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Welcome to Lookzy. In today's Lookzy:

• Future AI litigation hinges on these elements

• More details on S&C's future massive FTX payday

• Why your Vegas hotel room might be so expensive

• Rick Astley sues Yung Gravy for voice imitation

THE FUTURE OF AI LITIGATION

As we've previously reported, numerous artists and other copyright owners have filed a collection of suits against various artificial intelligence companies which allow users to generate text, art or code via simple text commands.

In one suit, Microsoft, GitHub and OpenAI were sued in San Francisco federal proposed class action suit for improperly monetizing open source code to train their AI systems. These defendants, represented by Morrison Foerster and Orrick, have now sought to have the suit dismissed because the anonymous copyright owner plaintiffs did not outline their allegations specifically enough.

What core issues are at play in this and similar AI copyright infringement based suits? Let's take a look.

Training sets

Much of the drama surrounding these new AI technologies stems from the use of large training sets, which often contain billions of data points (text, images, code) including significant numbers of copyrighted works or open source works that are not being used pursuant to a license.

While the AI models and interfaces, such as OpenAI and Stable Diffusion, are largely being sued to date, plaintiffs' suits should likely be directed at the party responsible for compiling the images used to train them: Large-scale Artificial Intelligence Open Network (LAION), a nonprofit organization.

That said, many experts believe it will be difficult to prove actual copyright infringement when it is challenging to identify which images were used to train certain AI systems given that the output will always look at least slightly different than any input.

Stylistic copying

Some artists have sought damages for the ability of image-generating AI systems to produce images "in the style of" existing artists, which allows users to create new images that look very similar to artists' work. However, style has proven nearly impossible to shield with copyright.

Fair use

Finally, much of AI companies' defense in suits such as these comes down to fair use.

OpenAI, Stable Diffusion and others have claimed that 'fair use' protects them even if their systems are trained on licensed content, allowing them to avoid seeking a license or other permission from the copyright or license holder.

This largely hinges on whether the output of these AI models is seen as "transformative". This remains an open question, but recent case law including the 2021 Google v. Oracle decision at the Supreme Court, suggests that creating new works from collected data can in fact be transformative.

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ECON SNAPSHOT

The difference between special bonuses and layoffs

THE VERDICT

Arguing today's litigation news

Lawyers get paid. Now officially appointed as debtor's counsel in the FTX bankruptcy, Sullivan & Cromwell is looking at a massive future payday. We've previously looked at S&C's record-breaking rates (well above $2,100/hour for some partners), but the scope of the firm's work has not previously been understood. S&C has more than 150 people working on the bankruptcy, including more than 30 partners with rates above $2,000 per hour. In November 2022 alone, more than 100 lawyers from the firm’s bankruptcy, regulatory, and litigation practices each logged at least 10 hours on the case. If these 150 hours only spent 10 hours per month on the bankruptcy for one year (120 total hours each) at an average billing rate of just $1,000, that alone with bring S&C's bill up to $18 million. According to bankruptcy filings, S&C's top rates are 23% above the billing rates S&C used in Garrett Motion's bankruptcy in 2020.

Vegas, baby. A consumer antitrust suit was filed against the operators of several prominent Las Vegas hotels including the Wynn, MGM, Caesers, and Treasure Island claiming that the hotels are conspiring to keep hotel room rates artificially high by using the same pricing algorithms. The suit also included as a defendant a company called Rainmaker, which creates the pricing algorithms, and which the complaint claims is used by 90% of the hotels on the Las Vegas strip. Plaintiffs firms Panish Shea and Hagens Berman filed the suit.

Unvaxxed jurors. A 4th Circuit panel reviewed a defendant's claim that his Sixth Amendment right to a jury representing a cross-section of society was violated when a court excluded unvaccinated individuals from a jury pool. Prosecutors have countered that the defendant has not demonstrated that the unvaccinated are a distinct group with common views.

Wary Warren. Senator Elizabeth Warren has been pushing the FTC to move to block L3Harris' proposed $4.7 billion acquisition of Aerojet Rocketdyne, the last remaining independent U.S. supplier of missile propulsion systems, because of concerns that the US defense industry is becoming too consolidated.

Voice imitation. Singer Rick Astley filed a suit against rapper Yung Gravy alleging that Gravy’s 2022 breakout hit, “Betty (Get Money),” imitated his voice from Astley's hit song "Never Gonna Give You Up" without legal authorization. Astley's attorney claimed “The public could not tell the difference. The imitation of Mr. Astley’s voice was so successful the public believed it was actually Mr. Astley singing.” Astley's attorney cited the famous 1988 legal battle between the actress Bette Midler and Ford Motor Co., which notably hired a voice actor to impersonate Midler after the company was unable to hire her for a series of commercials. Astley is being represented by Richard S. Busch, the lawyer who represented the family of Marvin Gaye in its copyright infringement suit against the "Blurred Lines" creators.

THE DEAL

Wheelin' and dealin' today's corporate news

Board refreshment. Countering in advance Elliott Management's slate of director nominees in the upcoming proxy fight at Salesforce, Salesforce itself proposed three new board members, including one from the hedge fund ValueAct Capital as part of what it called an "ongoing board refreshment process".

Bio SPAC. Biopharmaceutical company Longevity Biomedical Inc. agreed to merge with Denali Capital, a SPAC, in a $236.2 million deal. Nelson Mullins is representing Longevity and Sidley Austin is representing Denali.

Energy IPO. Natural gas company TXO Energy Partners LP started trading after pricing a $100 million IPO, serving as the first IPO of an energy company in 2023. Latham is representing TXO and Baker Botts is representing the underwriters.

Big funds. Venture capital firm New Enterprise Associates raised a total of $6.2 billion for its most recent two investment funds, one fund being dedicated to early-stage investing and the other to venture growth-stage opportunities.

German IPO. German web-hosting company Ionos Group SE is seeking to raise over €540 million in its upcoming IPO, which will provide it with a $3.4 billion valuation, which many hope will revive Europe's IPO market.

BUSINESS OF THE FIRM

Lateral Moves:

• Crowell & Moring hired partner Jason Crawford from the DOJ civil division’s fraud section.

BOILERPLATE

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