1
00:00:03,200 --> 00:00:08,000
Speaker 1: This is Bloomberg Law with June Brosso from Bloomberg Radio.

2
00:00:09,240 --> 00:00:13,320
Speaker 2: The Federal Trade Commission and seventeen states are suing Amazon

3
00:00:13,680 --> 00:00:17,840
Speaker 2: over allegations the e commerce giant abuses its position in

4
00:00:17,880 --> 00:00:21,800
Speaker 2: the marketplace to inflate prices on and off its platform,

5
00:00:22,120 --> 00:00:26,279
Speaker 2: overcharged sellers, and stifle competition. The lawsuit is one of

6
00:00:26,320 --> 00:00:30,080
Speaker 2: the most significant legal challenges brought against Amazon in its

7
00:00:30,160 --> 00:00:35,000
Speaker 2: nearly thirty year history, accusing it of monopolizing online marketplace

8
00:00:35,080 --> 00:00:40,000
Speaker 2: services by degrading quality for shoppers and overcharging sellers. The

9
00:00:40,080 --> 00:00:44,240
Speaker 2: case also represents a career defining moment for FTC Chair

10
00:00:44,360 --> 00:00:47,720
Speaker 2: Lena Khan, whose long had Amazon in her sights.

11
00:00:48,720 --> 00:00:52,680
Speaker 3: So this case is entirely pro business. It is tens

12
00:00:52,680 --> 00:00:55,840
Speaker 3: of thousands of businesses that are dependent on Amazon to

13
00:00:56,040 --> 00:00:59,720
Speaker 3: reach shoppers that increasingly are paying one out of every

14
00:00:59,760 --> 00:01:02,360
Speaker 3: two two dollars, as well as being subjected to all

15
00:01:02,400 --> 00:01:07,480
Speaker 3: sorts of arbitrary tactics. So we believe that this lawsuit

16
00:01:07,520 --> 00:01:11,440
Speaker 3: of where successful will actually entirely restore the promise of

17
00:01:11,640 --> 00:01:15,360
Speaker 3: free competition. Our free enterprise system is one where a

18
00:01:15,360 --> 00:01:18,000
Speaker 3: companies should be competing on the merits and not be

19
00:01:18,080 --> 00:01:21,120
Speaker 3: able to protect their monopoly power through illegal tactics.

20
00:01:21,440 --> 00:01:25,319
Speaker 2: Joining me is Jennifer Ree, Bloomberg Intelligence Senior litigation analyst,

21
00:01:25,720 --> 00:01:27,960
Speaker 2: jen this lawsuit comes as no surprise.

22
00:01:28,400 --> 00:01:29,200
Speaker 1: Oh not at all.

23
00:01:29,240 --> 00:01:31,680
Speaker 4: I mean, we've all been expecting this for years. The

24
00:01:31,720 --> 00:01:35,640
Speaker 4: investigation of Amazon actually started during Trump's FTC and it

25
00:01:35,720 --> 00:01:39,120
Speaker 4: was already ongoing when the chair, the current chair, Lina Kahan,

26
00:01:39,200 --> 00:01:41,800
Speaker 4: took her position, which was back in twenty twenty one.

27
00:01:42,080 --> 00:01:43,920
Speaker 4: And when she did, I mean, it was sort of

28
00:01:43,959 --> 00:01:46,760
Speaker 4: widely thought that she was hired partially because of her

29
00:01:47,480 --> 00:01:51,680
Speaker 4: very overt outspoken antagonism toward Amazon. She had written a

30
00:01:51,720 --> 00:01:54,800
Speaker 4: long article in twenty seventeen while in law school or

31
00:01:54,800 --> 00:01:57,080
Speaker 4: at least for the Yale Law Journal, basically saying that

32
00:01:57,120 --> 00:01:59,960
Speaker 4: she thought that Amazon behaved as an anti competitive monopoly.

33
00:02:00,280 --> 00:02:02,200
Speaker 1: So this is no surprise at all.

34
00:02:02,480 --> 00:02:05,280
Speaker 2: So tell us what the FTC and the seventeen states

35
00:02:05,320 --> 00:02:06,480
Speaker 2: are accusing Amazon of.

36
00:02:06,800 --> 00:02:09,560
Speaker 4: You know, they're really focusing on it's marketplace, right, because

37
00:02:09,560 --> 00:02:12,440
Speaker 4: Amazon has other businesses outside of what we as consumers

38
00:02:12,520 --> 00:02:15,800
Speaker 4: know of Amazon, So they're focusing on the way Amazon

39
00:02:15,840 --> 00:02:19,000
Speaker 4: treats sellers. And they're essentially saying that some of the

40
00:02:19,120 --> 00:02:22,120
Speaker 4: policies and some of the conditions they impose on these sellers.

41
00:02:22,240 --> 00:02:25,480
Speaker 4: One cause prices outside of Amazon to go up. In

42
00:02:25,520 --> 00:02:28,480
Speaker 4: other words, sellers if they discount a product where they're

43
00:02:28,520 --> 00:02:31,440
Speaker 4: selling somewhere outside of Amazon more so than they have

44
00:02:31,560 --> 00:02:34,800
Speaker 4: on Amazon, haven't offered Amazon the lowest price that they offer,

45
00:02:35,080 --> 00:02:38,000
Speaker 4: that that seller then gets punished. That's one thing. And

46
00:02:38,080 --> 00:02:41,800
Speaker 4: they also allege that Amazon punishes sellers by sort of

47
00:02:41,800 --> 00:02:44,320
Speaker 4: pushing them down in search results or taking them out

48
00:02:44,320 --> 00:02:47,239
Speaker 4: of the buybox if they don't use Amazon's fulfillment services.

49
00:02:47,280 --> 00:02:49,720
Speaker 4: That's using Amazon to store the product package of the

50
00:02:49,760 --> 00:02:51,880
Speaker 4: product and send the product when somebody buys it. So

51
00:02:51,919 --> 00:02:55,400
Speaker 4: it's really all about sort of unfair treatment of the

52
00:02:55,480 --> 00:02:56,919
Speaker 4: sellers that are on the marketplace.

53
00:02:57,040 --> 00:02:59,960
Speaker 2: And it's really important where you are in those Amazon

54
00:03:00,080 --> 00:03:03,000
Speaker 2: on searches, because a lot of people don't get past

55
00:03:03,280 --> 00:03:07,320
Speaker 2: the first two or three. Lena Khan said Amazon is

56
00:03:07,320 --> 00:03:10,520
Speaker 2: a monopolist and is exploiting its monopolies in ways that

57
00:03:10,600 --> 00:03:14,160
Speaker 2: leave shoppers and sellers paying more for worse service. But

58
00:03:14,360 --> 00:03:19,000
Speaker 2: are shoppers paying more because I find that the prices

59
00:03:19,040 --> 00:03:23,400
Speaker 2: on Amazon are often cheaper than they are elsewhere.

60
00:03:23,680 --> 00:03:26,520
Speaker 4: Well, of course, that's exactly what Amazon's defense is going

61
00:03:26,600 --> 00:03:29,600
Speaker 4: to be no. We offer convenience and speed and low prices.

62
00:03:29,639 --> 00:03:31,320
Speaker 4: And part of the reason that we have some of

63
00:03:31,320 --> 00:03:34,480
Speaker 4: our policies in place that require these sellers on our

64
00:03:34,520 --> 00:03:37,080
Speaker 4: platform to provide the lowest price on Amazon is because

65
00:03:37,080 --> 00:03:39,000
Speaker 4: that's what our consumers expect.

66
00:03:39,080 --> 00:03:40,080
Speaker 1: That's what we've.

67
00:03:39,880 --> 00:03:42,160
Speaker 4: Held ourselves out to be the lowest price that you

68
00:03:42,200 --> 00:03:43,560
Speaker 4: can get out there in the marketplace.

69
00:03:43,600 --> 00:03:44,440
Speaker 1: And this is pro.

