Business
Column: The AI industry has a battle-tested plan to keep using our content without paying for it
This time in 2023, the world was in thrall to the rise of OpenAI’s dazzling chatbot. ChatGPT was metastasizing like a fungal infection, amassing tens of millions of users a month. Multibillion-dollar partnerships materialized, and investments poured in. Big Tech joined the party. AI image generators like Midjourney took flight.
Just a year later, the mood has darkened. The surprise sacking and rapid reinstatement of OpenAI Chief Executive Sam Altman gave the company an embarrassing emperor-has-no-clothes moment. Profits are scarce across the sector, and computing costs are sky high. But one issue looms large above all and threatens to bring the fledgling industry back to earth: Copyright.
The legal complaints that cropped up throughout last year have grown into a thundering chorus, and the tech companies say they now present an existential threat to generative AI (the kind that can produce writing, pictures, music and so on). If 2023 was the year the world marveled at AI content generators, 2024 may be the year that the humans who created the raw materials that made that content possible get their revenge — and maybe even claw back some of the value built on their work.
In the last days of December, the New York Times filed a bombshell lawsuit against Microsoft and OpenAI, alleging that “millions of its articles were used to train automated chatbots that now compete with the news outlet as a source of reliable information.” The Times’ lawsuit joins a host of others — class-action lawsuits filed by illustrators, by the photo service Getty Images, by George R.R. Martin and the Author’s Guild, by anonymous social media users, to name a few — all alleging that companies that stand to profit from generative AI used the work of writers, reporters, artists and others without consent or compensation, infringing on their copyrights in the process.
Our experiments make it all but certain that these systems are in fact training on copyrighted material.
— Cognitive scientist Gary Marcus
Each of these lawsuits have their merits, but the Gray Lady’s entrance into the arena changes the game. For one thing, the Times is influential in shaping national narratives. For another, the Times lawsuit is uniquely damning; it’s loaded with example after example of how ChatGPT replicates news articles nearly verbatim, and offers the responses to its paying customers, free of attribution.
It’s not just the lawsuits: The heat is getting turned up by Congress, researchers and AI experts too. On Wednesday, a congressional hearing saw senators and media industry representatives agree that AI companies should pay licensing fees for the material they use to train their models. “It’s not only morally right,” said Sen. Richard Blumenthal (D.-Conn.), who chairs the subcommittee that held the hearing, according to Wired. “It’s legally required.”
Meanwhile, a fiery study recently published in IEEE Spectrum, co-written by the cognitive scientist and AI expert Gary Marcus and the film industry veteran Reid Southern, shows that Midjourney and Dall-E, two of the leading AI image generators, were trained on copyrighted material, and can regurgitate that material at will — often without even being prompted to.
“Our experiments make it all but certain that these systems are in fact training on copyrighted material,” Marcus told me, something that the companies have been coy about copping to explicitly. “The companies have been far from straightforward in what they’re using, so it was important to establish that they are using copyrighted materials.” Also important: that the copyright-infringing works come spilling out of the systems with little prodding. “You don’t need to prompt it, to say ‘make C3P0’ — you can just say ‘draw golden droid.’ Or ‘Italian plumber’ — it will just draw Mario.”
This has serious implications for anyone using the systems in a commercial capacity. “The companies whose properties are infringed — Mattel, Nintendo — are going to take an interest in this,” Marcus says. “But the user is left vulnerable too — There’s nothing in the output that says what the sources are. In fact the software isn’t capable of doing that in a reliable way. So the users are on the hook and have no clue as to whether it’s infringing or not.”
There’s also a sense of momentum that’s beginning to build behind the simple notion that creators should be compensated for work that’s being used by AI companies valued at billions or tens of billions — or hundreds of billions of dollars, as Google and Microsoft are. The notion that generative AI systems are at root “plagiarism machines” has become increasingly widespread among their critics, and social media is teeming with opprobrium against AI.
