Stephen King, Tom Stoppard and GAI

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All the above are famous writers.  The first two have copyright protection.

Writers can copyright their works.  What protection does a human writer have who claims protection against copying when a text is generated by GAI on instruction from that human?

The US Copyright Office grants protection only to work with significant human involvement; we call that human the “author.”  But each work by GAI is created upon command or request by a human.  Is that work protectable by copyright, because GAI does not awaken late at night, turn itself on and write a ghost story or create an image without a human telling it to and giving it some sort of guidance–the human is involved.  How much guidance need the human give to GAI before the human can be said to be an “author” or an artist?

There is a pending legal case on appeal from the refusal by the Copyright Office to grant a copyright to a person who created a digital piece using AI.  The artist, who won an art award with the piece, claims his work used AI as a tool of his artistic expression.  Where is the line?  How much must the person “do” to be the author or artist, and thus to be protected from “infringement”?

The dividing line is a matter of judgment and experts are drafting proposed guidance to be applied by the Copyright Office; last guidance in March suggested that AI-generated work can be protected if a human selects or arranges AI materials with sufficient creativity that “the resulting work as a whole constitutes an original work of authorship.”  Any reader want to try to apply that standard in a consistent, legally useful manner to a diverse series of art works, poems or stories?

A photographer takes a picture with a Leica film camera, a machine, and prints it through a commercial printer without alteration.  It can be subject to copyright.  A photographer takes a picture with my new Apple I-Phone 14 (or the rumored and inevitable 15, expected in a couple of months) and prints it right off the phone electronics with no alteration.  It can be subject to copyright.  An artist commands AI to make an image of a horse walking on water, says no more, and prints the AI result with no alteration.   Can you  get a copyright of that horse walking on water, in the name of the photographer?  Tomorrow, a person in Paris, not having seen the prior work, asks AI to make an image of a horse walking on water and says no more, and AI again produces the same, or virtually the same, image– is the Paris picture an illegal infringement?

Disclaimer: Note that an experienced Intellectual Property attorney to whom I showed a draft of this post suggested that existing law has dealt with these kinds of issues many times and that there are a lot of pre-AI legal precedents to apply.  He also did not think much of a copyright claim for my horse walking on water; perhaps my exact version would have narrow coverage, but likely not even that, let alone protection against a subsequent AI version.  I do not question him, although I suspect that with the growth of GAI there is a growing push to expand the copyright protection and alter what in simpler times might be somewhat settled law. (This post speculates on issues that will be raised in the future; as with all posts, and per my blog site ground-rules, this post is not legal advice and should not be relied upon as such.)

[Disclosure: the contents of this post are based upon reportage contained in, and concepts suggested by, the  article entitled “How to Think About AI,” Harvard Law Bulletin, Summer 2023. In case you are wondering, that article is protected by copyright.]

AI Issues in Laws Affecting Health Care

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AI has a significant role, and a growing role, in healthcare.  AI can apply massive date to improve diagnosis, treatment program design, drug development and robotic surgery.  Medical literature doubles every seven years, promising massive updated data to be processed for analysis by GAI.

Patient concerns: Studies reveal that patient presently are distrustful of advice not delivered by a physician.  Pathologists and radiologists see AI as the death-knell of their professions.  Surgical robotics is viewed as lacking empathy (Health IT Analytics, 3-2-2022).  Handling individual medical data within an expanded AI system runs risks of loss of data privacy.

Who is liable for bad results? If there is an AI diagnosis that is wrong, who is liable?  If a robot removes the wrong organ, who is liable?  How do you “see” the key medical decision points, and who/what makes them?  When will the health care system become sufficiently adept at handling AI so that the benefits outweigh the risks?  Since GAI hallucinates (reaches wrong answers within itself), does that mean the programmer is liable?  The supplier of the AI?  The doctor who failed to pick up an allegedly obvious anomaly? If there is an error, how do you know if it is the AI’s inherent lack of data, its misreading of the data, or a malfunction of the device that reads and delivers AI’s answer?

