Why the NYT Lawsuit Targeting OpenAI Is Important in CRE

When the New York Times filed a copyright infringement lawsuit against OpenAI — the vendor of generative AI systems ChatGPT and DALL-E3 — it dragged complaints many authors, artists, photographers, and even programmers had out onto a large stage. The results could ultimately affect OpenAI’s ability to operate and make money as well as the results its customers seek, including those in commercial real estate.

At the center of the conflict are control and compensation. Those whose work is creative in nature, and the companies that hire them and license their materials, don’t have a say in how their material is used when companies scan vast amounts of text, imagery, or code to expose generative artificial intelligence systems for training purposes. The AI systems break the material down to individual parts and statistically track how one part — a word or image segment or bit of code — relates to what might follow. When someone provides a prompt, the system looks at the connections of content bits within the context and assembles the output.

The copyright issues on this are complex and many have never been litigated, making definitive legal interpretation unavailable. There is precedent that copying material into memory without permission at least is allowable. The AI software might be considered a derivative work, although that doesn’t necessarily rule out the concept of fair use.

There have been multiple lawsuits against the big AI companies, but the New York Times brings the challenge up to a new and painful level. Not only does it have large monetary and legal resources, but its complaint shows how prompts can result in output that seems obviously copied from articles that have appeared in the Times.

If found liable, OpenAI could find itself facing massive legal fines and a need to license material at significant cost. The company has already started looking to sign agreements in the range of $1 million to $5 million a year, according to paywalled The Information as quoted by The Verge. However, as Reuters reported in December, OpenAI has been looking for new investment at a $100 billion valuation. If that is the realistic value of the company, owners and publishers of all sorts of content will be aware and likely see the offered money as insignificant in comparison to the value. It’s important to remember that without content, generative AI is like a shiny new factory without any materials to make products.

Companies, worried about what they’ve previously seen in the company’s leadership and board fighting and thrashing, have already started to add alternative sources of generative AI software, according to the Wall Street Journal. But should OpenAI lose the case in a big way, it will turn the entire industry upside down.

And given that its user terms require indemnification from customers, there’s the possibility of the company trying to push some, if not all, legal challenges onto clientele.

CRE companies plunging into using generative AI, for the sake of prudence and risk management, should pay attention to what is happening on the legal front and consider how they’re using generative AI, checking to see whether vendors have valid content licenses or at least use material in the public domain.