Weekly Column: Emerging Technology leading to Dealmaking and Disputes

In his capacity as a Columnist for California Sports Lawyer®, Founder and Managing Attorney Jeremy Evans has written a column about emerging technologies leading to dealmaking and disputes in the entertainment, media, and sports industries.

You can read the full column below.

Artificial intelligence (“AI”) and innovations in streaming and distribution have led to some fantastic opportunities for creatives, talent, people, fans, and companies in entertainment, media, and sports. However, existing rules, laws, and regulations have placed needed barriers of protection between innovation and growth. As the old saying goes, you cannot break the law, one can only break against the law.

Intellectual property, for example, a group of laws surrounding copyright, trademark, trade secrets, licensing, and patents, with specific focus on copyright law may protect creatives from AI software taking copyrighted works. Infringement litigation claims have been filed in the music industry by music labels like Universal Music Group to prevent AI software and programs from taking underlying copyrighted music works (e.g., musical composition, sound recording, lyrics, melody, etc.) and creating new works. The key question and defense by AI companies will be under the fair use doctrine and specifically that the AI work is transformative because of the use of technology and creating something entirely new. It is a difficult argument to make and courts have shown little as to a pattern of decision-making when it comes to fair use analysis so the risk is significant.

The result of a decision in Universal’s favor and the talent it controls music copyrights to means that AI companies will be restricted from using copyrighted material without Universal’s express written consent (e.g., a license and likely a fee). The decision would have a ripple effect in the entertainment industry and beyond because AI software and platforms have consistently used copyrighted material to create the brain power needed to produce answers and results to user-generated questions and prompts. AI companies would be forced to create paid and unpaid service platforms with limited data for the unpaid offering. AI companies would be treated no differently than a song writer or performer wanting to license a song for use. Arguably, AI’s taking of copyrighted music is well beyond sampling music and of course AI takes all available information from the internet that the program is conceivably allowed to gather to create answers to prompts beyond the music industry. Furthermore, common misconceptions in the industry state that five or eight seconds or less is approved in practice. That concept is neither true or a legal principle.

Specifically in California, AI generated works are also up against privacy laws that protect consumers and the collection of their data without approval. Some terms and conditions with the check-the-box notifications do cover some obligations and liability, but not all. However, it is also true that AI is leading to significant innovations and opportunities for creatives, producers, and distributors alike. As the entertainment, media, and sports industries see more competition and slimmer margins, mergers will continue to be the talk of the town. It is why Paramount is seeking buyers. Why Lionsgate created a SPAC to spin-off STARZ. And why the YES Network and MSG Networks partnered on streaming New York area sports games together in the aptly named, Gotham Advanced Media and Entertainment ("GAME"). Technology is leading to innovation, growth, and dealmaking.

However, mergers will also go up against antitrust rules, laws, and regulations. Similarly, in college sports, as athletic programs move into name, image, and likeness ("NIL") management and discussion of splitting revenues with amateurs, athletes, universities, and their conferences will continue to be subject tax laws and for universities/conferences, antitrust claims. Again, back to those pesky little laws.

In the end, dealmaking seems to prevail for the powerbrokers. Evidenced by Disney’s deal with Comcast. Technology also requires time to adapt. Evidenced by Warner’s continuation of the free B/R Sports tier on MAX as it navigates technical innovations and adaptions that often coincide with technology improvements. Emerging technology is leading to dealmaking and disputes. Hopefully the result is more consumer choice, protected works, and innovation.

About Jeremy M. Evans:

Jeremy M. Evans is the Chief Entrepreneur Officer, Founder & Managing Attorney at California Sports Lawyer®, representing entertainment, media, and sports clients in contractual, intellectual property, and dealmaking matters. Evans is an award-winning attorney and industry leader based in Los Angeles and Newport Beach, California. He can be reached at Jeremy@CSLlegal.com. www.CSLlegal.com.