Patient waiver issues: Will medical ethics require a physician, clinic or hospital to give affirmative disclosure that AI was utilized in health care delivery?  In what detail?  Will courts enforce a patient release signed after such a disclosure, which release is to some degree dependent on the fullness of the data concerning risk which has been given the releasing patient?  Since AI may deliver a statistically correct result and since it is not likely to be 100% effective in every case, even if the AI and the computer work perfectly, must there be a disclosure chart showing percentages of negative results?  Can a physician or hospital obtain a waiver of warranty, selling medical advice based on AI “as is”?

The curious reader might look at an article entitled “Artificial Intelligence is Altering the Face of Medicine.” Practical Lawyer, August, 2023.

SEC Approach to AI

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The obvious first issues that the SEC should be concerned about, as GAI advances, are that businesses do not lie about either their use of AI or how they protect themselves from being harmed by third party GAI. In fact, the SEC seems interested in far more.

The SEC today released the text of remarks by Chair Gary Gensler.  Aside from being an advocate for strong SEC regulation, Gensler was a professor at MIT, and his speech to the National Press Club ranges from Isaac Newton and the bubonic plague to the following litany of regulatory concerns:

  • Advisers and brokers will rely on GAI to make investment recommendations.  Will the AI they use be set up to maximize return to the user (the broker, let us say) or to maximize return to and protection of the investor?
  • GAI builds its conclusion based on masses of data gathered from multiple sources, including huge amounts of data from every individual; who owns that data, and thus the intelligence culled from its manipulation?  [Query why this is SEC mandate?]
  • “Bad actors” can use GAI to manipulate capital markets, to spook the public, to influence elections. [Some of that seems the bailiwick of the Federal Elections Commission]
  • “For the SEC, the challenge here is to promote competitive, efficient markets in the face of what could be dominant base layers at the center of the capital markets.”  This follows the query about who owns the data culled to enhance AI operation.  Is he asking whether we will have honest markets if everyone uses the same GAI based on the same base layer of information?  [This is an SEC issue?]
  • “AI may heighten financial fragility” if a “herd of individual actors” make similar decisions “because they are getting the same signal from a base model or data aggregator,” which in turn could “play a central role in the after-action reports of a a future financial crisis.”

Seems to me that the SEC better start hoping that people as smart as Isaac Newton start applying for jobs, rather than the young people coming out of law school looking for an entry level foot-hold in the legal or business community.  And can you imagine the reaction of the minority Republican Commissioners, already deeply troubled by Gensler’s broad view of SEC regulatory purview?

SEC Focus on FDA-Regulated Companies

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The FDA has a Task Force with focus on companies subject to FDA regulation/clearances.  It should be remembered that while the SEC regulates, and monitors disclosure by, public companies, much of what they do also covers private enterprises which raise capital, including early-stage med-tech and bio companies.  The focus of SEC activity is to prevent misstatements and over-statements made to new investors or (for public companies) into the public marketplace.

Many investigations arise by reason of inaccuracies in materials utilized by emerging companies in private fund-raising, whether for stock offerings or other “securities” such as SAFEs and Convertible Notes.  These misstatements can arise in connection with oral presentations, offering “decks,” private placement memoranda or other written material. This includes articles or studies prepared by third parties, based on misstatements or exaggerations made by companies and which are repeated by third party sources.  Companies offering securities of any sort need to centralize and review disclosures of all types by all personnel; which  includes scientists and researchers who may not be attuned to the impact and scope of the laws concerning sale of securities.

The types of typical misstatements often relate to a misstatement of the science, the status and success of trials, the existence and scope of customer base, failure to clarify that certain “sales” are really beta tests, and particularly ambiguous or misleading statements concerning company status vis-a-vis FDA guidance or approval.

While one might expect that most complaints come from ultimately dissatisfied investors and arise many months (or years) later, overly enthused senior management should note that very often the SEC is “tipped” by inside whistleblowers who are uncomfortable with what is being said about the company offerings which seem excessive to scientific employees who are finely attuned to the granular accuracy of data concerning the science.