But those AI companies aren’t likely to relent. We saw a foreshadowing of how the AI companies would respond to copyright concerns at large last year, when famed venture capitalist and AI evangelist Marc Andreessen’s firm argued that AI companies would go broke if they had to pay copyright royalties or licensing fees. Just this week, British media outlets reported that OpenAI has made the same case, seeking an exemption from copyright rules in England, claiming that the company simply couldn’t operate without ingesting copyrighted materials.
“Because copyright today covers virtually every sort of human expression — including blogposts, photographs, forum posts, scraps of software code, and government documents — it would be impossible to train today’s leading AI models without using copyrighted materials,” OpenAI argued in its submission to the House of Lords. Note that both Andreessen and OpenAI’s statements underscore the value of copyrighted work in arguing that AI companies shouldn’t have to pay for it. What can they do about it?
First, they’re pleading poverty. There’s just too much material out there to compensate everyone who contributed to making their system work and to making their valuation go through the roof. “Poor little rich company that’s valued at $100 billion can’t afford it,” Marcus says. “I don’t know how well that’s going to wash, but that’s what they’re arguing.”
The AI companies also argue what they’re doing falls under the legal doctrine of fair use — probably the strongest argument they’ve got — because it’s transformative. This argument helped Google win in court against the big book publishers when it was copying books into its massive Google Books database, and defeat claims that YouTube was profiting by allowing users to host and promulgate unlicensed material.
Next, the AI companies argue that copyright-violating outputs like those uncovered by Marcus, Southern and the New York Times are rare or are bugs that are going to be patched.
“They say, ‘Well this doesn’t happen very much. You need to do special prompting.’ But the things we asked it were pretty neutral — and we still got” copyrighted material, Marcus says. “This is not a minor side issue — this is how the systems are built. It is existential for these companies to be able to use this amount of data.” Finally, aside from just making arguments in court and in statements, the AI companies are going to use their ample resources to lobby behind the scenes and throw their power around to help make their case.
Again, the generative AI industry isn’t making much money yet — last year was essentially one massive product demo to hype up the technology. And it worked: The investment dollars did pour in. But that doesn’t mean the AI companies have figured out ways to build a sustainable business model. They’re already operating under the assumption that they will not pay for things such as training materials, licenses or artists’ labor.
Of course, it is in no way true that the likes of Google, Microsoft, or even OpenAI cannot afford to pay to use copyrighted works — but Silicon Valley is at this point used to cutting labor and the cost of creative works out of the equation, and has little reason to think it would not be able to do so again. From Uber to Spotify, the business models of many of this century’s biggest tech companies have been built on the assumption that labor costs could be cut out or minimized. And when creative industries argued that YouTube allowed pirated and unlicensed materials to proliferate at the workers’ expense, and backed the Stop Online Piracy Act (SOPA) to fight it, Google was instrumental in stopping the bill, organizing rallies and online campaigns, and lobbying lawmakers to jump ship.
William Fitzgerald, a partner at the Worker Agency and former member of the public policy team at Google, tells me he sees a similar pressure campaign taking shape to fight the copyright cases, one modeled on the playbook Google has used successfully in the past: Marshaling third-party groups and organs such as the Chamber of Progress to push the idea that using copyrighted works for generative AI is not just fair use, but something that’s being embraced by artists themselves, not all of whom are so hung up on things like wanting to be paid for their work. He points to a pro-generative AI open letter signed by AI artists, that was, according to one of the artists involved, organized by Derek Slater, a former Google policy director whose firm works with Google — the same person who took credit for organizing the anti-SOPA efforts. Fitzgerald also sees Google’s fingerprints on Creative Commons’ embrace of the argument that AI art is fair use, as Google is a major funder of the organization.