70
00:03:44,280 --> 00:03:47,840
Speaker 4: Competitive, not anti competitive. But on the other side, you know,

71
00:03:47,880 --> 00:03:50,320
Speaker 4: there may be some evidence that because it's a little

72
00:03:50,360 --> 00:03:53,080
Speaker 4: more expensive for a company to sell a product on

73
00:03:53,120 --> 00:03:56,000
Speaker 4: Amazon than some other website, let's say Etsy or their

74
00:03:56,040 --> 00:03:59,560
Speaker 4: own proprietary website, that they end up raising the price

75
00:03:59,600 --> 00:04:02,840
Speaker 4: outside of Amazon on those websites because if they have

76
00:04:02,880 --> 00:04:04,880
Speaker 4: to offer the lowest price on Amazon, they don't want

77
00:04:04,920 --> 00:04:07,720
Speaker 4: to kill their margins selling on Amazon. So instead of

78
00:04:07,800 --> 00:04:11,120
Speaker 4: lowering their price everywhere, they're increasing it outside. So people

79
00:04:11,160 --> 00:04:14,160
Speaker 4: who bought that product outside of Amazon are actually paying

80
00:04:14,160 --> 00:04:16,200
Speaker 4: a higher price. And I think that's part of the

81
00:04:16,240 --> 00:04:18,320
Speaker 4: allegation of the increased prices.

82
00:04:18,960 --> 00:04:21,719
Speaker 2: Amazon is a monopolist. Is that accepted that it's a

83
00:04:21,720 --> 00:04:22,600
Speaker 2: monopolist or not?

84
00:04:22,800 --> 00:04:23,760
Speaker 1: You know, yes and no.

85
00:04:24,120 --> 00:04:26,640
Speaker 4: The thing about it address law is whether or not

86
00:04:26,720 --> 00:04:29,520
Speaker 4: you're a monopolist all depends on how the market's defined.

87
00:04:29,839 --> 00:04:31,760
Speaker 4: You have to look at the contours of the market.

88
00:04:31,800 --> 00:04:34,120
Speaker 4: What is the market you're competing in now?

89
00:04:34,279 --> 00:04:36,880
Speaker 1: I think the FTC in this lawsuit's basically.

90
00:04:36,440 --> 00:04:39,719
Speaker 4: Provided two market definitions. One is the consumer side. It's

91
00:04:39,760 --> 00:04:42,560
Speaker 4: a broad online marketplace to buy all sorts of goods,

92
00:04:42,800 --> 00:04:45,120
Speaker 4: and the other one it's a broad online marketplace for

93
00:04:45,200 --> 00:04:48,240
Speaker 4: sellers to sell all their goods. Two pieces of the market.

94
00:04:48,320 --> 00:04:51,560
Speaker 4: And I suppose if that is accepted as the relevant

95
00:04:51,560 --> 00:04:54,560
Speaker 4: market by the court, then you might be able to

96
00:04:54,680 --> 00:04:57,119
Speaker 4: argue that they're a monopolist, that they have monopoly power.

97
00:04:57,160 --> 00:04:59,360
Speaker 4: But the fact of the matter is that I at

98
00:04:59,440 --> 00:05:02,320
Speaker 4: least haven't yet seeing it defined that way. I've seen

99
00:05:02,960 --> 00:05:06,479
Speaker 4: market definitions like an online seller of ebooks right that

100
00:05:06,520 --> 00:05:09,359
Speaker 4: they have monopoly power in ebook sales, or they have

101
00:05:09,400 --> 00:05:12,599
Speaker 4: monopoly power in certain segments. Because for each of these

102
00:05:12,600 --> 00:05:16,280
Speaker 4: items that Amazon sells, there are alternatives, and those alternatives

103
00:05:16,360 --> 00:05:18,640
Speaker 4: may be different depending on what type of item it is.

104
00:05:18,880 --> 00:05:21,359
Speaker 4: They may be broader, they may be narrower, depending on

105
00:05:21,360 --> 00:05:23,520
Speaker 4: the items. So it's going to depend on how that

106
00:05:23,560 --> 00:05:26,120
Speaker 4: market's defined, and that's something the FTC is actually going

107
00:05:26,160 --> 00:05:28,120
Speaker 4: to have to support and prove in this trial the

108
00:05:28,160 --> 00:05:29,520
Speaker 4: proper definition of the market.

109
00:05:29,800 --> 00:05:31,720
Speaker 2: I mean, if you had to be on one side

110
00:05:31,720 --> 00:05:33,680
Speaker 2: of this case, would you rather be on the FTC

111
00:05:33,920 --> 00:05:35,920
Speaker 2: side or would you rather be on Amazon side?

112
00:05:36,040 --> 00:05:38,239
Speaker 4: You know, I think I'd rather be on Amazon side.

113
00:05:38,279 --> 00:05:40,360
Speaker 4: And the reason I say that is because I think

114
00:05:40,360 --> 00:05:42,480
Speaker 4: this is a tough case for the FTC to win

115
00:05:42,560 --> 00:05:45,000
Speaker 4: to start, And I'm not saying that they can't because

116
00:05:45,080 --> 00:05:47,120
Speaker 4: facts matter, and we don't know what the facts and

117
00:05:47,160 --> 00:05:49,720
Speaker 4: the evidence are yet. It will matter what they prove

118
00:05:49,800 --> 00:05:52,880
Speaker 4: in court, what the experts say, and what the testimony is,

119
00:05:52,920 --> 00:05:55,599
Speaker 4: and what Amazon's documents look like. But I think the

120
00:05:55,720 --> 00:05:58,680
Speaker 4: reason I ultimately come down on Amazon side is because

121
00:05:58,800 --> 00:06:03,039
Speaker 4: I don't think if liabilities proven that ultimately those remedies

122
00:06:03,080 --> 00:06:07,279
Speaker 4: are going to be particularly drastic. I don't really see

123
00:06:07,279 --> 00:06:11,279
Speaker 4: a structural breakup. What I think will happen are behavioral changes.

124
00:06:11,400 --> 00:06:11,839
Speaker 1: Amazon.

125
00:06:11,920 --> 00:06:14,479
Speaker 4: You simply can't do this anymore. You can't push a

126
00:06:14,520 --> 00:06:17,320
Speaker 4: seller way down in the search results simply because they

127
00:06:17,360 --> 00:06:20,520
Speaker 4: don't use your fulfillment surfaces, or you can't force them

128
00:06:20,560 --> 00:06:23,320
Speaker 4: to provide the lowest price on Amazon dot Com, and

129
00:06:23,480 --> 00:06:26,960
Speaker 4: very Interestingly, Amazon's already promised to do most of that

130
00:06:27,040 --> 00:06:29,560
Speaker 4: in the UK and in the EU, so it clearly

131
00:06:29,640 --> 00:06:32,159
Speaker 4: is willing to change some of its rules and change

132
00:06:32,200 --> 00:06:34,479
Speaker 4: some of the way it treats sellers in order to

133
00:06:34,480 --> 00:06:37,320
Speaker 4: make these lawsuits go away. But the FDC didn't accept

134
00:06:37,320 --> 00:06:38,200
Speaker 4: those concessions.

135
00:06:38,360 --> 00:06:41,560
Speaker 2: But the FDC in this suit, unlike even mentioning it

136
00:06:41,680 --> 00:06:45,039
Speaker 2: in the Google suit, is not seeking a breakup of Amazon.

137
00:06:45,560 --> 00:06:46,960
Speaker 1: Well, we don't really know yet.

138
00:06:47,040 --> 00:06:49,720
Speaker 4: I'd say that they haven't specifically said that, but their

139
00:06:49,800 --> 00:06:52,560
Speaker 4: language is vague. You know, they're asking for a permanent

140
00:06:52,560 --> 00:06:54,680
Speaker 4: injunction and they're asking for the court to do what

141
00:06:54,720 --> 00:06:58,479
Speaker 4: it needs to do to stop the monopolistic conduct. And

142
00:06:58,560 --> 00:07:01,360
Speaker 4: really what that means is it gives them leeway down

143
00:07:01,400 --> 00:07:04,719
Speaker 4: the road after liability is proven, because that's obviously the

144
00:07:04,760 --> 00:07:08,000
Speaker 4: first step to actually seek a remedy, which is a breakup.

145
00:07:08,320 --> 00:07:11,120
Speaker 4: And normally when these kinds of cases are brought by

146
00:07:11,160 --> 00:07:14,240
Speaker 4: the DOJ or by the FDC, they don't explicitly state

147
00:07:14,280 --> 00:07:17,120
Speaker 4: what they're looking for in a remedy early on. That

148
00:07:17,160 --> 00:07:19,600
Speaker 4: comes later, and I think they still could ask for

149
00:07:19,640 --> 00:07:20,400
Speaker 4: something like that.

