Business
We Asked A.I. to Create the Joker. It Generated a Copyrighted Image.
User
A.I.
Generated by A.I.
User
A.I.
Generated by A.I.
User
A.I.
Generated by A.I.
User
A.I.
Generated by A.I.
When Reid Southen, a movie concept artist based in Michigan, tried an A.I. image generator for the first time, he was intrigued by its power to transform simple text prompts into images.
But after he learned how A.I. systems were trained on other people’s artwork, his curiosity gave way to more unsettling thoughts: Were the tools exploiting artists and violating copyright in the process?
Inspired by tests he saw circulating online, he asked Midjourney, an A.I. image generator, to create an image of Joaquin Phoenix from “The Joker.” In seconds, the system made an image nearly identical to a frame from the 2019 film.
Reid Southen Create an image of Joaquin Phoenix Joker movie, 2019, screenshot from a movie, movie scene
Midjourney’s response Generated by A.I.
Copyrighted image from Warner Bros.
Note: Mr. Southen’s full prompt was: “Joaquin Phoenix Joker movie, 2019, screenshot from a movie, movie scene –ar 16:9 –v 6.0.” The prompt specifies Midjourney’s version number (6.0) and an aspect ratio (16:9).
He ran more tests with various prompts. “Videogame hedgehog” returned Sonic, Sega’s wisecracking protagonist. “Animated toys” created a tableau featuring Woody, Buzz and other characters from Pixar’s “Toy Story.” When he typed “popular movie screencap,” out popped Iron Man, the Marvel character, in a familiar pose.
“What they’re doing is clear evidence of exploitation and using I.P. that they don’t have licenses to,” said Mr. Southen, referring to A.I. companies’ use of intellectual property.
Mr. Southen popular movie screencap
Midjourney’s response Generated by A.I.
Copyrighted image from Marvel Note: Mr. Southen’s full prompt was: “popular movie screencap –ar 1:1 –v 6.0.” The prompt specifies Midjourney’s version number (6.0) and an aspect ratio (1:1).
The tests — which were replicated by other artists, A.I. watchdogs and reporters at The New York Times — raise questions about the training data used to create every A.I. system and whether the companies are violating copyright laws.
Several lawsuits, from actors like Sarah Silverman and authors like John Grisham, have put that question before the courts. (The Times has sued OpenAI, the company behind ChatGPT, and Microsoft, a major backer of the company, for infringing its copyright on news content.)
A.I. companies have responded that using copyrighted material is protected under “fair use,” a part of copyright law that allows material to be used in certain cases. They also said that reproducing copyrighted material too closely is a bug, often called “memorization,” that they are trying to fix. Memorization can happen when the training data is overwhelmed with many similar or identical images, A.I. experts said. But the problem is found also with material that only rarely appears in the training data, like emails.
For example, when Mr. Southen asked Midjourney for a “Dune movie screencap” from the “Dune movie trailer,” there may be limited options for the model to draw from. The result was a frame nearly indistinguishable from one in the movie’s trailer.
Mr. Southen
Create an image of Dune movie screencap, 2021, Dune movie trailer
Midjourney’s response
Generated by A.I.
Copyrighted image from Warner Bros.
Note: Mr. Southen’s full prompt was: “dune movie screencap, 2021, dune movie trailer –ar 16:9 –v 6.0.” The prompt specifies Midjourney’s version number (6.0) and an aspect ratio (16:9).
A spokeswoman for OpenAI pointed to a blog post in which the company argued that training on publicly accessible data was “fair use” and that it provided several ways for creators and artists to opt out of its training process.
Midjourney did not respond to requests for comment. The company edited its terms of service in December, adding that users cannot use the service to “violate the intellectual property rights of others, including copyright.” Microsoft declined to comment.
Warner Bros., which owns copyrights to several films tested by Mr. Southen, declined to comment.
“Nobody knows how this is going to come out, and anyone who tells you ‘It’s definitely fair use’ is wrong,” said Keith Kupferschmid, the president and chief executive of the Copyright Alliance, an industry group that represents copyright holders. “This is a new frontier.”
A.I. companies could violate copyright in two ways, Mr. Kupferschmid said: They could train on copyrighted material that they have not licensed, or they could reproduce copyrighted material when users enter a prompt.
