3151: From Copyright to Contracts: The Legal Impact of AI on IP

[00:00:03] happens when cutting-edge technology intersects with intellectual property and legal frameworks. This is a conversation I'm hearing more and more about at the moment, so I've invited Alex Watt, a partner and intellectual property and commercial lawyer with deep expertise in advertising, marketing and startup ecosystems, to join me on the podcast today.

[00:00:28] Alex works with IP-centric businesses from gaming to publishing, and he has experience spanning renowned organisations from Universal Pictures and the Telegraph Media Group to the BBC. But in today's episode, I want to explore more about the fascinating challenges and opportunities that are actually being bought by AI in the IP management, licensing and marketing front.

[00:00:53] Whether it be the complexities of copyright and ownership in AI-generated content that's on the rise of AI influences or the evolving role of startups in the tech landscape. My guest today is going to be offering a comprehensive view of how businesses can navigate this rapidly changing world. So, could AI reshape how we think about creativity, ownership and compliance in the years ahead? With that scene set, it's time for me to invite today's guest on.

[00:01:24] A massive warm welcome to the show. Can you tell everyone listening a little about who you are and what you do? Thank you very much for having me on. My name's Alex Watt. I'm a partner here at Howard Kennedy. I'm an IP lawyer, commercial IP lawyer. So, I tend not to litigate, though it does happen occasionally. I'm more concerned with doing deals and helping my clients make money. So, it tends to be commercial deals that have IP as a key component to them.

[00:01:52] So, franchising, concessionary agreements, licensing, distribution agreements, that sort of thing, is a big part of my practice. And then also advertising and marketing, increasingly in the social media arena. Art, we have a fast-growing art practice here. And then in addition to all that, just as a bonus, I run the firm's startup. Well, it's a pleasure to have you join me on the podcast.

[00:02:17] Every day on this podcast, I try and shine a light on a different area of business and technology and demystify some of those big questions that business leaders are asking at the moment. And one of the reasons I was excited to get you on, I'm getting a lot of questions at the moment around businesses that are throwing themselves into AI headfirst, maybe even creating applications through AI. But then they're starting to ask the question, hey, what does this mean for my IP?

[00:02:41] So, from everything that you're seeing here, can you just tell me a little bit more about the role of AI in intellectual property and also how AI is transforming IP management and enforcement too? What are you seeing here? Well, it's interesting. Running this startup program has meant that we've been very aware of the difficult fundraising environment that we've suffered over the last couple of years.

[00:03:06] And it seemed to me that one of the things that's assisting these AI products is that it's been almost impossible to raise funds for anything unless the thing that you were creating was some sort of AI something. So, people, almost every new startup idea appears to be a sort of AI this or an AI that. You know, I don't mean to denigrate the impact of AI.

[00:03:27] Obviously, we're going through a bit of an AI revolution because whilst we've always had the ability to work with large data sets and do clever things with them, and there's not necessarily a huge advance there. The advent of AI from the LLMs and what's being done by Google and OpenAI is, you know, really incredible.

[00:03:53] The reasoning bots that it looks like going to replace ChatGPG4, I'm very excited about. And so, I don't mean to detract from the importance of the change. I don't think AI is changing IP as such. What's happening is that, as ever, when there's a big shift, IP lawyers like myself and others

[00:04:18] have to think about how the existing rules need to be seen through the lens of that new technology. And it's an interesting question. Occasionally, the technology is such that it's deemed appropriate to change the IP laws. There's a sort of a feedback loop. And that is actually happening with AI because in order to make these large language models,

[00:04:45] what's been necessary is that they have to be trained on vast quantities of data. And that has meant scraping stuff without really any, at least in lots of cases, any particular care being taken as to whether or not they're permitted to use that copyright material or not. And so, there's been a lot of lobbying happening by those large tech businesses

[00:05:11] that are building those LLMs on governments to say that there should be an exemption created for the use of that copyright material within an LLM. And you'll have seen that in the news in the last few days, that both the EU and particularly the UK is trying to steal a march on everyone else by being even more accommodating to the AI environment, are proposing that there should be this exemption applied where effectively copyright material

[00:05:40] that would otherwise be protected and you wouldn't be able to use for other applications like this should be allowed to be used to train models. They're talking about there being an opt-out where you can provide notice. And I encourage anyone that has copyright material to feed into the debate. And if it does go ahead to notify when that's necessary to say that you don't want your copyright used. It's such a big topic right now.

