AI image generation copyright risks need to be of high priority for entrepreneurs to take into consideration when planning marketing strategies and content creation. As entrepreneurs, we juggle multiple roles, including fostering creativity, driving innovation, and carving a niche in the digital realm. The uprise of AI tools presents an opportunity for creating unique visual content for branding, advertising, and social media. There are numerous AI apps that are capable of generating images. For example, I use Chat GPT, Journey and Quantum AI Suite. (To learn more about tech stacking and how to select what may work for you, click HERE.) However, these advancements also bring new legal and ethical dilemmas that require our understanding and attention. By staying informed about potential copyright issues, such as licensing requirements and the evolving legal landscape, we can effectively utilize AI while safeguarding our businesses.

The Wild West of AI

I remember the early 70’s when the Apple 2 hit the market with IBM to follow in August of 81 with the IBM PC. I was in the computer industry at that time, and it was Awesome!! Why? It was like the Wild-Wild West! No rules, just create. Well, over time the Hi-Tech industry got tamed, until November 30, 2022, a third generation AI chatbot called Chat GPT was introduced to the common user. Welcome to the 2nd generation WILD-WILD West!

Anyone, with the proper structured language can create an image. But there is a problem, copyright infringement.

Copyright Infringement: A Lesson from Goldsmith vs. Warhol

With today’s AI, anyone with the proper structured language can create an image. However, this convenience comes with a significant problem: copyright infringement. Copyright infringement is a genuine concern, and the rules are still evolving. For example, consider the case of Andy Warhol and his artwork of Prince, which was based on a photograph by Goldsmith. Warhol was sued and ultimately lost, even though the Warhol Foundation finally settled with Goldsmith 43 years later. The case between Andy Warhol and photographer Lynn Goldsmith is a landmark example of how copyright law applies to art. In 1981, Lynn Goldsmith took a black-and-white portrait of Prince, which she held the copyright for. A few years later, in 1984, Vanity Fair licensed her photo for a one-time use and hired Andy Warhol to create an illustration based on it for an article about Prince. Goldsmith was credited and paid for this specific use. However, Warhol went on to create an entire series of 16 artworks, known as the “Prince Series,” all based on Goldsmith’s photograph, without her knowledge or further permission. These works were later displayed, sold, and licensed by the Andy Warhol Foundation.

The Tea: Prince’s Death, Copyright Infringement, and Condé Nast

The dispute arose after Prince died in 2016, when Condé Nast licensed one of Warhol’s Prince images from the Warhol Foundation for a magazine cover. Goldsmith was neither credited nor compensated for this new use, which went beyond the original license. Goldsmith argued that Warhol’s series relied directly on her copyrighted photograph, and that the commercial licensing of these works infringed on her rights as the original creator. The Warhol Foundation, on the other hand, claimed that Warhol’s alterations—such as cropping, color changes, and stylization—made the images transformative and thus protected under the fair use doctrine. Initially, a lower court ruled in favor of the Warhol Foundation. Still, on appeal, the Second Circuit reversed the decision, agreeing with Goldsmith that the works were not transformative enough to override her copyright. The case ultimately reached the U.S. Supreme Court, which ruled in 2023 that Warhol’s licensing of the Prince image for commercial use was not fair use and did indeed infringe on Goldsmith’s copyright. The Court emphasized that even famous artists must respect the rights of original creators, primarily when the new work serves a similar commercial purpose as the original. In 2024, the Warhol Foundation settled with Goldsmith, agreeing to pay over $21,000, including legal fees and compensation for the magazine license. This case set an important precedent, clarifying that artists cannot freely use copyrighted works for commercial purposes simply by altering them, and highlighted the importance of respecting original creators’ rights. This ruling is especially relevant today, as it provides guidance for how copyright law might apply to digital and AI-generated art.

Proceed with Caution: Avoid Legal Issues and Protect Your Business

So, what’s the takeaway? Entrepreneurs must exercise caution when using someone else’s artwork or AI-generated images for commercial purposes. In most cases, a license or fee is required to use an image legally. For more details on what is allowed, refer to the U.S. Copyright Office’s Fair Use Index. Understanding AI image generation copyright risks for entrepreneurs is not just about compliance; it’s about protecting your business and your creative integrity. Stay informed. Create with confidence. Know and respect the rights of original creators and protect your business. Take care.