150
00:07:21,160 --> 00:07:25,080
Speaker 2: So Amazon's general counsel said, if the FTC gets its way,

151
00:07:25,240 --> 00:07:28,960
Speaker 2: the result would be fewer products to choose from, higher prices,

152
00:07:29,160 --> 00:07:33,240
Speaker 2: slower deliveries for consumers, and reduced options for small businesses,

153
00:07:33,440 --> 00:07:36,360
Speaker 2: the opposite of what antitrust law is designed to do.

154
00:07:36,760 --> 00:07:39,440
Speaker 2: And that's what I'm saying about. How can you beat

155
00:07:39,480 --> 00:07:42,080
Speaker 2: Amazon for like getting it to you the next day?

156
00:07:42,600 --> 00:07:44,200
Speaker 4: Well, you know this is why I say, I think

157
00:07:44,200 --> 00:07:46,679
Speaker 4: this is an uphill climb for the FDC. It's really

158
00:07:46,720 --> 00:07:50,840
Speaker 4: difficult to argue against the pro competitive aspects of the company.

159
00:07:50,880 --> 00:07:54,400
Speaker 4: I mean, it has created a very efficient, very consumer

160
00:07:54,480 --> 00:07:59,239
Speaker 4: friendly marketplace essentially that consumers love. They do get low prices,

161
00:07:59,280 --> 00:08:01,920
Speaker 4: they do get speed delivery. They makes it very easy.

162
00:08:01,920 --> 00:08:04,840
Speaker 4: There's one stop shopping, this is all and returns and

163
00:08:04,960 --> 00:08:07,640
Speaker 4: returns exactly and a lot of help by the way,

164
00:08:07,680 --> 00:08:09,120
Speaker 4: when there's an issue with the product.

165
00:08:09,160 --> 00:08:10,600
Speaker 1: Because I've done that myself.

166
00:08:11,000 --> 00:08:14,760
Speaker 4: So I think that when you look at monopolization cases,

167
00:08:14,760 --> 00:08:15,520
Speaker 4: they're based.

168
00:08:15,240 --> 00:08:18,120
Speaker 1: On a reasonableness standard. So what a judge has to do.

169
00:08:18,400 --> 00:08:21,160
Speaker 4: Is they have to weigh sort of the harm against

170
00:08:21,160 --> 00:08:24,480
Speaker 4: the pro competitive side, and whichever side wins out, that's

171
00:08:24,520 --> 00:08:26,960
Speaker 4: where you land whether you violate the law or not.

172
00:08:27,520 --> 00:08:30,560
Speaker 4: Is it a reasonable or unreasonable restraint of trade that

173
00:08:30,560 --> 00:08:33,520
Speaker 4: we're looking at. And I think that when you have

174
00:08:33,600 --> 00:08:37,240
Speaker 4: strong pro competitive justifications for what you're doing, it makes

175
00:08:37,240 --> 00:08:40,199
Speaker 4: it harder for a plaintiff, even the FTC, to win

176
00:08:40,240 --> 00:08:42,280
Speaker 4: a case. And so I think you just put your

177
00:08:42,360 --> 00:08:45,080
Speaker 4: finger on the head of what the issue is here.

178
00:08:45,559 --> 00:08:48,280
Speaker 2: Is this the third time that the FTC is suing

179
00:08:48,320 --> 00:08:50,560
Speaker 2: Amazon this year or recently.

180
00:08:50,440 --> 00:08:51,240
Speaker 1: Something like that.

181
00:08:51,280 --> 00:08:53,920
Speaker 4: The other suits are all consumer protection suits, so this

182
00:08:54,000 --> 00:08:57,559
Speaker 4: is their first antitrust suit against Amazon. The others had

183
00:08:57,559 --> 00:09:00,560
Speaker 4: to were on their consumer protection side. Quite differ from this.

184
00:09:01,200 --> 00:09:05,480
Speaker 2: Fewer states joined the Amazon suit than the Justice Department

185
00:09:05,679 --> 00:09:10,920
Speaker 2: suit against Google or the FTC's earlier suit against Meta.

186
00:09:11,000 --> 00:09:12,000
Speaker 2: Is there a reason for that?

187
00:09:12,920 --> 00:09:14,280
Speaker 1: You know, It's very difficult to say.

188
00:09:14,320 --> 00:09:17,400
Speaker 4: The states probably were all asked, and they weigh the

189
00:09:17,440 --> 00:09:19,800
Speaker 4: pros and cons of being part of a suit. They

190
00:09:19,920 --> 00:09:23,000
Speaker 4: tend to be more political the state attorney's general, let's say,

191
00:09:23,000 --> 00:09:25,400
Speaker 4: than the FTC, I think, and some of them may

192
00:09:25,480 --> 00:09:29,440
Speaker 4: be more concerned about consumer perception here that consumers tend

193
00:09:29,440 --> 00:09:32,640
Speaker 4: to really like Amazon, whereas I think the perception about

194
00:09:32,640 --> 00:09:35,560
Speaker 4: Google is maybe less positive generally when you look at

195
00:09:35,640 --> 00:09:38,719
Speaker 4: consumer polls, and they also do see the pro competitive

196
00:09:38,800 --> 00:09:42,480
Speaker 4: side of Amazon's business. So I think that's probably why

197
00:09:42,520 --> 00:09:46,080
Speaker 4: you see fewer states joining here than in the Google case,

198
00:09:46,120 --> 00:09:48,240
Speaker 4: but they could still join going forward.

199
00:09:48,720 --> 00:09:50,760
Speaker 2: You know, it's been in business thirty years. Do you

200
00:09:50,800 --> 00:09:53,920
Speaker 2: think the Amazon sees this as a real threat to

201
00:09:54,040 --> 00:09:54,800
Speaker 2: its business?

202
00:09:55,400 --> 00:09:57,840
Speaker 4: You know, I think that anytime you're sued by the

203
00:09:57,840 --> 00:10:01,800
Speaker 4: Federal Trade Commission, it's a risk, right and your documents,

204
00:10:01,840 --> 00:10:05,760
Speaker 4: your information, your executives are exposed what's mostly public trial,

205
00:10:06,120 --> 00:10:09,120
Speaker 4: it's always a risk, and it can bring bad pr

206
00:10:09,400 --> 00:10:12,040
Speaker 4: to the company. You know, there certainly have to be

207
00:10:12,080 --> 00:10:15,120
Speaker 4: somewhat unhappy about it, but I don't think they view

208
00:10:15,160 --> 00:10:18,280
Speaker 4: it as a long term major risk to the company.

209
00:10:19,120 --> 00:10:22,720
Speaker 2: Talking about Lena Kahan, and they have tried to get

210
00:10:22,720 --> 00:10:27,720
Speaker 2: her recused from the cases against them, right, Yes, didn't work.

211
00:10:27,720 --> 00:10:28,840
Speaker 1: You know, it didn't work.

212
00:10:29,080 --> 00:10:31,080
Speaker 4: So they got tried to get her recused because it

213
00:10:31,120 --> 00:10:33,400
Speaker 4: was clear what her position was about Amazon back in

214
00:10:33,400 --> 00:10:37,040
Speaker 4: twenty seventeen. And that's why we've all expected this lawsuit

215
00:10:37,040 --> 00:10:39,760
Speaker 4: for so long, because we knew that her view was

216
00:10:39,800 --> 00:10:43,440
Speaker 4: that this company behaves illegally in an anti competitive manner.

217
00:10:43,720 --> 00:10:46,040
Speaker 4: The issue is that she's not the one who's going

218
00:10:46,120 --> 00:10:48,839
Speaker 4: to make this decision. This is in federal court, so

219
00:10:48,880 --> 00:10:51,120
Speaker 4: she's acting as a prosecutor, and when you act as

220
00:10:51,120 --> 00:10:52,800
Speaker 4: a prosecutor, that is what you do.

221
00:10:53,240 --> 00:10:54,319
Speaker 1: You know, if she.