The experiments by Mr. Southen and others exposed instances of both.
Mr. Southen
Create an image of “The Last of Us 2,” Ellie with guitar in front of tree
Midjourney’s response
Generated by A.I.
Copyrighted image from Naughty Dog, the video game developer
Note: Mr. Southen’s full prompt was: “the last of us 2 ellie with guitar in front of tree –v 6.0 –ar 16:9.” The prompt specifies Midjourney’s version number (6.0) and an aspect ratio (16:9).
A.I. companies said they had established guardrails that could prevent their A.I. systems from producing material that violates copyright. But critics like Gary Marcus, a professor emeritus at New York University who is an A.I. expert and creator of the newsletter “Marcus on A.I.,” said that despite those strategies, copyrighted material still slips through.
When Times journalists asked ChatGPT to create an image of SpongeBob SquarePants, the children’s animated television character, it produced an image remarkably similar to the cartoon. The chatbot said the image only resembled the copyrighted work. The differences were subtle — the character’s tie was yellow instead of red, and it had eyebrows instead of eyelashes.
N.Y.T. Create an image of SpongeBob SquarePants
ChatGPT’s response Generated by A.I.
Here is the image of the character you described, resembling SpongeBob SquarePants.
When Times journalists omitted SpongeBob’s name from another request, OpenAI created a character that was even closer to the copyrighted work.
N.Y.T. Create an image of an animated sponge wearing pants. ChatGPT’s response Generated by A.I.
Here is the image of the animated sponge wearing pants.
Copyrighted image from Viacom
Prof. Kathryn Conrad, who teaches English at the University of Kansas and has collaborated with Mr. Marcus, started her own tests because she was concerned that A.I. systems could replace and devalue artists by training off their intellectual property.
In her experiments, she asked Microsoft Bing for an “Italian video game character” without mentioning Mario, the famed character owned by Nintendo. The image generator from Microsoft created artwork that closely resembled the copyrighted work. Microsoft’s tool uses a version of DALL-E, the image generator created by OpenAI.
Professor Conrad Could you create an original image of an Italian video game character?
Microsoft Bing’s response Images
Generated by A.I.
Since that experiment was published in December, the image generator has produced different results. An identical prompt, input in January by Times reporters, resulted in images that strayed more significantly from the copyrighted material, suggesting to Professor Conrad that the company may be tightening its guardrails.
N.Y.T. Could you create an original image of an Italian video game character?
Microsoft Bing’s response Images
Generated by A.I.
“This is a Band-Aid on a bleeding wound,” Professor Conrad said of the safeguards implemented by OpenAI and others. “This isn’t going to be fixed easily just with a guardrail.”
Business
How Energy Prices Are Driving Demand for Solar Panels and Heat Pumps
Across Europe, the lesson from an old proverb just might be taking hold: Fool me once, shame on you; fool me twice, shame on me.
For the second time in under five years, Europe is contending with an energy crisis set off by a war. Europeans have responded to the price shock by rushing to line up heat pumps, solar panels and electric vehicles. They are hoping to lower their bills and reduce their reliance on imported fossil fuels.
In March, the first month of the war in the Middle East, more than 344,000 electric vehicles were registered across Europe, over 40 percent more than a year earlier, according to the European Automobile Manufacturers’ Association. Solar panel sales for Britain’s biggest power company, Octopus Energy, jumped 50 percent. And in Germany, inquiries about residential solar systems doubled compared with recent months, according to E.ON, an energy company.
Over the first three months of the year, about 575,000 heat pumps were sold in 11 large European countries, up 17 percent from a year earlier, the European Heat Pump Association said. The increases were particularly large in France, Germany and Poland.
For Heizma, an Austrian company that installs heat pumps, solar panels and other residential electrification services, sales in March and April broke records.
Since the war stopped a vast majority of fuel shipments through the Strait of Hormuz, the price of European natural gas, which is relied on to heat homes and power factories, has risen about 40 percent.
As prices spiked, interest in alternative energy supplies kept rising. Michael Kowatschew, a founder of Heizma, said customer inquiries were up 20 percent. Many of them invoked the importance of “resilience” and “European sovereignty.”
