How is Midjourney's ToS Legal?

Question

I feel this is fairly straightforward, but I have seen no explanation as to why Midjourney is allowed to restrict the "copyright" or commercial use rights of their users, paid or otherwise, in their ToS.

In their terms of service, it states that you only have the right to use generated images commercially if you have paid for a membership during the time the asset was made. This seems to directly contradict the idea that AI generated images have no copyright, and are therefore public domain (as my understanding goes, which could be way off-base). It doesn't seem like they have a leg to stand on if I created a free account and used generated images commercially, since my assumption is that they could only attempt a DMCA claim, which shouldn't work because the image has no copyright.

So, I ask anyone here with knowledge on the subject to explain to me whether or not I am mistaken. I know it's all still fairly new, but I thought the ruling on AI-generated content was pretty clear. The only thing I could potentially see is that the images were generated by their machines, but I don't see how that changes things.

The section in question:

4. Copyright and Trademark In this section, Paid Member shall refer to a Customer who has subscribed to a paying plan.

Rights You give to Midjourney By using the Services, You grant to Midjourney, its successors, and assigns a perpetual, worldwide, non-exclusive, sublicensable no-charge, royalty-free, irrevocable copyright license to reproduce, prepare Derivative Works of, publicly display, publicly perform, sublicense, and distribute text, and image prompts You input into the Services, or Assets produced by the service at Your direction. This license survives termination of this Agreement by any party, for any reason.

Your Rights Subject to the above license, You own all Assets You create with the Services, provided they were created in accordance with this Agreement. This excludes upscaling the images of others, which images remain owned by the original Asset creators. Midjourney makes no representations or warranties with respect to the current law that might apply to You. Please consult Your own lawyer if You want more information about the state of current law in Your jurisdiction. Your ownership of the Assets you created persists even if in subsequent months You downgrade or cancel Your membership. However, You do not own the Assets if You fall under the exceptions below.

If You are an employee or owner of a company with more than $1,000,000 USD a year in gross revenue and You are using the Services on behalf of Your employer, You must purchase a “Pro” membership for every individual accessing the Services on Your behalf in order to own Assets You create. If You are not sure whether Your use qualifies as on behalf of Your employer, please assume it does.

If You are not a Paid Member, You don’t own the Assets You create. Instead, Midjourney grants You a license to the Assets under the Creative Commons Noncommercial 4.0 Attribution International License (the “Asset License”). The full text is accessible as of the Effective Date here: https://creativecommons.org/licenses/by-nc/4.0/legalcode.

Please note: Midjourney is an open community which allows others to use and remix Your images and prompts whenever they are posted in a public setting. By default, Your images are publically viewable and remixable. As described above, You grant Midjourney a license to allow this. If You purchase a "Pro" plan, You may bypass some of these public sharing defaults.

If You purchased the Stealth feature as part of Your “Pro” subscription or through the previously available add-on, we agree to make best efforts not to publish any Assets You make in any situation where you have engaged stealth mode in the Services.

Please be aware that any image You make in a shared or open space such as a Discord chatroom, is viewable by anyone in that chatroom, regardless of whether Stealth mode is engaged.

Clearly, I'm not lawyer, and I could easily misunderstand what this trying to say. I understand companies typically needing to add broad language to protect themselves, and is usually innocuous, despite the claims made by others. I'm mostly here to try and gain an understanding of why they might have included this.

Answer 1

In their terms of service, it states that you only have the right to use generated images commercially if you have paid for a membership during the time the asset was made. This seems to directly contradict the idea that AI generated images have no copyright, and are therefore public domain (as my understanding goes, which could be way off-base). It doesn't seem like they have a leg to stand on if I created a free account and used generated images commercially, since my assumption is that they could only attempt a DMCA claim, which shouldn't work because the image has no copyright.

So, I ask anyone here with knowledge on the subject to explain to me whether or not I am mistaken. I know it's all still fairly new, but I thought the ruling on AI-generated content was pretty clear.

Two main points.

The Law Is Not That Clear Yet

First, you are mistaken that the law on the copyrightable content of AI-generated content is pretty clear.

AI-generated content comparable to Midjourney or ChatGPT in their current dramatically new versions is only a year or two old so far. At this point, we have opinion letters and policy statements from the U.S. Copyright Registrar's office, and a handful of trial court orders, and perhaps one or two rulings on requests for preliminary injunctions pending appeals.

But, there is still a legitimate argument that these AI engines are different in kind in legally relevant ways from earlier automated technologies like motion activated cameras, or cameras on timers, or cameras operated by monkeys or other animals. This argument has not yet been definitively foreclosed by existing law.

Copyright infringement cases are in the exclusive jurisdiction of the federal courts, and AFAIK, there is really no meaningful body of precedential final U.S. Court of Appeals opinions on the merits of these issues in light of this arguably different in kind AI technology. There is certainly no U.S. Supreme Court ruling that is squarely on point factually yet. And, even if one or two circuits had ruled a particular way on the issue, the possibility of a circuit split evolving before the dust settles is real.

We have the "first word" on how copyright law applies to these kinds of works, but not the "last word" or a definitive ruling regarding the question under U.S. law.

