Generative artificial intelligence (“GenAI”) has become a hot topic in recent times as increasingly capable GenAI models have been made available for use by businesses and the public. GenAI systems are trained to recognise patterns and relationships between data points which enable them to generate outputs based on inputs or prompts from a user. The output is generated swiftly but often resembles work which would take much longer to complete by humans using traditional methods.
For example, if you are using a GenAI service and enter prompts for an image of a cartoon dog wearing a waist coat and glasses, or a 32-line poem with rhyming couplets themed around flowers and plants, the GenAI system will generate output based on the connections and meanings it has learned from its training and how it has been used.
As GenAI becomes more widely used and continues to be heralded as the next revolutionary technology, businesses need to understand the legal risks involved. In addition to concerns about accuracy and security, there are a number of key intellectual property (IP) risks. These include: the risk of copyright infringement in the data used to train GenAI models; whether the output of GenAI is capable of copyright protection and if so, who owns the copyright.
The UK government published its Report on Copyright and Artificial Intelligence in March 2026 (the “Copyright AI Report”). This demonstrates just how complex the issue of balancing IP rights with growth of the AI sector is in the UK. In particular, the treatment of copyright and potential licensing and/or exceptions to enable use of works is a key part of the debate amongst stakeholders.
What are the risks of copyright infringement when using GenAI?
AI models are often trained with data that includes copyrighted content, used without the consent of the owner or creator. To extend the example above, this training data may include various images of dogs dressed up in clothes in various artistic styles and poems and other literary content which includes botanical themes.
When prompted to generate output, a GenAI system may produce something which is very similar to content used in its training which is protected by copyright. There is therefore a risk that copyright could be infringed by the output of GenAI systems if that copyright material was used to train the GenAI system without the copyright owner’s permission.
It is unclear how far this infringement risk goes. The English High Court’s decision in 2025 in the Getty Images v Stability AI case could not rule on whether the image generating Stable Diffusion GenAI model itself infringed copyright. This was because the model was trained to use copyright images outside the UK. The Copyright, Designs and Patents Act 1988 only covers infringements which take place in the UK. The judge also ruled that in making its model available to its users, Stability had not imported into the UK, an “infringing copy” of any Getty Images copyrighted material. This decision is being appealed so there will be more to consider later this year.
Who owns copyright in the output of GenAI?
Another risk of using GenAI is that it is not clear who would own copyright in the output, or even if the output is protected by copyright in the first place.
The legal position in most jurisdictions is that there needs to be a human author in order for copyright to exist. The risk when generating content through GenAI is that there will be no copyright protection. We can help assess this risk for you.
Another key problem is identifying the author who would be the first owner of copyright in the generated work. In the UK, the person taking the steps necessary to create a work is considered to be its author. However, in the absence of legal guidance or case law it is not necessarily clear which party would be the author for copyright purposes when GenAI is used. This is because multiple parties could claim authorship (such as the user entering the prompts, the developer of the GenAI system, the company who owns the GenAI system etc.). We can help you assess your likelihood of authorship.
Evolving legal and policy landscape
There was considerable backlash from UK creative industries to the legislative proposal that would permit creators’ GenAI models to scrape the internet to gather training data, unless copyright holders exercised an opt out right. The Copyright AI Report did not advance that Government proposal. Instead, the Government will continue to gather evidence and monitor the AI market in other jurisdictions such as the EU and USA for legal challenges, licensing developments and regulatory reform.
Mitigating the risks
So as matters stand there is no Government proposal or dedicated licensing scheme. This means that before businesses can start adopting GenAI systems to take advantage of their huge potential economic benefits they must conduct a risk assessment to understand the potential risks of IP infringement.
The regulatory uncertainty over the use of GenAI systems means that the risk assessment will need to consider and address the following issues:
- The terms of contracts for the use of GenAI systems are critical and need a thorough legal review to confirm that you can use the GenAI system as you intend in the context of your potential legal exposure.
- In considering the risks associated with use of GenAI in their operations, businesses need advice on what steps to put in place in terms of staff training and governance at all levels of the business.
- Businesses also need advice on technical means of limiting risk, such as controlling the information used in training or prompting a GenAI system or using a private system which does not store or share any of their information outside of the business.
How 3CS can help you with this risk assessment.
Our expert intellectual property and commercial technology solicitors can help you understand the legal risks of using AI in your business, provide training, review AI service contracts and help develop guard rails and governance to enable your business to start exploring the possibilities of this new technology without exposing your core business.
We provide a wide range of services, including IP registration, advice on what IP you need for your business operations, IP licensing, transfer of IP ownership, identification of IP risks, and the provision of robust legal documentation relating to corporate transactions, including M&A and group reorganisations.
Our dispute resolution experts will also fight your corner in any IP and commercial disputes which AI might raise for your business.
For advice or guidance, please get in touch.