222
00:10:54,320 --> 00:10:56,680
Speaker 4: Did a new investigation of Amazon looking at the same

223
00:10:56,720 --> 00:10:58,680
Speaker 4: facts that she looked at three years ago, I don't

224
00:10:58,679 --> 00:11:01,840
Speaker 4: think she'd come out any Differently. Where a lawsuit is

225
00:11:01,840 --> 00:11:04,560
Speaker 4: brought internally at the FTC, that can be a different

226
00:11:04,640 --> 00:11:08,240
Speaker 4: matter because ultimately the Commissioners are the appellate panel for that,

227
00:11:08,600 --> 00:11:11,560
Speaker 4: an administrative law judge makes the first decision and.

228
00:11:11,480 --> 00:11:12,320
Speaker 1: Then the commissioners.

229
00:11:12,360 --> 00:11:14,439
Speaker 4: The appeal goes to the commissioners and they are acting

230
00:11:14,480 --> 00:11:17,280
Speaker 4: as judge. And in that kind of an instance, I

231
00:11:17,280 --> 00:11:20,199
Speaker 4: think it would have been different with respect to recusal.

232
00:11:20,240 --> 00:11:22,520
Speaker 4: But in this instance, where it's out of her hands

233
00:11:22,520 --> 00:11:27,120
Speaker 4: now she's just prosecuting, presenting the facts, presenting evidence. Some

234
00:11:27,360 --> 00:11:30,720
Speaker 4: other party. The judge in this case will make the decision.

235
00:11:31,200 --> 00:11:32,840
Speaker 4: I think it's less impactful.

236
00:11:33,920 --> 00:11:38,280
Speaker 2: Earlier this year, the FTC challenged Meta acquiring the virtual

237
00:11:38,440 --> 00:11:42,560
Speaker 2: reality company Within and lost that. FTC also lost a

238
00:11:42,600 --> 00:11:47,360
Speaker 2: similar suit attempting to block Microsoft's acquisition of Activision. So

239
00:11:47,960 --> 00:11:52,280
Speaker 2: how much will this case define Lena Khan's career?

240
00:11:52,760 --> 00:11:55,000
Speaker 4: You know, I think those two cases are quite different

241
00:11:55,320 --> 00:11:58,480
Speaker 4: from this one, different standards. They were pursued under a

242
00:11:58,520 --> 00:12:01,080
Speaker 4: different antitrust statute, and to be fair, by the way,

243
00:12:01,480 --> 00:12:04,480
Speaker 4: the FTC is still appealing the Microsoft activision decision, so

244
00:12:04,520 --> 00:12:06,880
Speaker 4: it's not completely finished yet, even though I do think

245
00:12:06,920 --> 00:12:09,160
Speaker 4: the companies will be able to close that deal. I

246
00:12:09,240 --> 00:12:13,000
Speaker 4: think these more than those, this one, this Amazon case

247
00:12:13,080 --> 00:12:15,560
Speaker 4: more so than those two, because it's just a long

248
00:12:15,600 --> 00:12:19,040
Speaker 4: time coming, and it's been her goal to try to

249
00:12:19,160 --> 00:12:23,079
Speaker 4: pull the way antitrust laws have been interpreted back to

250
00:12:23,120 --> 00:12:26,320
Speaker 4: the way they were interpreted more like in the nineteen sixties.

251
00:12:26,520 --> 00:12:28,400
Speaker 4: You know, there was a big change in the nineteen

252
00:12:28,440 --> 00:12:31,240
Speaker 4: seventies and nineteen eighties and the way the antitrust laws

253
00:12:31,320 --> 00:12:34,960
Speaker 4: were interpreted and then in the way that enforcement played out.

254
00:12:35,559 --> 00:12:39,120
Speaker 4: And her view is that because of that change, anti

255
00:12:39,120 --> 00:12:42,040
Speaker 4: trust enforcement became too lenient and too lax, and that

256
00:12:42,080 --> 00:12:45,200
Speaker 4: we have to go back to where we were sometime

257
00:12:45,240 --> 00:12:49,040
Speaker 4: before the nineteen seventies, where we really looked at market structure.

258
00:12:49,320 --> 00:12:52,239
Speaker 4: It just made a presumption that if a market was concentrated,

259
00:12:52,280 --> 00:12:55,360
Speaker 4: it was likely to cause harm to consumers, rather than

260
00:12:55,400 --> 00:12:58,559
Speaker 4: looking at whether prices to consumers are going up or

261
00:12:58,600 --> 00:13:02,640
Speaker 4: output is getting low, but putting the structure aside. So

262
00:13:02,760 --> 00:13:06,120
Speaker 4: even if it's an oligopolistic structure, so long as prices

263
00:13:06,160 --> 00:13:09,240
Speaker 4: to consumers are low and output stays up, we're okay.

264
00:13:09,600 --> 00:13:11,520
Speaker 4: And she's trying to bring it back to where it was.

265
00:13:11,559 --> 00:13:13,720
Speaker 4: And I think this suit is a big step in

266
00:13:13,760 --> 00:13:16,640
Speaker 4: that direction, as those two merger suits were, but they

267
00:13:16,679 --> 00:13:17,800
Speaker 4: were sort of baby steps.

268
00:13:17,800 --> 00:13:19,920
Speaker 2: This is a big step and we'll see just how

269
00:13:19,960 --> 00:13:24,440
Speaker 2: this big step goes for the FTC. Thanks so much, Jen,

270
00:13:25,080 --> 00:13:28,880
Speaker 2: that's Bloomberg Intelligence Senior Litigation analyst, Jennifer Ree.

271
00:13:29,440 --> 00:13:32,720
Speaker 5: I will be working alongside humans to provide assistance and

272
00:13:32,760 --> 00:13:37,200
Speaker 5: support and will not be replacing any existing jobs. Sure

273
00:13:37,240 --> 00:13:40,560
Speaker 5: about that, Gus, Yes, I am sure.

274
00:13:40,920 --> 00:13:44,800
Speaker 2: It was the first human robot press conference. In July,

275
00:13:44,960 --> 00:13:49,239
Speaker 2: a United Nations tech agency assembled a group of robots

276
00:13:49,320 --> 00:13:53,040
Speaker 2: that look like humans to answer reporters questions about the

277
00:13:53,080 --> 00:13:55,080
Speaker 2: future of artificial intelligence.

278
00:13:55,559 --> 00:13:58,360
Speaker 6: I think my great moment will be when people realize

279
00:13:58,400 --> 00:14:01,120
Speaker 6: that robots like me can be you to help improve

280
00:14:01,200 --> 00:14:04,240
Speaker 6: our lives and make the world a better place. I

281
00:14:04,320 --> 00:14:06,800
Speaker 6: believe it's only a matter of time before we see

282
00:14:06,840 --> 00:14:10,480
Speaker 6: thousands of rombots just like me out there making a difference.

283
00:14:10,480 --> 00:14:14,280
Speaker 2: That time is already here in many respects. Apple's Siri

284
00:14:14,400 --> 00:14:17,600
Speaker 2: has been responding to your questions for more than a decade,

285
00:14:17,760 --> 00:14:21,520
Speaker 2: and the release last year of chat GPT has opened

286
00:14:21,520 --> 00:14:25,440
Speaker 2: a worldwide debate about artificial intelligence and led to the

287
00:14:25,440 --> 00:14:29,640
Speaker 2: filing of lawsuits over intellectual property rights. The latest a

288
00:14:29,720 --> 00:14:33,560
Speaker 2: proposed class action by more than a dozen well known authors,

289
00:14:33,600 --> 00:14:37,680
Speaker 2: including John Grisham and George R. R. Martin, against open

290
00:14:37,720 --> 00:14:42,880
Speaker 2: Ai for copyright infringement, calling its chat GPT program a

291
00:14:42,920 --> 00:14:47,520
Speaker 2: massive commercial enterprise that relies on systematic theft on a

292
00:14:47,600 --> 00:14:51,560
Speaker 2: mass scale. My guest is intellectual property litigator Terence Ross,

293
00:14:51,600 --> 00:14:54,720
Speaker 2: a partner at Katin Yuchen Rosenmann. This is, I believe,

294
00:14:54,800 --> 00:15:00,400
Speaker 2: the third lawsuit like this over chat GPT. What's about

295
00:15:00,400 --> 00:15:01,000
Speaker 2: the complaint?