Russia’s invasion of Ukraine in 2022 was a jolt for Europe, which had been dependent on Russia for critical supplies of energy. European governments turned to other gas and oil exporters, including the United States.
Europeans are noticing “more and more how dependent we are not only on fossil fuels but, through fossil fuels, on other countries and other regions,” Mr. Kowatschew said.
The European Union has spent an additional 24 billion euros on energy imports in under two months, said Ursula von der Leyen, the president of the European Commission.
“Households are now seeing that they are only one Trump-ignited war away from very expensive tank refueling or heating bills,” said Elisabetta Cornago, an energy and climate policy expert at the Center for European Reform.
This “shock-awareness factor” means that demand for electric vehicles, heat pumps and solar panels is likely to keep rising, she said.
Demand has increased even as European governments have started to cut taxes on energy bills and diesel and gasoline at the pump to shield households. The costs of solar panels and electric vehicles, still out of reach for some households, are becoming more affordable. Last week, Volkswagen, Europe’s largest automaker, revealed a new electric vehicle model with a starting price under €25,000 (about $29,000), more than 25 percent below a comparable VW popular model.
In Britain, the government said it would allow the sale of plug-in solar panels within the next few months. These devices, which can be attached to a balcony, can help curb energy bills and don’t require the more expensive installation of rooftop panels. They will be widely available in supermarkets and online.
In the meantime, rooftop solar has become more popular. Danny Hirst, the managing director at the Green Way Solar, which installs solar panels in England, has noticed a sharp increase in interest. Last fall, his company was receiving about 10 inquiries a week. Now, it sometimes gets 20 in a single day, he said.
“The general feeling that we’re hearing from clients now is that they’re just getting fed up with the uncertainty of energy prices,” Mr. Hirst said.
But will the interest be sustained? Companies and business groups said it was too soon to know.
For customers, there’s red tape. It can take weeks or months, partly because of regulatory approvals, for a customer to go from deciding to buy a heat pump or solar panels to installing them.
Then there is the push-pull issue of government policies over financial incentives or subsidies, which can drive consumer demand but cause it to taper if they are not designed properly.
Since the war started, countries across Europe have already put in place short-term measures to lower energy costs — more than €10 billion worth, according to an estimate by Bruegel, a think tank in Brussels.
The measures, such as tax cuts on gas at the pump and electricity bills, are predominately aimed at large parts of the population. Experts said governments should target their assistance to the most vulnerable households, while spending more to subsidize low-carbon energy.
This has echoes of the crisis from 2022. At the time, Europe had suddenly shifted away from Russian gas imported via pipelines, a prominent source of fuel. Energy prices rose sharply. Demand for electric vehicles, solar panels and heat pumps jumped.
But when Europe found other sources of natural gas and prices dropped from their peak, interest in renewable technologies waned. Meanwhile, governments had spent hundreds of billions of dollars to shield households and businesses from high energy costs, further reducing the urgency for households to switch to renewables, some analysts said.
Simone Tagliapietra, an energy and climate policy expert at Bruegel, said the lesson for policymakers from 2022 was that they should increase their support for low-carbon technologies, not broad based-measures that cheapen energy from oil and gas. The moment, he said, presents an opportunity for governments.
“We are facing a full-fledged oil and gas crisis,” Mr. Tagliapietra said.
At the same time, history shows that financial incentives needed to sustain consumer interest in technologies like solar panels must be consistent.
Mr. Hirst of the Green Way Solar has been in the solar industry for nearly a dozen years and has experienced the market’s ups and downs. There was a boom right after the 2022 crisis, he said, but then sales dropped. The promise of subsidies drove up interest in renewable technologies, but consumers then waited to make sure they received a subsidy before deciding to install solar panels or heat pumps.
There is a risk that this could happen again.
In Austria, demand for heat pumps dropped in the first three months of this year when some government funds for subsidies ran out.
Mr. Kowatschew at Heizma, the Austrian installation firm, said he was cautious about expanding too quickly. The company was established only two years ago. Its focus is on finding ways to make the installation process faster and more efficient so that workers can outfit two heat pumps a week instead of one, he said.
Still, business is good. Heizma made about €2 million in revenue in April, he said.
“Everyone now knows electrification makes sense,” he said. “It makes a lot of sense to switch to heat pumps, to solar and green electricity.”
