By Mark Seavy  

Artificial intelligence’s impact on licensing has so far been vastly underestimated and will require guardrails as it is deployed in standard agreements, said experts at Licensing International’s recent AI & Licensing Summit in Chicago. 

Those protections will vary and will apply to licensors, licensees, and third-party suppliers. Additionally, lawyers speaking at the summit said those protections will need to sharply define the input and output of content in a market that is evolving rapidly. 

“Because it is evolving so quickly, it is hard to tell what the risks are that we should be drafting for and the question is—what are we missing?” said Kristine Young, a partner at the Chicago-based Mayer Brown law firm.  

Upcoming licensing agreements need all the basic protections, including clear ownership rights and quality control provisions, but with the proviso that if licensees are working with contract suppliers using AI, the result must be a product that has a “human touch,” said Rohith George, a partner at Mayer Brown. 

Hasbro, for example, has established an AI group within the company dedicated to providing licensees with characters like Peppa Pig in AI form, said Rosalind Read, Head of Business and Legal Affairs, Hasbro Entertainment.  

To do so, Hasbro worked for about a year bringing together licensing, IP protection, legal, financial, and business staff to create the contract framework for AI agreements. And as a first step, Hasbro is focused on making its AI-based IP available for business-to-business applications like marketing rather than to consumers, where the business for now is “very risky,” Read said. Among the requirements is that Hasbro’s IP is not used for training AI. 

“We are providing characters in their AI form and in building out [contract] frameworks there are ethical considerations so that our characters can interact in a way that sticks to the brand cannon of their persona in a responsible way,” Read said. “That way, when we move out to market, we already have governance frameworks in place. We then can focus on specific use cases as far as what the licensee is going to be doing with the IP and how it will be deployed and how consumer interactions occur. It is all about trying to get ahead of the protection programs and working with the bespoke use cases that licensees are planning that can be tailored in a responsible way.” 

While IP owners will unlikely be able to clear the Internet and computing platforms like Amazon Web Services or Microsoft’s Azure of all IP infringement and AI deepfakes, the goal is to set ground rules, the experts said. Indemnity clauses are being established for all parties involved to guard against trademark and IP violations, and “enterprise vaults” are being created on computing platforms from which IP assets can be drawn.  

At the same time, IP owners do not want to discourage user-generated content that is more an homage to a brand or character and less a revenue driver, according to speakers at the summit. For example, Hasbro’s game platforms Dungeons & Dragons and Magic the Gathering have long been the inspiration for user-generated content. 

“The excitement for AI is huge, and it opens a new licensing landscape and unlocks a lot of economic value,” Read said. “The preliminary conversations we have had with licensees has been well received and we are thinking this through rather than going into a neck-and-neck fight over how IP is deployed. We like the fan engagement and user-generated content and, if it is not hugely egregious or monetized away from us, we support that. We want to create a bigger splash with our characters that keeps it within our control and moves it into the market responsibly.” 

Yet the excitement around AI (and consumers’ growing use of the technology) is what appears to have given rise to pop superstar Taylor Swift filing an application on April 24 with the U.S. Patent and Trademark Office for two audio clips and one image. The applications seek to protect Swift’s voice and likeness from being used in deep-fake AI videos and audio. 

Moving beyond trademark concerns in the entertainment space, AI is also transforming the fashion industry.  

From a sustainability and transparency standpoint, AI can drive waste reduction and energy optimization by documenting every stage of material transformation from the initial textile fiber to finished garment. It can also verify all declared information across the value chain to ensure compliance with industry standards. And many in the industry believe that artificial intelligence will never replace designers but rather test concepts and accelerate decision making, something that could be key in an industry subject to ever-changing trends.