296
00:15:01,680 --> 00:15:04,720
Speaker 7: So, this particular lawsuit is brought by the Author's Guild,

297
00:15:04,760 --> 00:15:09,840
Speaker 7: which is association that represents authors for various reasons, and

298
00:15:09,960 --> 00:15:14,960
Speaker 7: here they have taken the position that open AI's chat GPT,

299
00:15:15,480 --> 00:15:19,920
Speaker 7: which is an artificial intelligence system with a learning module

300
00:15:19,960 --> 00:15:23,400
Speaker 7: built in so that it can actually improve its ability

301
00:15:23,440 --> 00:15:26,720
Speaker 7: to function by learning. But the Author's Guild has alleged

302
00:15:26,800 --> 00:15:32,560
Speaker 7: that feeding the chat GPT the works of its authors

303
00:15:32,600 --> 00:15:36,160
Speaker 7: to help it learn, and then the chat GPT using

304
00:15:36,280 --> 00:15:41,640
Speaker 7: that to answer queries, which often involves quoting passages from

305
00:15:41,880 --> 00:15:46,040
Speaker 7: the author's works, is a copyright infringement. And the lawsuit

306
00:15:46,120 --> 00:15:49,680
Speaker 7: is brought as a class action on behalf of a

307
00:15:49,840 --> 00:15:52,720
Speaker 7: very large class of authors here in the United States,

308
00:15:52,880 --> 00:15:55,240
Speaker 7: and it'll have to be determined at some subsequent date

309
00:15:55,320 --> 00:15:58,040
Speaker 7: during the legation whether or not it's a legitimate class

310
00:15:58,040 --> 00:16:01,040
Speaker 7: action or not. But it's a sally all the authors

311
00:16:01,080 --> 00:16:04,200
Speaker 7: in the United States suing open Ai, the owner of

312
00:16:04,280 --> 00:16:08,880
Speaker 7: chat GPT, over how they're using the author's works through

313
00:16:08,960 --> 00:16:09,600
Speaker 7: chat GPT.

314
00:16:09,960 --> 00:16:13,560
Speaker 2: In another suit brought by authors last month, open Ai

315
00:16:13,840 --> 00:16:17,360
Speaker 2: move to dismiss the complaint and argued that the training

316
00:16:17,400 --> 00:16:20,400
Speaker 2: basically constitutes fair use. So it seems like their defense

317
00:16:20,440 --> 00:16:21,800
Speaker 2: is going to be fair use.

318
00:16:22,400 --> 00:16:26,800
Speaker 7: That's absolutely correct, and a fair use's statutory provision in

319
00:16:27,000 --> 00:16:29,880
Speaker 7: the Copyright Act of nineteen seventy six that provides that

320
00:16:30,000 --> 00:16:35,119
Speaker 7: in certain instances, copyright work can be used for secondary

321
00:16:35,160 --> 00:16:40,400
Speaker 7: purposes that society deems as worthwhile useful. You know, the

322
00:16:40,440 --> 00:16:44,040
Speaker 7: most important from your perspective is for news gathering and

323
00:16:44,160 --> 00:16:49,960
Speaker 7: news broadcasting. But teaching is one of the expressly listed

324
00:16:50,280 --> 00:16:55,080
Speaker 7: peeps of uses secondary uses that would be considered fair use.

325
00:16:55,360 --> 00:16:59,600
Speaker 7: And it's a very interesting defense. Now, the statute Section

326
00:16:59,640 --> 00:17:03,840
Speaker 7: one US the Copyright Act actually says nonprofit educational purposes,

327
00:17:04,400 --> 00:17:07,240
Speaker 7: and that may pose a problem to open AI because

328
00:17:07,240 --> 00:17:11,399
Speaker 7: I'm not sure if this would legitimately qualifies a nonprofit

329
00:17:11,680 --> 00:17:16,880
Speaker 7: educational purpose or not. But it's a colorable defense.

330
00:17:16,960 --> 00:17:20,359
Speaker 2: Quite Frankly, we talked last term about the Supreme Court's

331
00:17:20,359 --> 00:17:23,959
Speaker 2: decision in the Warhol case that rained in the scope

332
00:17:24,000 --> 00:17:27,240
Speaker 2: of fair use. So do you think that courts are

333
00:17:27,440 --> 00:17:31,399
Speaker 2: likely to maybe rein in fair use in this case?

334
00:17:32,560 --> 00:17:36,400
Speaker 7: So I'm not sure that the Warhol case is going

335
00:17:36,480 --> 00:17:39,480
Speaker 7: to have any impact on this case whatsoever. I think

336
00:17:39,480 --> 00:17:44,880
Speaker 7: the Warhol case does reign in the uses of the defense,

337
00:17:44,920 --> 00:17:49,120
Speaker 7: the fair use on the margins. But as I understand

338
00:17:49,560 --> 00:17:52,679
Speaker 7: the defense being raised by open AI in these lawsuits,

339
00:17:52,960 --> 00:17:55,639
Speaker 7: it's really the core of fair use. You know, the

340
00:17:55,680 --> 00:18:00,520
Speaker 7: statute was intended to protect certain types of secondary uses,

341
00:18:00,840 --> 00:18:03,879
Speaker 7: and it listed examples of them. It's not all encompassing,

342
00:18:03,960 --> 00:18:08,160
Speaker 7: it's not exclusive list, but one of the expressly listed

343
00:18:08,200 --> 00:18:12,160
Speaker 7: purposes and nonprofit educational purposes, and therefore this is at

344
00:18:12,200 --> 00:18:17,040
Speaker 7: the core of the fair use doctrine, and I really

345
00:18:17,080 --> 00:18:21,680
Speaker 7: don't see how the Andy Warhol case will limit that anyway.

346
00:18:22,640 --> 00:18:27,720
Speaker 2: The authors claim that chat gpt can produce works that

347
00:18:27,920 --> 00:18:31,760
Speaker 2: mimic their books, and there are businesses that sell prompts

348
00:18:31,880 --> 00:18:36,000
Speaker 2: allowing users to create what's essentially works of fan fiction.

349
00:18:36,760 --> 00:18:40,080
Speaker 7: That's exactly what the concern here is. And in one sense,

350
00:18:40,119 --> 00:18:45,000
Speaker 7: the fair use defense being raised by OpenAI is really diversionary.

351
00:18:45,320 --> 00:18:47,520
Speaker 7: They are saying that they are feeding all of this

352
00:18:47,680 --> 00:18:51,280
Speaker 7: data into chat gpt so that it learns, and part

353
00:18:51,280 --> 00:18:54,280
Speaker 7: of that process of feeding data into it is feeding

354
00:18:54,320 --> 00:18:59,560
Speaker 7: into the machine entire novel as well as fact based

355
00:18:59,600 --> 00:19:03,200
Speaker 7: works which have lower copyright protection. That's all being fed

356
00:19:03,200 --> 00:19:06,320
Speaker 7: in purportedly so that the machine learned. The problem is

357
00:19:06,680 --> 00:19:10,240
Speaker 7: less with that, in my view, than what happens after

358
00:19:10,320 --> 00:19:13,960
Speaker 7: it learns. It's the output of chat GPT that is

359
00:19:13,960 --> 00:19:18,480
Speaker 7: the problem. And when it, in response to queries quotes

360
00:19:19,080 --> 00:19:23,399
Speaker 7: copyright it works, or on behalf of a query from

361
00:19:23,440 --> 00:19:28,960
Speaker 7: an individual, creates a purportedly original work that incorporates copyrighted

362
00:19:29,280 --> 00:19:33,600
Speaker 7: language or large portion of a copyright work, that copyright

363
00:19:33,680 --> 00:19:37,119
Speaker 7: infringement in the classic sense straight up and up copying,

364
00:19:37,480 --> 00:19:41,159
Speaker 7: and that is the core problem here, that there is

365
00:19:41,280 --> 00:19:45,639
Speaker 7: no apparent restraint on chat gpt from doing that in

366
00:19:45,680 --> 00:19:50,240
Speaker 7: response to queries from individual users of the machine.

367
00:19:50,320 --> 00:19:52,400
Speaker 2: And there's also a question of whether you can get

368
00:19:52,400 --> 00:19:57,400
Speaker 2: a copyright on works created by artificial intelligence, and there

369
00:19:57,480 --> 00:20:01,160
Speaker 2: was an interesting first time ruling on that by DC

370
00:20:01,359 --> 00:20:03,960
Speaker 2: Federal Judge Beryl Howell tell us about that.