“It’s worrisome to see Google deploy the same lobbying tactics they’ve developed over the years to ensure workers don’t get paid fairly for their labor,” Fitzgerald said. And OpenAI is close behind. It is not only taking a similar approach to heading off copyright complaints as Google, but it’s also hiring the same people: It hired Fred Von Lohmann, Google’s former director of copyright policy, as its top copyright lawyer. “It appears OpenAI is replicating Google’s lobbying playbook,” he says. “They’ve hired former Google advocates to affect the same playbook that’s been so successful for Google for decades now.”
Things are different this time, however. There was real grassroots animosity against SOPA, which was seen at the time as engineered by Hollywood and the music industry; Silicon Valley was still widely beloved as a benevolent inventor of the future, and many didn’t see how having an artist’s work uploaded to a video platform owned by the good guys on the internet might be detrimental to their economic interests. (Though many did!)
Now, however, workers in the digital world are better prepared. Everyone from Hollywood screenwriters to freelance illustrators to part-time copywriters to full-time coders can recognize the potential material effect of a generative AI system that can ingest their work, replicate it, and offer it to users for a monthly fee — paid to a Silicon Valley corporation, not them.
“It’s asking for an enormous giveaway,” Marcus says. “It’s the equivalent of a major land grab.”
Now, there are many in Silicon Valley who are of course genuinely excited about the potential of AI, and many others who are genuinely oblivious to matters of political economy; who want to see the gains made as quickly as possible, and do not realize how these work-automating systems will be used in practice. Others may simply not care. But for those who do, Marcus says there’s a simple way forward. “There’s an obvious alternative here — OpenAI’s saying that we need all this or we can’t build AI — but they could pay for it!” We want a world with artists and with writers, after all, he adds, one that rewards artistic work — not one where all the money goes to the top because a handful of tech companies won a digital land grab.
“It’s up to workers everywhere to see this for what it is, get organized, educate lawmakers and fight to get paid fairly for their labor,” Fitzgerald says. “Because if they don’t, Google and OpenAI will continue to profit from other people’s labor and content for a long time to come.”
The highest gas prices in the country are making it tougher for some gig drivers to make a living.
Gas prices have shot up amid the war in the Middle East. On average, California gas prices are the most expensive in the United States, according to data from the American Automobile Assn. The average price of regular gas in California is almost $6. The national average is a little above $4.
While Uber and Lyft drivers have concocted clever ways to cut gas consumption, they say that without some relief they will be forced to leave the ride-hailing business.
John Mejia was already struggling to make money as a part-time Lyft driver when soaring gas prices made his side hustle even harder.
“Unfortunately, it’s the economics of paying less to drivers and gas prices,” he said. “It actually is pulling people out of the business.”
Guests at The Westin St. Francis hotel get into an Uber.
(Jess Lynn Goss / For The Times)
Gig work offers drivers the freedom to work for themselves and more flexibility, but being independent contractors also means they must shoulder unexpected costs.
Ride-sharing companies say they’re trying to help, but drivers say the gas relief comes with caveats. For now, drivers say they’re being pickier about what rides they accept, cutting hours and are looking at other ways to make money.
Mejia, who started driving for Lyft more than a decade ago, said in his early days, he would sometimes make $400 in three hours. Now it takes 12 hours to rake in $200.
The San Francisco Bay Area consultant is an active member of the California Gig Workers Union, so he knows he isn’t alone. California has more than 800,000 gig rideshare drivers, according to the group, which is affiliated with the Service Employees International Union.
On social media sites such as Reddit and Facebook, gig workers have posted about how the higher gas prices are eating into their earnings. Among the tricks they are suggesting: reducing the number of times the ignition is turned on or off, avoiding traffic, working in specific neighborhoods and at times with high demand and switching to electric vehicles.
Gig drivers usually have only seconds to decide whether to accept a ride on the app, but they have become more strategic about which rides and deliveries they accept.
That means they are more likely to sit back in their cars and wait for higher fares for quick pick-up and drop-off.