[00:06:09] And whether it be a third party scraping your data off the internet or indeed a business where their employees are putting company data into AI. And there's a lot of talk about where company data is stored at the moment, whether it be in the public cloud or bringing it back on-prem in a private cloud. So I'm curious with everything that's happening, what complexities are you seeing around licensing agreement in tech and gaming industries and indeed beyond into multiple industries in businesses?

[00:06:39] I actually don't think that the agreements I'm seeing have caught up completely with the impact that AI is going to have unless it's a very AI-focused agreement and it's a service that's being provided on that sort of basis. I think that what we're going through now is a period of time where lawyers like me are having to look at these agreements and work out what the issues are and add them in.

[00:07:08] And it will really depend on the subject matter. So, you know, it's going to be different from an advertising production agreement to, you know, a distribution agreement. You might not be wildly concerned about artificial intelligence when you're talking about moving drinks cans around the world. But when you're engaging a production team to create an advert for you, whereby you want to own all of the intellectual property in that advert,

[00:07:37] it's really important that you insist that either no artificial intelligence content is incorporated, or if it is incorporated, that you notify the procurer of those services and provide indemnities to say that you own the IP. And the issue there, of course, is that we don't quite know what the position is in relation to the IP because at the moment there isn't an exception for scraping large amounts of copyright material.

[00:08:06] And that does mean that these large language models have included, well, lots of them have, not all of them, but very often have included large amounts of copyright material, which is infringing because it's been done without their permission. And so what is the product of that? If one of these copyright images was one of the data sources that was used to create the new AI image, arguably that's an adaptation of that original image and therefore is something that's controlled by a third party.

[00:08:35] So, you know, the production crew that have pulled that together arguably don't own the IP in it. It's quite complicated. On what I'm saying, just to stay on the advertising tip for a moment, is I'm saying to clients that they just need to make sure that their agreements deal with AI. They specify, you know, this is how we expect you to not use it. Or if you do use it, this is how you use it. And just to drift slightly from AI for a moment, but staying into advertising and marketing,

[00:09:05] I'm curious, how are you seeing the worlds of influencer marketing and legal compliance colliding? There's been a lot of talk of this over the last few years, but are there any new trends evolving here? I don't know about new trends, but certainly the trend that has been most powerful in recent years, which is to say the shift first online and into digital, and then from just digital into social is continuing. That's obviously where everyone is.

[00:09:33] And, you know, COVID only exacerbated that. I think the reality is that shift is happening. That trend is a trend because it's effective. It works. You know, people are really moved to purchase things as a result of people that they follow on social media. And so as long as it works, people are going to keep on throwing money at it. In relation to AI, you know, we haven't begun to see, you know,

[00:10:02] anywhere near the beginning of it yet, I don't think. We're going to see AI influences. I mean, you've already got them, where you've got sort of virtual influences that don't really exist. Increasingly, you're going to see, you know, the face and body and clothing of someone that has been created by AI with content that has been written by AI and that's controlled, puppeteered by an agency somewhere. But then the questions about how that's properly regulated are going to be really interesting.

[00:10:30] I think that the Advertising Standards Authority in the UK has got its work cut out for it in trying to specify quite how that's properly regulated, particularly given advertising needs to be, it needs to be clear that it's advertising and one needs to be clear that what one is advertising is accurate. So it's going to be a really interesting time, I think. I think one of the other things though is that people are going to start using AI

[00:10:59] for monitoring these things. So you'll be able to, just as it gets more complicated, so the means by which you're able to check it will be made easier by the fact that you can use AI to do that. The same applies to the topic we were just talking about before actually, and we're talking about copyright infringement. The AI tools that are becoming, have come and are becoming available in order to find those sorts of infringements are remarkable. Yeah, I've seen some of those AI influences.

[00:11:28] I've got millions of followers. It completely blows my mind. And although AI has had all the headlines and possibly stole the headlines from another area in technology, things like extended reality, mixed reality being brought to life through the Apple headset, the one from Meta, and the Ray-Ban sunglasses as well. So when thinking about the future of IP in things like the metaverse, how do you think virtual worlds will reshape intellectual property laws? Is it uncharted territory

[00:11:58] or are there plans in place for things like that? What are you seeing there? Yeah. When you say, it's funny, isn't it? The last few years, there's been a sort of catchphrase or topic put every year. You know, people talk about metaverses, you know, it's 2023. People talk about NFTs, it's like 2022, 21. Yeah. And you're right, AI is this year's big catchphrase, but AI is not going anywhere soon. And I think, I really think the metaverse hasn't had its time yet.