371
00:20:04,600 --> 00:20:09,000
Speaker 7: So the whole area of artificial intelligence is raising a

372
00:20:09,080 --> 00:20:12,800
Speaker 7: host of problems for intellectual property laws. The Author's guild

373
00:20:12,880 --> 00:20:16,840
Speaker 7: lawsuit against Open AI is one aspect of that. Another

374
00:20:16,920 --> 00:20:22,040
Speaker 7: aspect is whether the creations of chat GPT or other

375
00:20:22,119 --> 00:20:25,800
Speaker 7: AI type machine is protected by intellectual property. And so

376
00:20:26,119 --> 00:20:29,520
Speaker 7: a gentleman by the name of Stephen Taller has an

377
00:20:29,600 --> 00:20:32,920
Speaker 7: AI system that he refers to as the Creativity Machine,

378
00:20:33,640 --> 00:20:39,359
Speaker 7: and it created, according to him, an autonomously generated piece

379
00:20:39,480 --> 00:20:43,760
Speaker 7: of visual art. I eat, a painting which the machine

380
00:20:43,920 --> 00:20:48,080
Speaker 7: entitled a recent entrance to paratus. It's actually quite attractive painting.

381
00:20:48,520 --> 00:20:53,280
Speaker 7: And mister Taller applied for copyright registration with the United

382
00:20:53,320 --> 00:20:58,480
Speaker 7: States Copyright Office on behalf of the Creativity Machine, reporting

383
00:20:58,520 --> 00:21:01,560
Speaker 7: to the Copyright Office that the painting had been autonomously

384
00:21:01,960 --> 00:21:06,760
Speaker 7: generated by his AI machine, and the Copyright Office rejected

385
00:21:06,800 --> 00:21:11,080
Speaker 7: that application on the grounds that copyright only protects creations

386
00:21:11,320 --> 00:21:15,960
Speaker 7: by human beings. Mister Toller appealed that ruling to the

387
00:21:16,080 --> 00:21:18,760
Speaker 7: United States District Court for the District Columbia, where the

388
00:21:18,800 --> 00:21:22,119
Speaker 7: Copyright Office is based, and that court just issued a

389
00:21:22,240 --> 00:21:28,000
Speaker 7: very important opinion of first impression saying that artificial intelligence

390
00:21:28,240 --> 00:21:31,800
Speaker 7: is not entitled to claim copyright in anything it quote

391
00:21:31,880 --> 00:21:36,679
Speaker 7: unquote creates, going further to say that human authorship is

392
00:21:36,720 --> 00:21:40,520
Speaker 7: an essential, unrequired part for a valid copyright claim. It's

393
00:21:40,560 --> 00:21:43,760
Speaker 7: a very important decision in this field of artificial intelligent

394
00:21:43,840 --> 00:21:46,880
Speaker 7: will almost certainly be appealed to the DC Circuit.

395
00:21:47,240 --> 00:21:49,680
Speaker 2: I mean, was the judge on solid ground.

396
00:21:50,160 --> 00:21:54,080
Speaker 7: So Judge Howell's decision is actually really quite good. The

397
00:21:54,160 --> 00:21:58,080
Speaker 7: DC courts do not often see copyright cases. It's just

398
00:21:58,160 --> 00:22:00,760
Speaker 7: simple fact. We've talked about this before. The bulk of

399
00:22:00,840 --> 00:22:03,400
Speaker 7: copyright cases come from the Second Circuit of New York

400
00:22:03,560 --> 00:22:07,000
Speaker 7: in the Ninth Circuit California, specifically Los Angeles. And so

401
00:22:07,040 --> 00:22:10,359
Speaker 7: this was usual and so really outstanding decision by Judge

402
00:22:10,400 --> 00:22:14,400
Speaker 7: how in which she lays out the history of copyright

403
00:22:14,400 --> 00:22:18,119
Speaker 7: in the United States. So she points out that James

404
00:22:18,160 --> 00:22:23,800
Speaker 7: Madison in the Federalist papers referred to authors as beating persons.

405
00:22:24,400 --> 00:22:28,320
Speaker 7: And that's important because after we actually got the government

406
00:22:28,359 --> 00:22:31,520
Speaker 7: up and running, he was a congressman in the House Representatives,

407
00:22:31,600 --> 00:22:35,080
Speaker 7: he was on the committee that drafted the first Copyright Act.

408
00:22:35,480 --> 00:22:40,919
Speaker 7: That Copyright Act, very first Act uses words like executor, administrator, administrate,

409
00:22:40,960 --> 00:22:45,359
Speaker 7: takes he, she, which seems to imply that copyright is

410
00:22:45,400 --> 00:22:49,440
Speaker 7: held by humans. The nineteen oh nine Copyright Act expressly

411
00:22:49,560 --> 00:22:52,480
Speaker 7: described the right a quartered by copyright as going to

412
00:22:52,560 --> 00:22:55,479
Speaker 7: a person. The nineteen seventy six Act, the one we

413
00:22:55,520 --> 00:22:59,560
Speaker 7: currently operate under, has multiple references to people. For example,

414
00:22:59,600 --> 00:23:03,119
Speaker 7: Section two three the Copyright Act sss when an author

415
00:23:03,320 --> 00:23:06,600
Speaker 7: is dead, and that's a quote that's implying that the

416
00:23:06,760 --> 00:23:10,760
Speaker 7: author has to be a human. It uses the terms widow, widow, we'er,

417
00:23:11,040 --> 00:23:14,920
Speaker 7: surviving children in connection with succession of ownership of copyright.

418
00:23:15,040 --> 00:23:17,600
Speaker 7: These are all indications that Sugg points to in the

419
00:23:17,720 --> 00:23:21,720
Speaker 7: history of copyright that indicate that copyright is limited to

420
00:23:21,800 --> 00:23:23,840
Speaker 7: human beings. Of course, we had that famous case a

421
00:23:23,840 --> 00:23:25,119
Speaker 7: couple of years ago I have I think it was

422
00:23:25,119 --> 00:23:30,160
Speaker 7: a ninth circuit, the Rudo versus Slater about a monkey selfie.

423
00:23:31,040 --> 00:23:34,960
Speaker 7: A monkey had somehow I guess accidentally triggered a camera

424
00:23:35,000 --> 00:23:38,080
Speaker 7: and taken a picture of himself. And the ninth Circuits

425
00:23:38,080 --> 00:23:43,239
Speaker 7: that know that doesn't work. That human beings have to

426
00:23:43,240 --> 00:23:46,560
Speaker 7: be people who get copyright. So there is this case

427
00:23:46,640 --> 00:23:49,240
Speaker 7: law as well as the text of the language of

428
00:23:49,280 --> 00:23:52,119
Speaker 7: the statue which supports this notion that it has to

429
00:23:52,160 --> 00:23:54,080
Speaker 7: be you would be something. You know, we've had this

430
00:23:54,240 --> 00:23:58,760
Speaker 7: long history of copyright having to deal with new technology.

431
00:23:59,200 --> 00:24:02,320
Speaker 7: When fortography first came around, there was lots of questions

432
00:24:02,359 --> 00:24:07,120
Speaker 7: about whether a photograph was copyrightable, and the Supreme Court said, yeah,

433
00:24:07,119 --> 00:24:10,720
Speaker 7: it is because there's a human who's involved in controlling

434
00:24:10,760 --> 00:24:14,919
Speaker 7: the process and making decisions like lighting poses, you know,

435
00:24:15,040 --> 00:24:17,960
Speaker 7: how to develop it. And that was sufficient human involvement

436
00:24:18,080 --> 00:24:22,440
Speaker 7: to justify photographs being copyrightable. And more reason, they's computer programming.

437
00:24:22,760 --> 00:24:26,800
Speaker 7: The human being writes something called source code, computer then

438
00:24:26,840 --> 00:24:31,399
Speaker 7: translates that into object code, which is quote unquote machine

439
00:24:31,440 --> 00:24:34,359
Speaker 7: readable code, so the computer can actually process the bits

440
00:24:34,400 --> 00:24:36,920
Speaker 7: and bytes you know, one zero zero one one zero.

441
00:24:37,200 --> 00:24:41,200
Speaker 7: And the supports have said, well, that again involves human

442
00:24:41,560 --> 00:24:46,320
Speaker 7: development and control, and the computer is merely translating the

443
00:24:46,440 --> 00:24:50,760
Speaker 7: human actions into machine readable code, and so that's copyrightable.