Furthermore, it isn't just U.S. legal authorities that matter.

Anything Internet based can be used anywhere in the world, and it is entirely possible that even if U.S. law ultimately concludes that A.I. generated content can't be copyrighted, nothing prevents courts and intellectual property right administering administrative agencies in Japan or France or Russia or Brazil or Australia or China from coming to a different conclusion, which could give these terms in a ToS legal significance to the extent that the choice of law provisions and substantive terms of a ToS don't resolve them.

An attorney drafting a ToS in this context needs to consider every plausible way that courts could ultimately reach without knowing for sure at the time it is drafted what will happen, and wants to do that in a way that maximally preserves the firm's preferred outcome in each of those scenarios. If this turns out to be irrelevant latter, so be it, at least they tried. If it turns out to be important later due to, for example, an unexpected U.S. Supreme Court precedent addressing the issue in the future, the drafting lawyer gets sued for malpractice for not anticipating the possibility.

If, when the time comes to try to rely upon the ToS in a court case, the legal assumptions about copyright of A.I.- generated material in the ToS turns out to be untenable under the law as it has evolved by then in the place where the case is actually being litigated, the firm can abandon that legal argument at the outset of the case and would almost surely not be sanctioned for doing so.

If an agency like the FTC sued them for deceptive trade practices, or they were sued in a class action on similar grounds, and again, the legal position taken when the ToS was drafted now seems untenable, the firm could enter into a consent degree and amend the ToS prospectively to settle the lawsuit and probably wouldn't face serious money damages or fines for not predicting the state of a body of law which was really only a year or two old or less at the time that it was drafted.

The uncertainty in the law at the time the ToS was drafted is reflected in the following very atypical ToS language, which disclaimed any liability on the part of the firm of taking a position about the copyright status of the A.I.-generated work in the ToS or elsewhere, that turns out to be wrong:

Midjourney makes no representations or warranties with respect to the current law that might apply to You. Please consult Your own lawyer if You want more information about the state of current law in Your jurisdiction.

Copyright Rights v. Contract Rights

Suppose that there are no copyrights that can be obtained in A.I.-generated content. This doesn't mean that the ToS are improper or wrongful. The ToS is doing several things:

1. It is prohibiting users from using the firm issuing the ToS or fellow users on intellectual property grounds. The waiver dispenses with the need to litigate over the merits of whether there is a valid copyright or not.

2. It establishes rules of the road about who has to pay for using the website and what rights within the platform come with what kind of relationship a user has with the firm.

3. It disavows any expectation of privacy in the content generated in order to protect the firm from breach of privacy rights claims.

Critically, note also that it is possible and legal to license and/or profit from content even if the content isn't protected by copyright.

For example, it is usually legal to print copies of an out of copyright book, sell it to consumers at a profit, and enter into non-competition agreements with firms that are distributing that book that prohibits them from printing their own copies of the same out of copyright book and selling it to their buyers at a price lower than your product's price. The justification for a non-competition clause like this isn't that you own the rights to the out of copyright book. Instead, it is the business justification that someone you are hiring to do something for you (i.e. distributing the book) shouldn't also be competing with you in the same line of business that you are hiring them to do work for you in. You shouldn't have to be subsidizing your very own competition by giving them profits from your business dealings with them.

Similarly, it is legal to sell customer lists or other compilations of "sweat of the brow" data that is not protected by copyright law (e.g. conveniently packaged complete packages of U.S. government documents that are inconvenient to get directly from the agencies in question) in a contract with the buyer (the "first sale doctrine" limits somewhat what restrictions on use of the purchased item can be imposed on a buyer, but doesn't completely limit all contractual arrangements of this kind).

So, the fact that there are provisions about licensing in an agreement isn't inherently unlawful even if the underlying material isn't actually protected by copyright as the ToS implicitly and explicitly assumes.

There are times when licensing restrictions can go too far and raise anti-trust concerns.

For example, there is a duty in some cases to license legally protected intellectual property that is necessary for any other firm to participate in an industry like, e.g., cell phones, on an equitable basis under anti-trust law in some cases, so that the IP dependent industry doesn't become a natural monopoly, and so that the IP owner gets paid but doesn't pick winners or losers in the competitive marketplace for improper reasons.

But these kinds of restrictions are the exception and not the rule. This kind of analysis also implicates legal doctrines far afield from the contract and copyright oriented issues raised in the question.

Answer 2

A TOS is not intrinsically illegal, but an interpretation of a TOS may or may not be supported by a court, that remains to be seen. It probably does not constitute a "deceptive practice" under FTC standards.

The TOS is your permission to use the software, and there can be no question that they have the right to impose conditions on customer use of the software. E.g. Amazon cannot freely use software that is only licensed for free educational use. They speak of "ownership" of IP so created and explicitly disclaim any claims about Current Law in Your Jurisdiction. At the crucial point in the agreement, they switch to talking about the license (BY-NC) that they grant when you are not a paid member.

The exact details of this ownership are not part of the free tier TOS, but they do seem to add certain protections to "owned" content created under the Pro plan – they are under no legal obligation to make all content universally visible and usable.