Having company disclosure substantively reviewed by outside counsel prior to its use is an excellent way, absent actual intent to defraud, to protect against an SEC criminal action based on material misstatement; the SEC may well take civil action and also cause corrective disclosure or a rescission offer to investors, but such is far more palatable than a criminal charge.

Finally, and this relates to public companies, the SEC focuses on trading upon material non-public information, whether through formal trading programs (so-called 10b5-1 plans or otherwise), and trading in shares of companies other than one’s own company based on insights obtained (by example) by reason of inter-company collaboration or trade group disclosures.

With so much funding going into med-tech of all sizes, it is not surprising that the SEC has a specific Task Force in this vertical, and companies should be aware of the particular SEC focus  which does not make different rules for med-tech but does create heightened scrutiny.

GAI Users Speak Up

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Current press coverage is full of articles and columns extolling the advantages of AI in business.  These articles form a counterpoint to the scare risk scenarios which grabbed the early headlines.  The gist is that at least in its current form, GAI can speed reasonably simple but time-consuming tasks.  Articles have appeared very recently in the NYTimes, Boston Globe and in the current issue of Boston Business Journal.

The BBJ coverage is revealing, in making an excellent case for the controlled utilization of ChatGPT on the part of founders of early-stage companies.  The highlighted entrepreneurs, all in their mid-thirties, claim spectacular time savings in such tasks as: analyzing and comparing big-company franchise agreements against other franchise agreements to identify differences for clients; designing sales materials for digital platforms; building presentations; using Chatbox as a customer, practicing interactions.

Surely these are modest undertakings by modest enterprises, and surely large enterprises are or will be more intense users and at higher levels of output.  It is unclear whether the fear of GAI ‘hallucinations” (inventions of facts) is of concern in applications such as suggested here.  It seems that today’s folks are relying on either comparing extant texts or phrasing or modeling given data (eg, inputting clear instructions and asking GAI to phrase, package, prepare for posting the facts/ideas given).

Then there was the article I read over the weekend, not sure where, about a  person who had chatbox write a get-well-soon poem to someone who was ailing.  Seems it was so literate and uplifting that the writer now has  used chatbox for many personal messages.  Perhaps the folks who write Hallmark cards should begin to worry…

And as to the last thought, given the nature of modern poetry, where fact and fiction free-associate without necessarily making a linear narrative, it sounds like chatbox may be the next Walt Whitman.  As someone who has published five books of poetry and sits on the board of the New England Poetry Club, I personally have, indeed, begun to worry that one day we will give an annual poetry award (we grant several) to a circuit board.

Generative AI Marches On

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Notwithstanding the call for slowing down GAI until controls can be applied, businesses are charging ahead, according to today’s NYTimes.  (I hate to say it, but per my immediately prior post, was the writer correct that the drive for profit trumps all other considerations?)

Major companies (Oracle, Salesforce, AT&T, Amazon) are providing GAI business products that: help engineers produce new code; create sales material and product descriptions for marketing; answer employee questions; summarize meeting notes and lengthy documents.

Further, Gartner reports over half of business customer-users have no internal policy on GAI usage, which is unsettling (I note a very small sample size, however.)

Meanwhile, nothing is heard from Congress, and precious little beyond passing mention from the White House. In an earlier post, I noted that the tendency in the US, when it comes to new tech, is to let it advance unencumbered for some time, then step back and evaluate risk and need for regulation based on what has actually happened “on the ground.”  This reflects the desire to foster the entrepreneurial spirit and to keep the US ahead of the world in new technologies.  While I have no direct line to either the Congress or President Biden (who falls into the vast category of people who have never bought me a beer), it seems that our government is going to let the AGI beast run wild for a bit longer, notwithstanding the various warnings voiced by the gamekeepers.

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GAI and Neoliberalism

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You need to bear with me on this long post; skip it if you are not interested in a completely different analysis of GAI risk.