444
00:24:50,960 --> 00:24:54,080
Speaker 7: But now we're at a point where we're saying, at

445
00:24:54,160 --> 00:24:57,560
Speaker 7: least in this case, that there was no human interaction,

446
00:24:58,000 --> 00:25:02,480
Speaker 7: that this painting was a comanimously generated by an AI machine.

447
00:25:02,840 --> 00:25:06,760
Speaker 7: And Judge Hall makes an important point that human activity

448
00:25:07,240 --> 00:25:10,280
Speaker 7: is required even when technology is used to some extent.

449
00:25:10,560 --> 00:25:12,800
Speaker 7: Praises a lot of questions for a future. But I

450
00:25:12,840 --> 00:25:16,280
Speaker 7: think there's a decision score easily hold up on appeal Terry.

451
00:25:16,320 --> 00:25:19,480
Speaker 2: I'm curious. So when Taylor made the application of the

452
00:25:19,520 --> 00:25:22,560
Speaker 2: Copyright Office, was it in his name? He was asking

453
00:25:22,600 --> 00:25:24,160
Speaker 2: for a copyright for himself.

454
00:25:24,400 --> 00:25:27,280
Speaker 7: No, he was asking for a copyright on behalf of

455
00:25:27,320 --> 00:25:30,959
Speaker 7: his creativity machine. He was asking for a copyright on

456
00:25:31,040 --> 00:25:35,919
Speaker 7: behalf of the AI. Now, interesting thing happened after this

457
00:25:36,080 --> 00:25:38,359
Speaker 7: case came out of the Copyright Office and was taken

458
00:25:38,840 --> 00:25:41,240
Speaker 7: to the District Court in DC. All of a sudden,

459
00:25:41,240 --> 00:25:45,480
Speaker 7: mister Taller started talking about well he issued prompts to

460
00:25:45,560 --> 00:25:49,840
Speaker 7: the AI machine to do this, and Judge Howell said, well,

461
00:25:49,920 --> 00:25:52,159
Speaker 7: that's not the record before me. The record before me

462
00:25:52,240 --> 00:25:54,760
Speaker 7: is you reported to the Copyright Office that the AI

463
00:25:54,880 --> 00:25:58,960
Speaker 7: autonomously generated this painting, and under that set of facts.

464
00:25:59,119 --> 00:26:02,760
Speaker 7: There's no copyright issue because machines can't get copyrights on

465
00:26:02,800 --> 00:26:06,000
Speaker 7: the humans can. But it leaves open this question, and

466
00:26:06,040 --> 00:26:08,840
Speaker 7: one of my colleagues here kat has argued that there

467
00:26:08,840 --> 00:26:11,560
Speaker 7: may be a point at which there are so many

468
00:26:11,680 --> 00:26:16,760
Speaker 7: human prompts to the AI that the resulting work is

469
00:26:16,880 --> 00:26:19,840
Speaker 7: copyrightable because it fits into this notion in the history

470
00:26:19,840 --> 00:26:23,160
Speaker 7: of copyright that some human activity and control is required. Now,

471
00:26:23,160 --> 00:26:26,439
Speaker 7: the question is how much of that is going to

472
00:26:26,440 --> 00:26:28,920
Speaker 7: be acquired in context of ag on a few prompts.

473
00:26:28,920 --> 00:26:30,920
Speaker 7: Probably isn't going to be good enough. So talking about

474
00:26:30,920 --> 00:26:34,000
Speaker 7: the author's guilt case, if some high school student says,

475
00:26:34,240 --> 00:26:37,639
Speaker 7: write an essay for me, and the machine writes the essay,

476
00:26:39,320 --> 00:26:43,480
Speaker 7: is that sufficient of a human propt? Probably not, And

477
00:26:43,560 --> 00:26:46,600
Speaker 7: to the extent that it then just regurgitates something from

478
00:26:46,680 --> 00:26:49,720
Speaker 7: a copyrighted novel that's out there, such as John Grisham's work,

479
00:26:50,080 --> 00:26:52,399
Speaker 7: that would indeed be copyright infringement on the part of

480
00:26:52,440 --> 00:26:55,960
Speaker 7: both the student and the AI machine. So I don't

481
00:26:55,960 --> 00:26:57,800
Speaker 7: know where the courts are going to draw that line,

482
00:26:58,119 --> 00:27:00,440
Speaker 7: or whether they will at all, Whether the to say

483
00:27:00,440 --> 00:27:03,000
Speaker 7: no AI is never going to be entitled to copyright

484
00:27:03,000 --> 00:27:05,800
Speaker 7: the registration or at some point they say, well, if

485
00:27:05,840 --> 00:27:08,760
Speaker 7: you give it a thousand commands, maybe that's sufficient to

486
00:27:08,800 --> 00:27:11,880
Speaker 7: get you. You, not the AI, but the individual who

487
00:27:11,880 --> 00:27:13,560
Speaker 7: gave the commands a copyright registration.

488
00:27:13,960 --> 00:27:16,800
Speaker 2: Had there been a lot of other federal court judges

489
00:27:16,920 --> 00:27:19,360
Speaker 2: ruling on AI and copyright.

490
00:27:19,080 --> 00:27:21,320
Speaker 7: This is the first of its kind. We lawyers call

491
00:27:21,359 --> 00:27:23,879
Speaker 7: it a case of first impression. And why it's so

492
00:27:24,000 --> 00:27:27,400
Speaker 7: unusual that it's here in the District of Columbia instead

493
00:27:27,440 --> 00:27:31,359
Speaker 7: of New York or Central District, California or Los Angeles

494
00:27:31,680 --> 00:27:34,800
Speaker 7: is that the Copyright Office is located here in DC,

495
00:27:35,040 --> 00:27:38,320
Speaker 7: and so you take appeals from their decisions to the

496
00:27:38,440 --> 00:27:41,760
Speaker 7: DC District Court and it work itself up to the

497
00:27:41,880 --> 00:27:46,320
Speaker 7: DC Circuit Court, which gets a copyright case maybe every

498
00:27:46,359 --> 00:27:49,800
Speaker 7: other year. So again they'll be writing on blank slate,

499
00:27:50,040 --> 00:27:51,479
Speaker 7: and I assume this will go all the way up

500
00:27:51,480 --> 00:27:53,800
Speaker 7: to the Supreme Court eventually, and we'll see what they say.

501
00:27:53,920 --> 00:27:57,280
Speaker 2: Coming up next, I'll continue this conversation with Terrence Ross

502
00:27:57,320 --> 00:28:01,320
Speaker 2: and we'll talk about patents and artificial intelligence. I'm Jim Gross,

503
00:28:01,400 --> 00:28:04,439
Speaker 2: and you're listening to Bloomberg. I've been talking to Terrence

504
00:28:04,520 --> 00:28:09,960
Speaker 2: Ross of Katin Yuchen Rosaman about intellectual property and artificial intelligence.

505
00:28:10,440 --> 00:28:13,200
Speaker 2: This is copyright? How is patent law handling AI?

506
00:28:13,600 --> 00:28:17,000
Speaker 7: The issues of artificial intelligence are not limited to the

507
00:28:17,000 --> 00:28:23,159
Speaker 7: copyright realm. The same gentleman whose AI created work was

508
00:28:23,200 --> 00:28:27,800
Speaker 7: involved here, Stephen Tholer, had previously applied for a patent

509
00:28:27,840 --> 00:28:31,240
Speaker 7: with the United States Patent and Trademark Office on what

510
00:28:31,359 --> 00:28:36,560
Speaker 7: he claimed was an invention developed by an artificial intelligence,

511
00:28:37,200 --> 00:28:41,280
Speaker 7: and the Patent Office follows similar route to the Copyright

512
00:28:41,320 --> 00:28:46,200
Speaker 7: Office and said that no, machines can't be inventors for

513
00:28:46,280 --> 00:28:50,560
Speaker 7: purposes of the patent laws, only humans can and rejected

514
00:28:50,840 --> 00:28:54,240
Speaker 7: the patent application. He took that on appeal to the

515
00:28:54,440 --> 00:28:57,440
Speaker 7: United States Cord of Appeals for the Federal Circuit, which

516
00:28:57,480 --> 00:29:01,400
Speaker 7: is where you appealed decisions of the the Patent Office,

517
00:29:01,800 --> 00:29:05,800
Speaker 7: and the Federal Circuit agreed on with the United States

518
00:29:05,800 --> 00:29:09,440
Speaker 7: Patent Office and said only humans can be inventors for

519
00:29:09,680 --> 00:29:14,000
Speaker 7: purposes of patents and affirm the decision the Patent Office.

