ABSTRACT
Generative artificial intelligence (GenAI) models have stirred controversy about copyright protection for AI training inputs and model outputs. The European Union’s AI Act require model developers to be transparent about their use of training inputs. Art 4 of the EU Copyright Directive allows free text and data mining of these media inputs unless copyright holders have opted out and want license payments.
This paper argues that opt-outs amount to economically inefficient overprotection of copyright. Free use of media content for GenAI training does not affect media sales to consumers. Opt-outs only strengthen the bargaining position of copyright holders without any increase in consumer surplus or social welfare.
Licensing of training inputs reduces the quantity of data and the quality of GenAI models, creates transaction costs and reduces competition between GenAI firms. This slows down GenAI-induced innovation and productivity gains in all service sectors that apply GenAI. Ultimately, it slows down economic growth. Bargaining over license pricing is arbitrary as there is no objective revenue benchmark. Defenders of the moral right to remuneration argue that any arbitrary remuneration is better than no remuneration. But this comes at the expense of social welfare. Ongoing bargaining and court cases between media producers and GenAI developers risk entrenching this market failure in jurisprudence.
There is no need for copyright on GenAI outputs either. GenAI reduces the marginal cost of machine-production of media outputs to close to zero, on par with the marginal cost of reproduction. That eliminates incentives for piracy. Moreover, composite human-machine outputs benefit from a de-facto extension of copyright on the human component.
Martens, Bertin, Why the Scope of EU Copyright Protection should be Reduced to Realize the Innovation Benefits of Generative AI (August 22, 2024), TILEC Discussion Paper No 2024-07.
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