyright cases pending in the United States. While some headlines suggested that Disney and Universal were broadly ordered to disclose their own internal AI use, the actual discovery ruling is more nuanced. The court permitted only limited discovery into AI-related issues tied to market harm, technological safeguard, and the scope of requested relief, while rejecting most of Midjourney's broader requests regarding the studios' internal AI development and use.

The plaintiffs allege that Midjourney unlawfully used copyrighted works to train its image-generation models; generated highly recognizable depictions of copyrighted characters such as Darth Vader, Mickey Mouse, Shrek, Yoda, Bart Simpson, and others; and continued producing allegedly infringing outputs after receiving notice from the studios.

Midjourney argues that training AI models on billions of publicly available images is fundamentally different from reproducing those images. Its position is that the model learns statistical relationships rather than storing expressive copies; the training is transformative rather than substitutive; and the resulting model does not contain copies of the underlying works.

Midjourney also argued that Disney and Universal themselves use generative AI internally. Its theory is not simply "everyone does it." Rather, Midjourney contends that evidence regarding the studios' own AI practices could bear on issues such as alleged market harm, available technological safeguards, industry standards, and equitable defenses.

The court largely rejected Midjourney's request for sweeping discovery into the studios' internal AI development and use, finding much of it irrelevant or disproportionate, but allowed targeted discovery tied to narrower issues such as market harm, safeguards, and the scope of requested relief. It is important to emphasize that the court did not broadly compel production of all Disney and Universal AI usage; instead, it substantially narrowed the requested discovery.

While the discovery dispute generated significant attention, it does not establish that Disney or Universal engaged in wrongful conduct, nor does it determine whether AI training constitutes copyright infringement. Those substantive questions remain for future proceedings.