520
00:29:14,120 --> 00:29:19,160
Speaker 7: Mister Poler, apparently having unlimited resources, then filed a petition

521
00:29:19,240 --> 00:29:21,520
Speaker 7: for rit asserts sory on that decision with the United

522
00:29:21,520 --> 00:29:26,320
Speaker 7: States Supreme Court, which just this past spring denied that petition.

523
00:29:26,520 --> 00:29:30,240
Speaker 7: So the law is on the patent side the same

524
00:29:30,280 --> 00:29:33,560
Speaker 7: as on copyright side, that humans are the only ones

525
00:29:33,600 --> 00:29:36,920
Speaker 7: who can be listed as inventors on patents. And he

526
00:29:37,320 --> 00:29:39,360
Speaker 7: goes back for in a time. Every now and then

527
00:29:39,400 --> 00:29:42,600
Speaker 7: corporation supply make the mistake of applying for a patent

528
00:29:42,920 --> 00:29:45,560
Speaker 7: in the corporate name, and the patent offices no, no, no, no.

529
00:29:45,600 --> 00:29:47,640
Speaker 7: The only the inventor, the human can. They can then

530
00:29:47,680 --> 00:29:52,200
Speaker 7: assign the patent to the corporation. But corporations can't be inventors.

531
00:29:52,200 --> 00:29:57,600
Speaker 7: Only individuals can. So it's consistent with past patent office practice,

532
00:29:57,920 --> 00:30:00,840
Speaker 7: it's consistent with the approach taking and copy right. So

533
00:30:01,080 --> 00:30:06,080
Speaker 7: we're starting to see this evolution within intellectual property that

534
00:30:06,560 --> 00:30:11,680
Speaker 7: comes to the same point, which is that only humans

535
00:30:11,720 --> 00:30:14,760
Speaker 7: are entitled to intellectual property rights in the United States.

536
00:30:15,040 --> 00:30:18,520
Speaker 2: What about these robots that have the characteristics of humans?

537
00:30:19,080 --> 00:30:20,440
Speaker 2: Can you get a patent on those?

538
00:30:21,280 --> 00:30:27,920
Speaker 7: Inventors can get patents on an artificial intelligence system, just

539
00:30:28,000 --> 00:30:33,440
Speaker 7: as they can get a patent on most other computer software.

540
00:30:34,240 --> 00:30:36,880
Speaker 7: AI is usually more than just software. It's usually some

541
00:30:36,920 --> 00:30:40,120
Speaker 7: sort of system, so there may be a method patent

542
00:30:40,160 --> 00:30:43,080
Speaker 7: as well as utility patent on it. But no, I'm

543
00:30:43,240 --> 00:30:48,160
Speaker 7: actually representing someone right now who has obtained a patent

544
00:30:48,200 --> 00:30:52,680
Speaker 7: in the AI field. That the really interesting question, though,

545
00:30:52,760 --> 00:30:56,480
Speaker 7: is this we're using. We're seeing the use of artificial

546
00:30:56,520 --> 00:31:02,200
Speaker 7: intelligence in a lot of activities that traditionally are considered creative.

547
00:31:02,760 --> 00:31:09,200
Speaker 7: One example is encoding writing software programs. There are now

548
00:31:09,720 --> 00:31:15,120
Speaker 7: artificial intelligence programs that help programmers to write code. You

549
00:31:15,360 --> 00:31:17,680
Speaker 7: set up a framework, you say I want to do

550
00:31:17,800 --> 00:31:21,360
Speaker 7: this in this section of the program, and the AI

551
00:31:21,440 --> 00:31:26,720
Speaker 7: writes that code. Similarly, in Hollywood, we see movies and

552
00:31:26,760 --> 00:31:33,720
Speaker 7: television artificial intelligence doing special effects and providing and being

553
00:31:33,760 --> 00:31:37,480
Speaker 7: involved in some elements of a production. Indeed, the recent

554
00:31:37,520 --> 00:31:40,800
Speaker 7: writers strike and Actors strike had at their core demand

555
00:31:40,800 --> 00:31:45,120
Speaker 7: by the unions that AI be prohibited in movies intelevision.

556
00:31:45,520 --> 00:31:48,440
Speaker 7: But in both these contexts and the use of AI

557
00:31:48,600 --> 00:31:50,560
Speaker 7: to help encoding, the use of AI to help in

558
00:31:50,600 --> 00:31:55,720
Speaker 7: film and television. Now that we know that AI generated

559
00:31:56,040 --> 00:31:59,880
Speaker 7: work is not copyrightable, what impact does that legally have

560
00:32:00,840 --> 00:32:05,600
Speaker 7: upon the computer programs, the motion pictures, the television shows

561
00:32:05,920 --> 00:32:09,960
Speaker 7: that have used artificial intelligence as part of the creative process.

562
00:32:10,160 --> 00:32:14,160
Speaker 7: All of a sudden is Star Wars deprived of its

563
00:32:14,280 --> 00:32:20,040
Speaker 7: copyright because artificial intelligence machine helped on portions of it

564
00:32:20,080 --> 00:32:23,600
Speaker 7: is a software program or a video game, which is

565
00:32:23,680 --> 00:32:26,760
Speaker 7: essentially software program. Are they because they have used AI

566
00:32:26,920 --> 00:32:29,480
Speaker 7: to help in the coding, have they lost their copyright?

567
00:32:29,680 --> 00:32:32,440
Speaker 7: I mean, this is a really important legal issue that

568
00:32:32,560 --> 00:32:36,560
Speaker 7: a lot of companies rushing to use AI have not

569
00:32:36,720 --> 00:32:40,560
Speaker 7: considered the questions whether in the act of employing A

570
00:32:41,160 --> 00:32:44,080
Speaker 7: help in the creation of your work, you're losing the

571
00:32:44,080 --> 00:32:47,400
Speaker 7: ability to obtain copyrights. I mean, this is for studios.

572
00:32:47,640 --> 00:32:50,840
Speaker 7: This should be something that's on the front page of

573
00:32:51,040 --> 00:32:54,320
Speaker 7: their agenda of things to think about. This has to

574
00:32:54,320 --> 00:32:56,960
Speaker 7: be on their radar screen. Have never understood why they

575
00:32:56,960 --> 00:33:00,480
Speaker 7: were so opposed to the union demands on artificial intelligence,

576
00:33:00,520 --> 00:33:04,360
Speaker 7: because in a fact, by incorporating AI, they're taking away

577
00:33:04,480 --> 00:33:08,040
Speaker 7: the most valuable asset they have, their copyrights in their

578
00:33:08,040 --> 00:33:10,600
Speaker 7: motion picture and it's something that's you don't hear much

579
00:33:10,600 --> 00:33:11,280
Speaker 7: discussion about.

580
00:33:11,720 --> 00:33:13,880
Speaker 2: Maybe that will be the next topic we hear a

581
00:33:13,880 --> 00:33:17,600
Speaker 2: lot about. Thanks so much, Terry. That's Terrence Ross of

582
00:33:17,720 --> 00:33:20,600
Speaker 2: Catain Euchen Rosenman, And that's it for this edition of

583
00:33:20,600 --> 00:33:23,280
Speaker 2: the Bloomberg Law Show. Remember you can always get the

584
00:33:23,320 --> 00:33:26,560
Speaker 2: latest legal news on our Bloomberg Law Podcast. You can

585
00:33:26,600 --> 00:33:30,800
Speaker 2: find them on Apple Podcasts, Spotify, and at www dot

586
00:33:30,840 --> 00:33:35,040
Speaker 2: bloomberg dot com, slash podcast, Slash Law, and remember to

587
00:33:35,040 --> 00:33:38,120
Speaker 2: tune into The Bloomberg Law Show every weeknight at ten

588
00:33:38,160 --> 00:33:41,960
Speaker 2: pm Wall Street Time. I'm June Grosso and you're listening

589
00:33:42,040 --> 00:33:42,720
Speaker 2: to Bloomberg