Tag: IP / Copyright / Confidentiality

  • Disney v. Midjourney and the Broader Copyright Question for AI Users

    Disney v. Midjourney and the Broader Copyright Question for AI Users

    Disney v. Midjourney makes the AI copyright fight more concrete.

    The case is about training data, but it is also about outputs that allegedly look too much like famous protected characters and franchise imagery.

    What the case is actually about

    Disney, Universal, and affiliated rights holders sued Midjourney in federal court in Los Angeles on June 11, 2025.

    The case is:

    • Case: Disney Enterprises Inc. v. Midjourney Inc.
    • Court: C.D. Cal.
    • Docket: 2:25-cv-05275
    • Status: pending

    The studios' position is straightforward. They say Midjourney was built using copyrighted works and that the service can generate outputs that are too close to protected characters and expressive elements. The complaint reportedly includes example prompts and output images involving well-known properties, which is part of why the case landed so clearly in public discussion.

    Two examples from the complaint show why the output issue is getting so much attention:

    Cropped complaint comparison image showing an alleged Midjourney Homer Simpson output beside Disney reference images.
    Cropped complaint comparison image showing an alleged Midjourney Homer Simpson output beside Disney reference images. Source: Complaint, Disney Enterprises Inc. v. Midjourney Inc., No. 2:25-cv-05275 (C.D. Cal.), page 32.
    Cropped complaint comparison image showing an alleged Midjourney Minions output beside Universal reference images.
    Cropped complaint comparison image showing an alleged Midjourney Minions output beside Universal reference images. Source: Complaint, Disney Enterprises Inc. v. Midjourney Inc., No. 2:25-cv-05275 (C.D. Cal.), page 51.

    Midjourney’s likely response is also familiar. Training is not the same as republishing a work. Not every prompted image is substantially similar enough to infringe. And not every reference to a known character, franchise, or visual style cleanly collapses into liability for the platform.

    That is why this case matters. Both sides are arguing about where the legal line sits when a model produces commercially useful images that unmistakably evoke existing protected expression.

    Can businesses use Midjourney images commercially?

    Midjourney’s published guidance says customers generally own the images and videos they create and may use them commercially, subject to its terms and plan requirements. For businesses with more than $1 million in annual gross revenue, Midjourney says a Pro or Mega Plan is required for commercial use.

    That contractual permission is only one part of the analysis. It does not guarantee that a particular output is noninfringing, that the user owns every element in the output, or that the output qualifies for copyright protection. Midjourney’s terms provide the service and assets on an “as is” basis, disclaim a warranty of noninfringement, and place responsibility for using or redistributing assets on the customer.

    For business use, the practical controls should include:

    • confirming that the account and subscription plan permit the intended commercial use;
    • screening prompts and outputs for recognizable characters, logos, protected expression, and other third-party rights;
    • retaining records of prompts, source materials, edits, and human review;
    • requiring additional clearance before using AI-generated images in prominent campaigns, products, or customer deliverables; and
    • reviewing vendor terms regularly because platform rules and protections can change.

    Commercial-use permission from the platform answers whether Midjourney permits the use. It does not answer whether a rights holder may challenge it.

    Related Clearon AI analysis: OpenAI copyright MDL and data governance and AI-generated code and copyleft risk.

    The bigger issue

    For companies, the issue is not just whether Midjourney wins or loses.

    It is whether the business has decided what level of copyright and brand-adjacent risk it is actually willing to accept when employees use generative AI in public-facing work.

    Many legal teams are comfortable saying obvious character replication is out of bounds. The harder question is the gray zone. Is the company willing to rely on a fair use argument if a marketing image is styled to evoke Disney, South Park, or another highly recognizable visual world? Is it comfortable arguing that a prompt drew on a style, not a protected work? Is it willing to defend that position after publication, in a customer campaign, or in court?

    That is the governance issue this case sharpens. Companies need a view on where they are comfortable being aggressive, where they want to be conservative, and which arguments they are actually prepared to stand behind if challenged.