“I highly recommend the ‘decline and recline’ strategy, rejecting unprofitable rides until a better one appears,” wrote Sergio Avedian, a driver, in the popular blog the Rideshare Guy.
Pedestrians cross the street in front of a Lyft and Uber driver on Wednesday. High gas prices have made it hard for gig drivers to make a living, cutting into their profits.
(Jess Lynn Goss / For The Times)
Uber, Lyft and other companies have unveiled several ways to help drivers save on gas.
Uber said drivers can get up to 15% cash back through May 26 with the Uber Pro card, a business debit Mastercard for drivers and couriers. Based on a worker’s tier, they can get up to $1 off per gallon of gas through Upside — an app that offers cash rewards — and up to 21 cents off per gallon of gas with Shell Fuel Rewards. The company also offers incentives for drivers who want to switch to electric vehicles.
“We know the price of gas is top of mind for many rideshare and delivery drivers across the country right now,” Uber said in a blog post about its gas savings efforts.
Lyft also said it’s expanding gas relief through May 26 because the company knows that the extra cost “hits hardest for drivers who depend on driving for their income.”
The company is offering more cash back, depending on the driver’s tier, for drivers who use a Lyft Direct business debit card to pay for gas at eligible gas stations. They can get an additional 14 cents per gallon off through Upside.
Drivers say the fine print on the offers dictates which card they use and where they fill up gas, making it difficult for them to save money.
“If I do the math, it’s ridiculous,” Mejia said. “They’re offering us nothing.”
Uber declined to comment, but pointed to its blog post about the gas relief efforts. Lyft also referenced the blog post and said “the gas savings were structured through rewards to maximize stackable opportunities.”
Guests at The Westin St. Francis hotel get into an Uber.
(Jess Lynn Goss / For The Times)
Gig workers have struggled with rising gas prices in the past.
In 2022, Lyft and Uber temporarily added a surcharge to their fares amid record-high gas prices following Russia’s invasion of Ukraine. This year, Uber is adding a fuel charge to its fares in Australia for roughly two months to offset the high cost of gas for drivers. Lyft said it hasn’t added a fuel charge in the U.S. or elsewhere.
Margarita Penalosa, who drives full time for Uber and Lyft in Los Angeles, started as a rideshare driver in 2017. Back then, gas was cheaper. She would easily hit her goal of making $300 in eight hours. Now she’s making just $250 after working as much as 14 hours.
Gas prices, she said, used to be less than $3 per gallon. Now some gas stations are charging more than $8 per gallon.
“Take out the gas. Take out the mileage from my car and maintenance. How much [do] I really make? Probably I get $11 for an hour,” she said.
Jonathan Tipton Meyers wants to spend fewer hours as a rideshare driver.
He already juggles multiple gigs even while driving for Uber and Lyft in Los Angeles. He’s a mobile notary and loan signing agent, a writer and performer.
Driving is “a very challenging, full-time job,” he said. “It’s very taxing and, of course, wages were just continually decreasing.”
John Mejia, a longtime Lyft and Uber driver, poses for a portrait before attending a meeting about unionizing gig drivers.
(Jess Lynn Goss / For The Times)
Even if oil continues to flow through the Strait of Hormuz, which Iran reopened Friday, it could take a while for gas prices to come down to earth, said Mark Zandi, the chief economist at Moody’s Analytics.
“There’s an old adage that prices rise like a rocket and fall like a feather,” he said. “I think that’ll apply.”
In the meantime, it will be survival of the fittest drivers. If enough of them decide to leave the apps, the ride-hailing companies could be forced to raise fares further to attract some back.
“Those who approach rideshare driving strategically, tracking expenses, choosing trips carefully, and optimizing efficiency are far more likely to weather periods of high gas prices,” wrote Avedian in the Rideshare Guy blog. “For everyone else, a spike at the pump can quickly turn rideshare driving from a side hustle into a money-losing venture.”
The proprietor of Los Angeles’ legendary Clifton’s has given up on reopening the shuttered venue.