It has been a couple of weeks since I posted on GAI, during which time the public discourse has rehashed prior issues; a cover story in The Economist, a publication usually with something to add, managed to find no new ground.  Patient readers of the Sunday New York Times, however, might have come across an interesting new perspective buried on page 6 of the Opinion section: an economic critique of the risk of GAI from the neoliberal policy makers who allegedly actually control our lives.

Neoliberalism is described as free market capitalism, its  attributes including free trade and  deregulation.  Simply put by the writer — indeed simplistically put by the writer — neoliberalism says that private enterprise is more efficient than government and the economy should be left to market dynamics.

But, it is asserted by this author, all the market does is maximize profit and all decisions ultimately lead to increased prices for all goods and services, and not to the promised economies and the  promised improvement of the life of our society. The market is the quick fix for the symptoms of our problems: lack of social equality and justice.  What is needed is solution to the problems themselves.

Without now engaging the inherent policy analysis, what the devil has this to do with the GAI risk?

GAI is the same con as, for example,  Theranos and Uber: each promised solutions to fundamental problems (public health and urban transportation, two matters ill-served by governments and regulated markets). (Also chastised: Tesla, TaskRabbit, Airbnb, Soylent and Facebook.)

After the “charming” tech innovation hits the marketplace, there always is “the ugly retrenchment” where the customers and government must shoulder the costs of making that innovation profitable.  This result is inevitable because at the start  “[a] always, Silicon Valley mavens play down the Market’s role.”  The description by uber-investor Marc Andreessen that AI “is owned by people and controlled by people, like any other technology” is described as an “exquisite euphemism.” The writer’s theme is that this neoliberal world view reframes social problems in light of for-profit tech solutions.

Whether you consider the author a communist or a social dreamer, or a prophet, is up to you the reader.  But the author’s message is that the market will in fact cause AGI to be developed for profit, and that AGI’s major risk is not political slavery, not robots shooting people, but rather the conning of the general population to the enrichment of the people who even now, assures the author, are pushing the development of AGI not for the public good but for market profit.

“A.G.I.-ism” is the clone of neoliberalism.  Companies need profit, having raised billions from investors and needing return on investment.  The company Open AI is  contemplating raising “another $100 billion to build A.G.I.” even as its CEO seems to be courting government control of the putative risks of war and dictatorship–but not the risk of the marketplace itself.

 

Will SEC Make Capital Formation for Small Business Easier?

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The SEC has a Small Business Capital Formation Advisory Committee (“Committee”)  to propose regulation that would make it easier for small business to raise investment capital.  A recent survey found that 89% of small businesses feel capital-limited, but only 6% of small business sought equity investment to meet that shortfall.

With such an unfulfilled need in the small business community, a bedrock of American capitalism and a highly favored cohort in the view of the general public, you would think that the SEC would have taken major steps  to ease capital formation for small business.  But it ain’t so!  Materially similar rules apply to small business capital raises as to larger VC-type raises.  One recent effort to afford easier access to capital has been the SEC system for crowd-funding, and while deals have been done, compliance with that method is formal and requires legal guidance (or the surrender of the small busienss to the crowdfunding platforms established under the SEC Crowdfunding Regulation (with related risk, expense and formalities).

This week, at a meeting of the Committee, two SEC commissioners spoke about the need to make capital formation easier for “underrepresentated” entrepreneurs. They were focusing upon entrepreneurs in rural areas  and others less sophisticated, both without access to knowledgeable lawyers.

But no specific proposals were suggested; that is the task of the Committee.  Will there be success where in the past the capital formation process has remained technical and requires, often, what one commissioner described as “a game of  ‘gotcha’ that requires $1,000 per hour lawyers to navigate”?

Making progress here will be difficult.  The problem fundamentally is the risk of fraud.  Scams abound, we read about them all the time whether through the internet or telephone or in person.  By definition, underrepresented founders are not likely to be attuned to legal formalities which are, indeed, sometimes arcane.  And the fundamental task of the SEC is to prevent fraud, not to engineer social policy for economic justice and growth.  Mechanisms to reach these two goals, as a practical matter, seem inherently contradictory.

