Licensing Internet Artificial Intelligence

New Jersey Law Journal          April 07, 2023

By Jonathan Bick      Bick is counsel at Brach Eichler in Roseland, and chairman of the firm’s patent, intellectual property, and information technology group. He is also an adjunct professor at Pace and Rutgers Law Schools.

As artificial intelligence (AI) increasingly interpenetrates internet transactions, licensing interest expands. The licensing of internet AI intellectual property is stymied because legal difficulties such as the proper assessment of the jurisdiction for the licensing agreement and the nature of the internet including the proper identification of the parties for the licensing agreement. However, the primary issue associated with securing a licensor’s consent for internet AI intellectual property is that normally the licensor is a computer program, hence not a legal person.

Legal, business and technological solutions to this difficulty are available. All of these solutions involve modifying the AI’s form or output.

AI, sometimes known as machine learning, is a sequence of instructions telling a to transform input data into a desired output. AI differs from traditional computer software algorithms due to a feature that allows AI computer software to re-write its own code independently or code previously defined by the programmer. Unlike traditional computer software algorithms which limit the code re-write to criteria and biases previously coded by the programmer, AI software code re-write is experience driven and hence free of programmer criteria and biases.

The criteria and biases programmer free features of AI are the source of the Internet licensing difficulties. A license is a grant of consent of one party (licensor) to another party (licensee) as an element of an agreement between those parties. A licensor is a legal “person” capable of granting rights.

The term “person” is defined in 18 U.S.C. § 2510(6) to mean any individual person as well as natural and legal entities. A legal entity corresponds to the notion of a legal person. A legal entity holds rights, and each entity has a legal status. Generally, a legal entity is any company or organization that has legal rights and responsibilities, including tax filings. It is a business that can enter into contracts, either as a vendor or a supplier, and can sue or be sued in a court of law.

Since the vast majority of the output of AI software is newly created software, which is intellectual property protected by copyright law and 17 U.S. Code § 201 states “Copyright in a work protected under this title vests initially in the author or authors of the work,” the AI owns the new intellectual property. However, as legal difficulty arises, specifically, the AI which is the creator of new intellectual property is not legally authorized to license it because it is not a legal person.

Legal, business and technological options are available to facilitate the licensing of AI intellectual property. Each option involves a separate method creating person to act as the licensor of the AI’s intellectual property.

The legal options include various filings. The business and technical options include modifying the AI intellectual property. These options are not mutually exclusive.

Since AI computer software is a set of protocols (universally agreed-upon actions) that takes a known set of input data and known responses to the data (as output), and prepares a model to generate reasonable predictions for the response to new data, the AI computer software may be incorporated into a patent. While AI may not be inventors (see Thaler v. Vidal, No. 21-2347 (Fed. Cir. 2022)) because only natural persons (i.e., human beings) can be named as inventors on U.S. patents, thereby excluding artificial intelligence from being listed as an inventor per se, the America Invents Act (and 35 U.S.C. § 102 ) allows the first to file (not first to invent) to be the owner of an invention.

Thus, the owner of an AI software (i.e., first to file) may be an AI software developer. Since the owner is a legal “person,” a license for the output of the AI software may be executed and enforced as an inventor of any patent that is applied for and granted over that invention. It should be noted that four conditions apply to all inventions in all fields of technology. More specifically, a patent may be granted for an AI invention when it is new, involves an inventive step, is capable of industrial application, and is not excluded from patent protection.

A company making, using or selling AI tools should also consider its freedom to operate to avoid encroaching on existing patents covering AI innovation. A patent and internet landscape assessment is helpful to understand the scope of internet licensing of AI intellectual property to mitigate risk.

Due to the worldwide nature of the internet, and the fact that patent rights are limited to specific jurisdictions (such as a U.S. patent only yields rights in the United States), internet licensing of internet AI may require more than one patent. Additionally, internet cul-de-sac software (i.e., software that limits licensing via the internet to user where said licensing is enforceable) should be considered.

Additionally, it should be noted that patents provide a time-limited protection for an invention. A patent entitles the patent owner to the exclusive right to make, use and sell his or her invention in exchange for full and clear disclosure on how to work the invention. Consequently, the enforceable term of the license will be limited to the term of the patent (if the patent is the basis for becoming the licensor for the AI intellectual property).

Copyright filing is another source of securing a “legal” person for purposes of licensing AI intellectual property. While the Copyright, Designs and Patents Act 1988 was of course drafted before licensing AI intellectual property was an issue, it addresses computer-generated works. If there is no human author, Section 9 says that for computer-generated works, “the author shall be taken to be the person by whom the arrangements necessary for the creation of the work are undertaken.”

As noted above, Section 102 of the Copyright Act states that the work initially vests in the owner (thus in the AI software for new and additional software which the AI software created). A business/technical work around to secure a relevant copyright in an AI-generated work, is to edit it in a way that you create a new copyright work. Once a new work is created then the editor (presumably a person) will have the right to execute and enforce a copyright license.

From a purely technical perspective, firms licensing AI intellectual property may benefit from placing digital locks on their products. Circumvention of digital locks is an offense in some jurisdictions and may provide relief against unauthorized parties.

From a purely business perspective, internet AI intellectual property licensing may benefit from strengthening their brand (trademark), and in so doing differentiating their products competitors and establish a positive market reputation, as well as goodwill. As an adjunct, a trademark registration should be considered.

Like patents, trademark registrations are jurisdictionally limited. Due to the worldwide nature of the internet, proper internet licensing of internet AI intellectual property may require registering a trademark in more than one country.