[00:12:27] It's, you know, there's been numerous instances of people saying it's time for the metaverse, but I just don't think it is yet. I don't think until headsets are widely available and they're comfortable and just practically speaking, how you get into it, until that's really, you know, made easy, I don't think we'll see metaverse in any real sort of sense. It certainly depends how you define metaverse, because arguably Fortnite is a metaverse. You know,

[00:12:57] Call of Duty is a metaverse of sorts. All of these big games, I mean, ultimately when Grand Theft Auto 6 comes out next year, that will, it will be a metaverse and I understand that they're working AI into lots of aspects of that. So the characters will be incredibly interesting to interact with. And in actual fact, just going back another year to NFTs, I feel like the sort of Dutch tulip explosion that happened with the value of NFT artwork

[00:13:27] has rather overshadowed the fact that there is still useful aspects to blockchain and the ability to own things in a digital space in a meaningful way, which is what it provides. And I think that we probably will see that again. I don't think it'll be given the same cachet as it was historically, but I think it's going to be important. Yeah, 100% with you on that. And on behalf of any startup founders that might be listening to our conversation today, and especially if they're concerned about IP protection,

[00:13:57] are there any strategies or advice that you'd recommend for how anybody listening can protect their intellectual property in this fast-paced startup environment? Because it seems that the pace of technological change just keeps ramping up and it can be overwhelming and daunting trying to keep up with that pace. But any advice that you would offer to founders listening there? Well, I mean, obviously what they need most of all is a really good IP lawyer, preferably one that's in charge of a decent startup program

[00:14:26] that provides advice to startups. But no, joking aside, yeah, file early would be my advice. Make sure, check your trademark's available. Well, I always tell clients to call it a project name until they're absolutely certain of it because otherwise it can be a bit embarrassing to explain to your investors that you've discovered your trademark. You can't register your trademark. But yeah, register your trademarks. See if you can file for a patent protection if you can, if you're doing something clever or whizzy.

[00:14:55] Make sure that your IP is owned by you, you know, get employment contracts in place relatively early on. I think the other thing, just to bring that question back to your AI thing, is that you can do an enormous amount with AI now. And I was at the International Startup Grind event in Silicon Valley earlier this year. And it was an interesting, there was lots of interesting talks, but one of the MCs was saying that they thought we'd see in the next few years,

[00:15:23] we probably would see a unicorn where it was really only one guy or two guys, where they had managed to do effectively everything using artificial intelligence. Just because, yeah, you can do your marketing with AI now. You can build your website with AI. You can, there's huge amounts that you can do and it'll be interesting to see how long that takes, but it's definitely going to happen. So leverage AI is what I suppose I'm saying

[00:15:52] to startup founders there. Yeah, I've seen a few Telegram groups out there that are dedicated to just that, where you can literally start with an idea and then build on that idea using AI from when you've got the idea how to launch the business, how to build a website, how to market it, all just by using AI, just one person on their own. So it is fascinating. But there are so many opportunities out there at the moment, but when it comes to AI and data privacy, I've got to ask,

[00:16:20] I mean, what is the secret to balancing innovation with those privacy concerns in some of those AI applications? Because it can be somewhat of a balancing act, can't it? It can. I mean, when you say balancing act, I suppose you mean how much you want to pay attention to GDPR and how much you don't care about it because you want to use AI. I'd say to everyone, just focus, make sure you get your GDPR compliance right. And obviously to the extent you're using AI,

[00:16:50] you really need to make sure that you're on top of the upcoming EU AI Act rules, legislation. Principally, those I understand are going to be concerned with transparency. But I don't think it's, I'm afraid I don't think it's a balancing act. I think everyone needs to take their protection really seriously. The fines, if you get it wrong, are just colossal. And the best thing to do is get that side of things, get your privacy right, get the terms and conditions, your privacy policy done properly

[00:17:19] and right the first time. You don't want to be in a place where the permissions you've got were not the same at the beginning of the business as two years down the line because you changed the privacy policy where you end up having to have sort of two databases where you can market to one set of people in one way and market to another set of people in another way because the permissions weren't set. So that's the way it should work. So yeah, get it right first time. Focus on your terms, focus on GDPR, focus on your privacy policy.