The SEC website has posted advice addressing methods of capital formation but it is not enough; I suspect that protection against fraud does require legal assistance (unless AI can be trained to uncover fraud, which I would not count on).  The answer, however impractical it may be, is that the Congress can create an independent agency of lawyers to represent the underrepresented entrepreneur in compliance with SEC (and indeed State) securities regulations, with fees based on ability to pay and upon success.  We have the SBA for general business advice and funding, and free lawyers for the criminally indigent.  I hate to suggest it, but we could use government lawyers to help fund small business through legally compliant capital investment.

Otherwise, I fear that this is a real issue that will not be solved– as it has not been since the SEC was formed almost a century ago….

 

Details of the US Corporate Transparency Act

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A couple of years ago, Congress found time to agree on a wildly intrusive law designed to prevent tax evasion and other illegality, the Corporate Transparency Act.  All business BELOW a certain size will be required, starting next January 1, to register with the US Treasury’s Financial Crimes Enforcement Network (FinCEN) and to provide detailed information about their companies and beneficial owners, in order to guard against tax scams and criminal activity.  Failure results in fines and jail time.

For starters, this is a law that affects small business; large businesses are exempt if public or if have 20 employees and more than $5M in gross receipts and a US office.  As a practical matter, a large enterprise will have very many owners and they will keep changing ownership.

So, if you are a small business (required to make a government filing to form your entity, such as setting up certain trusts, forming a corporation, forming a limited partnership LLP or forming an LLC), then during 2024 (whether your business was existing at the start of the year or formed thereafter) you must file with your government:

FOR YOUR BUSINESS: name, trade name and dba, address, jurisdiction of formation (if foreign company first site of US registration), and taxpayer ID number.

FOR EACH INDIVIDUAL OWNER: legal name, date of birth, address (usually home), an identifying number from a license or passport or similar document with an image of that document.

There is more if you form an entity after January 1,2024, but this is enough for now.   Better call your CPA for help.   (And, I sure do hope the portal for receiving this information is secure!)

There are all sorts of legal issues we won’t go into here, and numerous loopholes. For example, and this is NOT legal advice (nothing in any post here is ever legal advice) and as there seem to be no regulations, forms and instruction: are individual entrepreneurs exempt, are common law partnerships (unlike limited liability partnerships, they may well not need to file anything to be formed) exempt, will certain “owners” just become consultants or lenders to avoid having to file while in fact contracting to receive substantial financial rewards akin to an equity interest, what if investors form a group to invest which group need not report such as a simple partnership–just to hit a few thoughts that come to mind even from this ethical attorney posting this blog.

At a time when there is pressure to control large companies, at a time when efforts are being made to protect information of individuals, at a time where many in our body politic on both side of the aisle are fearful of government restricting personal liberties, does this regime make sense?  Is this intrusion, or just the gathering of otherwise government-known but dispersed information efficiently, so as to protect the US tax base and thus benefit all the honest taxpayers who will comply with this new law?

Resolution of the questions in these last two paragraphs are above my pay grade. If you have the answers, or have expertise in these areas, please reply to this post; legitimate dialog may be posted back out.

 

 

 

European Union Enacts Law Limiting AI

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As previously posted, the EU has been entertaining legislation of wide scope to control AI in numerous ways; this past Wednesday they enacted the first part of their proposed regulatory scheme.  Seems only China is ahead of the EU, and that the US lags far behind, in legislating AI controls.

Major points of the currently enacted EU law:

1.Live facial recognition software is banned.  (Query whether exemptions will follow for national security or law enforcement applications.)

2. Generative AI must be accompanied by summaries of copywritten materials used for training the system, and must be subject to controls to prevent illegal contact.

3. Critical AI systems must be subjected to risk testing if related to critical functions: infrastructure such as water and energy, legal system, access to government services and benefits.

4. Developers cannot “scrape” biometric data from social media in building their database.

Of course, such regulations will be complied with (one hopes) by  developers in commercial space and no doubt will avoid a wide variety of problems arising by accident or mis-design.  Criminal elements or enemy governments will not be checking the European Parliament code books for guidance, however.