    They also need to account for contract risk, not just copyright doctrine. Most, if not all, major AI image providers put the user on the hook for at least some infringement risk tied to prompts, inputs, or outputs. Even when a vendor offers limited indemnity, it is often narrow and conditional. So a company deciding to operate in the gray zone may also be deciding that it, not the service provider, will carry much of the downstream claim risk.

    The Clearon AI takeaway

    Disney v. Midjourney turns AI copyright risk into a risk-allocation question for users, not just model developers.

    The practical lesson is less “never touch this” and more “decide, in advance, which copyright arguments your company is truly willing to own.”

    Sources

  • Your AI Prompts May Not Be Privileged

    Your AI Prompts May Not Be Privileged

    Lawyers and business teams are increasingly using AI to think through legal and risk questions.

    That does not automatically make the prompt, output, or workflow privileged.

    The practical risk is simple: if people put sensitive legal analysis into the wrong AI environment, they may create a discoverable record instead of a protected one.

    This is a privilege, confidentiality, and workflow problem showing up in a new tool.

    The key practical point

    There is a major difference between:

    • a public or lightly controlled AI tool
    • and an enterprise environment with negotiated controls, restricted retention, and clear terms that do not permit your prompts or data to be used to train models for other users

    That distinction should be doing a lot of work in legal AI policy.

    If the tool is not enterprise-approved, if the data controls are unclear, or if the provider can use prompts to improve models for others, legal teams should assume the risk is much higher.

    What not to do

    • Do not paste live dispute facts, investigation details, board communications, draft legal theories, or regulator-response strategy into a casual AI tool.
    • Do not assume a prompt is protected just because it relates to legal advice.
    • Do not let employees use consumer AI tools for sensitive legal work without tool-specific approval.
    • Do not treat “internal” and “privileged” as if they mean the same thing.
    • Do not rely on vague vendor marketing about privacy or security. Check the actual enterprise terms, retention settings, training terms, and admin controls.

    What to do instead

    • Use an enterprise AI environment with contractual controls and settings that prevent your prompts and data from being used to train models for other customers or the public service.
    • Limit legal-use cases to approved tools and approved users.
    • Create a short list of off-limits prompt categories, including litigation strategy, privileged investigation facts, deal-sensitive issues, and regulator-response planning.
    • Require lawyer involvement when the purpose of the workflow is legal advice.
    • Know what records the tool keeps, where they are stored, who can export them, and how long they remain available.

    What recent cases make clear

    Recent attention to cases like United States v. Heppner has put a spotlight on a basic point many organizations still blur: a communication can feel private and still fail privilege requirements.

    In Heppner, Judge Rakoff held that AI-generated materials created through Claude were not protected by attorney-client privilege or the work-product doctrine because the defendant disclosed information to a third-party platform and the materials were not prepared by counsel or at counsel’s direction.

    Different cases can come out differently, and courts are not applying a one-line rule that all AI prompts are discoverable or all AI-assisted work loses protection.

    But that is not a reason for comfort. It is a reason to stop assuming the facts will break your way.

    A useful default rule

    If a prompt would be uncomfortable to hand to an opposing lawyer, regulator, or prosecutor later, it should not be casually entered into an unstructured AI workflow.

    That rule is not perfect, but it is much better than assuming “we were just using AI to think.”

    The takeaway for legal teams

    The real issue is not the model by itself. It is whether the workflow, tool, and contract structure are good enough to support sensitive legal use.

    Clearon AI’s recommendation is not to ban AI for legal work. It is to make sure legal AI use happens inside the right workflow.

    • approve an enterprise AI environment with terms and settings that protect sensitive prompts and do not allow them to train models for other users
    • block consumer or unapproved tools for privileged, litigation, investigation, and regulator-response work
    • limit sensitive legal prompting to approved users and defined use cases
    • give employees concrete do-and-don’t rules instead of vague policy language
    • treat prompt security, retention, and export controls as part of legal workflow design, not an afterthought

    In law, workflow mistakes have a nasty habit of becoming exhibits.