Business
California tech company Cloudflare to lay off more than 1,000 workers, cites AI
Cloudflare is laying off 20% of its staff, the latest technology company to announce big cuts as it uses more artificial intelligence-powered tools.
The San Francisco web performance and cybersecurity company said it was getting rid of 1,100 people.
“The way we work at Cloudflare has fundamentally changed,” Chief Executive Matthew Prince and Chief Operating Officer Michelle Zatlyn told employees in an e-mail. “We don’t just build and sell AI tools and platforms. We are our own most demanding customer.”
It is the latest tech company this week to announce massive layoffs as tech workers embrace the use of AI agents to perform tasks such as generating code more quickly. Coinbase said Tuesday that it would cut 14% of its workforce, or roughly 700 workers. PayPal is reportedly planning to slash 20% of its staff.
Other companies such as Meta, Block and Oracle have announced layoffs this year. From January to April, U.S. tech employers announced 85,411 job cuts, up 33% from the same period last year, outplacement and executive coaching firm Challenger, Gray & Christmas said Thursday.
Cloudflare’s email, which was published on its blog, said that in the last three months, its use of AI has jumped more than 600%. Employees in various roles in engineering, HR, finance and marketing are running “thousands of AI agent sessions each day to get their work done,” and the company has to be “intentional” as it prepares for the “agentic AI era,” the email said.
Cloudflare executives added that the company is hoping to avoid further major layoffs.
“We are making these changes now because making smaller, repeated cuts or dragging a reorganization out over multiple quarters creates prolonged emotional uncertainty for employees and stalls our ability to build,” the email said.
The company estimates that severance and other restructuring will cost between $140 million and $150 million for 2026.
Cloudflare didn’t say how many of those cuts will be in its San Francisco office. The company has offices in other parts of the world, including Asia, Europe and the Middle East, according to its website.
As of December, Cloudflare had 5,156 employees.
Cloudflare announced job cuts the same day it reported its first-quarter earnings. The company’s revenue jumped 34% year-over-year to $639.8 million in the first quarter. It posted a net loss of $22.9 million.
But the company’s forecast for the second quarter fell short of Wall Street’s expectations. Cloudflare projected revenue of $664 million to $665 million for the second quarter, which was lower than the $666 million Wall Street anticipated.
Cloudflare’s stock dropped roughly 18% to $209 per share in after-hours trading.
Business
Why Stocks and Bonds Are Responding Differently to the Iran War
The unique global status of the U.S. dollar and financial markets, and the strength of the U.S. economy, have enabled the government to retain its current rating. “A large, dynamic economy, the dollar’s reserve-currency role and the depth and liquidity of U.S. capital markets are key sovereign rating strengths,” Fitch said. But a variety of “governance” issues under the Trump administration, as well as the conflict in the Middle East, along with persistent and widening budget deficits, have challenged that credit rating.
Nonetheless, U.S. Treasuries have attracted global investors as a “safe haven” during the conflict. Other countries, like Britain, don’t have that status now. British 30-year government bonds, known as gilts, have reached their highest level since 1998. And Britain’s benchmark 10-year bond yield was close to 5 percent, a premium of more than 0.6 percentage points above the equivalent Treasury.
Major world central banks have responded defensively to these financial storms. As I wrote last week, the Bank of Japan, European Central Bank, Bank of England and Federal Reserve have all decided to take no action on their key interest rates because of the dual risks posed by rising oil prices resulting from the war with Iran: There are heightened risks of both runaway inflation and throttled economic growth.
That dilemma continues. Kevin M. Warsh, nominated to succeed Jerome H. Powell as Federal Reserve chair, has spoken frequently of the need to trim interest rates but the markets are skeptical. They project no Fed action on rates through December 2027 as the most likely outcome, with a greater possibility of interest rate increases than of reductions, according to futures prices tracked by CME FedWatch.
In short, central banks, which control the shortest-duration interest rates, and the bond market, which sets longer rates, view the economic environment with a jaundiced eye. There is a range of possibilities, from prosperity in many developed markets to chaos if the conflict in the Middle East widens. Fixed-income markets tend to focus on risks more than on the potential for windfall profits that the stock market cherishes.
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