FTC takes shots at AI in rare filing to US Copyright Office 

The U.S. Copyright Office has already repeatedly weighed in on creations made with generative artificial intelligence (AI) — saying they are largely ineligible for copyright because they don’t primarily come from a human hand.

But simultaneously, the agency has been conducting an AI study since August 2023 and accepting public comments on AI, and among those who recently weighed in was none other than another rival federal agency — the Federal Trade Commission (FTC), which traditionally has not been involved in many copyright matters, and instead sought to investigate and penalize companies for consumer and competition violations. 

Now critics are accusing the FTC of overstepping its bounds and ultimately undermining “Fair Use,” the long-held legal doctrine that allows creative works, even copyrighted ones, to be used without the original creators’ or rights-holders’ consent or compensation in some cases, such as parodies and commentary or news coverage. 

FTC signals aggressive stance toward generative AI, citing consumer deception risk

In its filing, the FTC warned that AI development has enabled potential copyright infringement and consumer deception.

The agency cautioned that generative AI could mimic “artists’ faces, voices, and performances without permission,” deceiving consumers about a work’s true authorship. FTC officials also expressed concerns about copyright violations, stating AI systems are trained on “pirated content” scraped “without consent.”

On copyright infringement, the FTC stated that “the use of pirated or misuse of copyrighted materials could be an unfair practice or unfair method of competition under Section 5 of the FTC Act.”

Separately but relatedly, leading AI companies such as OpenAI and Anthropic are facing lawsuits accusing them of violating copyright by using copyrighted content in their training data.

The FTC noted AI raises legal concerns when content is “taken from sources that themselves have pirated content, circumventing copyright protections.”

Regarding consumer deception, the FTC warned that harms occur “when authorship does not align with consumer expectations, such as when a consumer thinks a work has been created by a particular musician or other artist, but it has been generated by someone else using an AI tool.”

The FTC also cautioned that generative AI could enable “unfair methods of competition” if “powerful firms use AI in ways that harm competition.”

Fair use or copyright violation? 

The FTC noted that a recent court case involved assertion of a fair use defense for scraping content to train an AI system. It indicates that conduct that may be consistent with fair use and copyright law could still potentially violate consumer protection laws like the FTC Act in some circumstances.

Emphasizing there is “no AI exemption from the laws on the books,” the FTC pledged it will “vigorously use the full range of its authorities to protect Americans from deceptive and unfair conduct” involving AI. The FTC Act prohibits both “unfair or deceptive acts or practices” as well as “unfair methods of competition.”

The FTC’s comment filing to the Copyright Office aligns with concerns voiced by creative professionals at a recent FTC roundtable. Participants, including artists, musicians, and actors, called for AI regulation to protect their work from being used without consent or fair compensation.

Critics fire back at the FTC 

However, in an interview with VentureBeat, Chamber of Progress CEO Adam Kovacevich contends “the FTC’s founding charter literally says nothing about copyright” and copyright issues have “always been something that is adjudicated in the courts.” 

In his view, the FTC’s assertion that conduct lawful under copyright could violate the FTC Act reflects “Chairwoman [Lina] Khan’s efforts to expand the FTC’s mandate.”

Kovacevich also highlighted the role of fair use in anti-monopoly policy, stating, “fair use is the original anti-monopoly policy. Copyright is a monopoly right… The whole range of startups who have the potential to disrupt those incumbents are not going to have the ability to pay and that’s what the principle of fair use protects here.”

The FTC comment referenced fair use principles, noting their evolution could shape competition dynamics in AI-related markets. But the agency emphasized compliance with copyright law does not necessarily immunize potential consumer protection violations.

“So I think that the FTC really hasn’t thought about how fair use is anti-monopoly policy,” said Kovacevich.

Striking a balance will be challenging

This brewing debate highlights the complex interplay between copyright and consumer protection statutes as regulators grapple with AI’s rapid evolution. While the FTC believes oversight of generative models’ impacts falls squarely within its mission, some stakeholders contend the agency is overstepping its authority. 

Striking the right balance will require nuanced legal analysis of how consumer welfare and creative incentives intersect in AI-transformed markets.

As the FTC and critics debate the appropriate scope of the agency’s role, AI developers must carefully assess their responsibilities under both copyright and consumer protection laws. 

With the stakes high and the rules uncertain, businesses should proactively consider potential harms to consumers and creators from unauthorized use of copyrighted source materials and misleading outputs. While the legal boundaries remain contested, ethical AI practices that respect rights and prevent deception will serve companies well in the court of public opinion.