It’s just too difficult to do business in downtown’s historic core, he says.
Andrew Meieran bought Clifton’s on Broadway in 2010 and poured more than $14 million into repairs, renovations and upgrades, adding additional bar and restaurant spaces in the four-story building. In 2018, he found that demand for cafeteria food was too low to be profitable, and he pivoted to a nightclub and lounge concept called Clifton’s Republic, featuring multiple dining and drinking venues. Meieran has tried elaborate themed environments, such as a tiki bar and forest playgrounds, and renting out the location for big events to spark more interest.
It was never easy, but during and since the pandemic, the neighborhood has grown increasingly unsafe as downtown has emptied of office workers and visitors.
Storefronts are gated up due to vandalism in the historic district in downtown Los Angeles on Tuesday.
(Eric Thayer / Los Angeles Times)
The alley behind Clifton’s Cafeteria in the downtown historic district Tuesday.
(Eric Thayer / Los Angeles Times)
Vandalism has been rampant, with graffiti appearing on the historic structure almost daily. Vandals would use acid or diamond glass cutters to deface the windows, often cracking the glass. It would cost Meieran more than $30,000 each time to replace the windows. Insurance companies either stopped offering policies that covered vandalism or raised premiums by as much as 600%, he said.
There has been continuous crime in the area, he said, including multiple assaults on people in front of his building. He last shut the venue last year, hoping things would improve and he could come back with a business that could work. Now he has given up. Someone else may take over the space or even the name of the historic spot, but he is done trying.
“We’ve lost our way,” Meieran said. “I want to get up on the tops of the skyscrapers and yell that people need to pay attention to this.”
The disenchantment of a business leader who used to be one of downtown L.A.’s biggest backers shines a spotlight on the stubborn safety concerns, rising costs and thinner foot traffic that have made it increasingly difficult for even iconic businesses to survive.
The once-popular institution dates back to 1935, when it was a Depression-era cafeteria and kitschy oasis that sold as many as 15,000 meals a day when Broadway was the city’s entertainment hub.
It served traditional cafeteria food such as pot roast, mashed potatoes and Jell-O in a woodsy grotto among fake redwood trees and a stone-wrapped waterfall reminiscent of Brookdale Lodge in Northern California.
It’s not the only once-prominent destination that has failed to find a way to flourish in today’s market. Cole’s, one of L.A.’s most famous restaurants and often credited with inventing the French dip sandwich, closed last month after a 118-year run.
“The bigger problem for us and the rest of the industry is the high cost of doing business,” said Cedd Moses, who used to operate Cole’s and has backed many other bars and restaurants in historic buildings downtown for decades. “That’s what is killing independent restaurants in this city.”
Outside of Clifton’s Cafeteria.
(Eric Thayer / Los Angeles Times)
Clifton’s Republic owner Andrew Meieran stands next to a boat on the top floor of the historic restaurant in 2024.
(Wally Skalij / Los Angeles Times)
Clifton’s opened and closed repeatedly during the pandemic and, more recently, after a burst pipe caused extensive damage. Meieran opened it for special events such as last Halloween, but it has otherwise been closed.
Police are woefully understaffed and hampered by public policy, said Blair Besten, president of downtown’s Historic Core Business Improvement District, a nonprofit that arranges graffiti removal, trash pickup and safety patrols in the area.
Businesses and residents in the area would like to see a bigger police presence, but there have been protests against that by people who are not from downtown, she said.
“People are starting to see the fruits of the defunding movement,” she said. “It has not led us to a better place as a city.”
The Los Angeles Police Department is making progress downtown, Captain Kelly Muniz said, with violent crime down more than 10% from last year.
“While we’re working very hard to solve crime, to prevent crime, there are still elements such as trash, open-air drug use, homelessness and graffiti,” she said. “We’re swinging in the right direction.”