[00:17:49] And yeah, if you can do clever things with AI on top of that, great. But don't do it because you're ignoring your data protection obligations. And I know how valuable your time is. So it's a real honor to have you on the podcast and get some of these fantastic insights out of your head. And we'll have people listening all around the world. So any advice around legal considerations for digital advertising and marketing campaigns? Any observations or advice you can share around that too?

[00:18:17] Yeah, well, I think the themes that we've been covering, you know, will play out with, we've talked a little bit about social media and, you know, the AI act that's coming down the pipe will be predominantly about transparency. So that's going to bleed into content that's created and you'll need to make sure that any AI generated content is disclosed as being such. In actual fact, you could do that relatively straightforwardly. Instagram, there's like a little button

[00:18:46] that indicates that there's AI generated content there. But it's just going to be something that people need to be live to if they're going to be using AI in that way. If you're dropping in mid-journey imagery, you're going to need to disclose that. Again, privacy compliance, just making sure that your campaign is GDPR compliant and all the cookie consent rules are followed, that sort of boring but necessary stuff. And IP rights, you know, you need to try to make sure that

[00:19:15] you own everything that you're creating or procuring. AI can complicate that to a certain extent. That might actually become easier in the future if this legislation passes, who knows. But certainly make sure that your, as I said, your contracts stipulate how AI should be treated, i.e. it shouldn't be used at all or if it is used, that the bits that are generated should be identified. And I've got to ask, if we enter a new year, 2025,

[00:19:45] are there any particular trends that excite you or that you'll be monitoring throughout the year? Anything caught your attention at the moment? Anything you're watching closely? I think the next two years are going to be really interesting for AI. I mean, I don't know how far away singularity is, but it could be really close. The pace with which the updates to Claude and Llama and ChatGPT are coming

[00:20:13] just seems to be speeding up. And I, you know, it's daunting. It's worrying, but it's exciting as well. And I just think that, you know, 2025, 2026, we'll probably see some just colossal leaps and bounds in the capabilities of these incredible technologies. So that's definitely happening. It's going to happen all the way through next year and the year after. I think metaverse, the metaverse will improve

[00:20:42] and it will be more of a thing, but in large part, it's going to be more in the sphere of games. Like I say, GTA, GTA 6 is coming out next year. I think that's going to be very exciting to see how that works and, you know, the next big jump in sort of gaming and potential involvement of AI. And ethical AI is something that we're going to see a lot more. I think there's a rising demand now for AI governance frameworks to ensure responsible innovation.

[00:21:10] And I think that's something that we should all be clamouring for, frankly, given the pace of change. Fantastic advice. Absolutely love chatting with you today. And we've only touched the tip of the iceberg, I think. So for anyone listening wanting to find out more information about you, your work, how they can keep up to speed with some of the things we talked about, even work with you. Where would you like to point everyone listening? I'd say the Howard Kennedy website, my LinkedIn webpage, you know, slash Alex Watt.

[00:21:38] I'm at ACJ Watt on almost all social media. You can find me on X or Instagram or wherever. But certainly any queries or questions or interesting topics of conversation, DM me on LinkedIn. And how do you respond? Well, as I said at the very beginning of the podcast, there's so much excitement around AI at the moment, but also a lot of questions and uncertainty around the role of AI and intellectual property. I think you've dealt with them perfectly today.

[00:22:08] It can be daunting and exciting for people listening. But I'd love to hear what people are thinking. I will put the links to everything that you mentioned there so people can find you nice and easily. But more than anything, just thank you for shining a light on this conversation today. Oh, thank you, Neil, for having me on. I'm very grateful. Nice to meet you. Stay in touch. I think as Alex has highlighted, the legal landscape surrounding AI and intellectual property is as both complex as it is transformative. Whether it's adapting license agreements,

[00:22:38] navigating the rise of AI-generated influences, or simply preparing for emerging technologies like the metaverse, businesses right now are being challenged to stay ahead of these changes to protect their innovation and creativity and their IP. So big thank you to Alex for sharing his invaluable insights into these critical topics. And over to you. How do you see AI evolving legal frameworks impacting your industry? Let's continue the conversation.

[00:23:08] Love to hear your thoughts. Email me techblogwriteroutlook.com, LinkedIn, X, Instagram, just at Neil C. Hughes. Let me know your thoughts on all things AI and IP related. That's it for today's episode, though. I'll be back tomorrow with a completely different topic. Hopefully you can join me again. But that's it for today. Bye for now.