Retailers have been opting out of downtown L.A., said real estate broker Derrick Moore of CBRE, who helps arrange commercial property leases. Brands have headed to more vibrant nearby neighborhoods such as Echo Park and Silver Lake.
“A lot of operators are just electing to skip over downtown,” he said. “They’re leasing spaces elsewhere, where they feel they have a greater chance at higher sales.”
A man walks past a pile of trash left on the street in the historic district.
(Eric Thayer / Los Angeles Times)
While some businesses are struggling, many downtown residents say their perceptions of safety are improving and that the area is regaining some vibrancy.
“A lot of people live here. I think people forget that,” Besten said. “We’re all surviving. It’s just hard for all the businesses to survive.”
A green shoot for the Historic Core is Art Night on the first Thursday of every month, when 50 or 60 locations, including permanent art galleries and pop-up galleries in unused storefronts, display art to map-toting visitors who come for the occasion.
They often end up in Spring Street bars, which more typically thrive on weekend nights but are still a draw to downtown.
“I think nightlife will thrive downtown, since bars attract people that don’t mind a little grittier atmosphere,” said Moses. “Our sales are hitting new records at our bars downtown, fortunately, but our costs have risen dramatically.”
A closed sign for Clifton’s Cafeteria.
(Eric Thayer / Los Angeles Times)
Clifton’s former backer, Meieran, says he doesn’t think things are going to bounce back enough to warrant more massive investment. He has sold the building, and the owner is looking for a new tenant to occupy Clifton’s space. He still controls the Clifton’s name.
While there is still a chance he could let someone else use the name Clifton’s, Meieran is done for now — too many bad memories.
“There was a guy who was terrorizing the front of Clifton’s because he decided he wanted to live in the vestibule in front, and he didn’t want us to operate there,” Meieran said. “He would threaten to kill anybody who came through.”
He doesn’t believe official statistics that show crime and homelessness are way down in the area, and he doesn’t want to restart a business when criminals can so easily erase his hard work.
“What business that’s already on thin margins can survive that?” he said.
Trader Joe’s customers might soon get a payout from the popular grocery chain.
The Monrovia-based company agreed to a $7.4-million settlement in a class action lawsuit that claimed customers were left vulnerable to identity theft.
Customers who purchased items with a credit or debit card from March to July in 2019 might be eligible for a payment as part of the settlement.
The plaintiff alleged that some receipts printed in 2019 included 10-digit credit or debit card numbers —double what’s allowed under the Fair and Accurate Credit Transactions Act.
Trader Joe’s “vigorously denies any and all liability or wrongdoing whatsoever,” the grocery chain said in the settlement website. The grocery chain decided to settle to avoid a long and costly litigation process.
The payout will go toward paying impacted customers as well as attorney fees and other expenses.
About $2.6 million will go toward attorney fees, and the plaintiff will receive a $10,000 incentive payment, according to the settlement. The remaining funds will be distributed evenly among customers who submit valid claims.
It’s unclear how much money each customer would get, but the payout could be about $102, according to the settlement notice.
To receive the payout, customers must have received a receipt displaying the first six and last four digits of the card number.
Some customers identified as part of the settlement class have been notified and received a class ID number to file a claim.
Customers have from now until June 6 to file a claim online or by phone.
A customer not identified in the settlement can still submit a claim by entering the first six and last four digits of the card used, along with the date it was used at Trader Joe’s.
Brian Keim, the plaintiff who brought the case, used his debit card at stores in Florida in 2019. He said some stores printed transaction receipts that included the first six and last four digits of customers’ card numbers.
The receipts did not include other personal information, such as the middle digits of the users’ cards, the cards’ expiration dates, or the users’ addresses. No customer has reported identity theft as a result of the receipts since the lawsuit was filed, the grocer said.
However, identity theft doesn’t require submitting a claim for payment.
The settlement was agreed upon by both the grocer and the plaintiff, but still has to be approved by a court. A hearing is set in August.
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