Generative AI, with its ability to create text, images, audio, and other forms of content, has ushered in a new era of technological innovation. It also faces a severe intellectual property (IP) licensing crisis. Generative AI firms often struggle with copyright infringement risks and unauthorized data usage issues due to opaque and inefficient traditional licensing systems, which pose significant legal and ethical challenges. As blockchain technology continues to evolve, it offers a promising solution to address the IP licensing dilemmas of generative AI firms. Below is a detailed exploration of this topic in my perspective.
The IP Crisis in Generative AI
Generative AI systems require vast amounts of data for training, often sourcing it from platforms like the internet. A significant portion of this data is protected by IP rights, and the data usage permissions are often unclear. Generative AI algorithms analyze massive volumes of unstructured data, such as news articles and images, to identify patterns and relationships. During this process, details like IP rights and compensation terms are frequently overlooked, raising concerns among content creators. The Getty Images lawsuit against Stability AI is a prime example. In 2023, Getty Images filed a case against Stability AI of unlawfully copying and processing millions of copyrighted images to train its software for commercial gain, seeking up to $1.8 trillion in damages.
The traditional IP licensing system worsens these issues. It is often opaque, inefficient, and lacks transparency. For instance, creators may struggle to track how their works are used by generative AI firms and whether they receive fair compensation. Meanwhile, AI firms may inadvertently infringe on IP rights due to complex and lengthy licensing procedures, leading to legal disputes. I was at a conference early this year and I remember the speaker said that over 60% of generative AI firms have encountered IP licensing-related challenges, with 30% facing legal lawsuits. If this is true, someone or some tech got to try to fix this. The first thing I can think of would be “blockchain”.
Blockchain’s Core Strengths
Blockchain technology, characterized by decentralization, security, and transparency, can effectively address the inefficiencies and trust deficits in current IP licensing models. Blockchain operates as a distributed ledger where all transaction records are stored across multiple nodes, making data tamper-proof and immutable. This ensures the authenticity and traceability of IP ownership and usage rights. Additionally, blockchain employs advanced cryptographic techniques to protect data security, preventing unauthorized access and tampering.
Smart contracts, a key feature of blockchain, enable the automation of licensing agreements. Once predefined conditions are met, smart contracts automatically execute the terms of the agreement, reducing reliance on intermediaries and minimizing human intervention. This ensures the objectivity and fairness of the licensing process while lowering administrative costs.
Blockchain Solutions for Generative AI’s IP Licensing Issues
1. Smart Contracts for Automated Licensing
Blockchain-based smart contracts can automate licensing agreements, ensuring that creators are promptly and fairly compensated while helping AI firms easily comply with licensing requirements. For example, when a photographer’s image is used in generative AI training, a smart contract can automatically trigger a payment to the photographer once the image is accessed. This eliminates the need for lengthy negotiations and manual payments, reducing costs and improving efficiency. Based on my observations, smart contracts could probably reduce IP licensing costs by 30%–50% while enhancing transparency and fairness. This is a win-win scenario.
2. Immutable Provenance for Ownership Clarity
Blockchain’s immutable ledger permanently records data ownership and licensing history, providing a reliable basis for resolving IP disputes. Each piece of data on the blockchain carries a unique digital signature and timestamp, making it easy to trace its origin and usage history. This prevents unauthorized use and infringement, protecting creators’ rights. For instance, when a dataset is licensed to a generative AI firm, the blockchain records every detail of the licensing process, including the licensing party, terms, and duration. Any unauthorized use of the dataset can be quickly identified and addressed.
3. Decentralized Marketplaces for Cost Reduction
Blockchain enables the creation of decentralized IP licensing marketplaces where creators and AI firms can directly engage in peer-to-peer transactions, bypassing intermediaries and reducing costs. Traditional licensing often involves multiple middlemen, such as licensing agencies and law firms, which increases costs and complexity. On a blockchain-based decentralized marketplace, creators can directly publish and license their works, while AI firms can browse and purchase licenses based on their needs. This not only reduces licensing costs but also increases revenue for creators. For example, there are decentralized data marketplaces that allow data owners to control access to their data and receive compensation.
4. Enhanced Security Against Fraud
Blockchain’s cryptographic security mechanisms ensure the integrity and authenticity of licensing records, preventing fraud. All licensing information on the blockchain is encrypted and verified by multiple nodes, making it nearly impossible to forge or tamper with. This protects both creators and AI firms from false claims and ensures the reliability of each transaction. Another example that I would like to quote- fake licenses cannot be validated on the blockchain, preventing AI firms from suffering losses due to fraudulent licenses and safeguarding creators’ rights.
5. Transparency to Build Accountability
The open and transparent nature of blockchain makes all licensing transactions visible to all parties, fostering trust and simplifying compliance for AI firms and regulators. Creators can track the usage of their works in real time, while AI firms can demonstrate compliance with licensing agreements to regulators and the public. This transparency helps build trust between creators and AI firms, fostering collaboration. Take the European Union’s Artificial Intelligence Act for instance, which took initial effect in August 2024, requires generative AI models to disclose the copyrighted works used during training. A blockchain-based platform could provide detailed records of training data sources and usage, helping AI firms meet regulatory requirements.
6. Tokenization for Flexible Licensing
Through tokenization, blockchain can transform IP assets into digital tokens, enabling flexible and scalable licensing models. Creators can issue tokens representing the usage rights to their works and sell them on blockchain platforms. AI firms can purchase the tokens they need based on their requirements. This not only provides creators with new revenue streams but also offers AI firms greater flexibility in accessing data. A musician could tokenize the licensing rights to their songs and sell them to generative AI firms. These firms could then use the songs to train music generation models while paying the musician via token-based payments.
7. Global Scalability and Compliance
Blockchain technology operates across borders, enabling generative AI firms to manage IP licensing on a global scale while complying with international regulations. Different countries have varying IP laws and regulations, making cross-border licensing complex. Blockchain’s standardized protocols and rules can simplify cross-border licensing processes, reduce legal risks, and facilitate global collaboration. Blockchain platforms could manage datasets licensed from multiple countries, ensuring compliance with each country’s IP laws while streamlining licensing procedures.
8. Future-Proofing for AI’s Evolution
Blockchain’s adaptability allows it to address emerging IP challenges as generative AI evolves, offering a long-term solution. As generative AI technologies advance, new IP issues may arise, such as ownership disputes over AI-generated content. Blockchain’s smart contracts and decentralized architecture can evolve to meet these new challenges. Future smart contracts could define usage rights and revenue-sharing mechanisms for AI-generated content, ensuring fair compensation for all stakeholders.
Existing Challenges and Prospects
Despite blockchain’s potential to resolve generative AI’s IP licensing issues, several challenges remain. First, technical barriers need to be overcome. Blockchain technology is still evolving, and its integration with generative AI systems requires significant technical effort. Achieving real-time tracking and recording of data usage in generative AI training while ensuring blockchain performance and scalability is a complex technical challenge.
Second, regulatory uncertainty persists. The legal status of blockchain-based IP licensing and the regulatory requirements for smart contracts remain unclear in many countries. This creates uncertainty for both creators and AI firms. Third, market adoption is slow. Transitioning from traditional licensing models to blockchain-based ones requires time and effort. Both creators and AI firms need to adapt to new technologies and processes, and the market requires time to mature.
In my view, the future prospects are promising. As blockchain technology matures and regulatory frameworks gradually improve, its application in generative AI IP licensing is likely to expand. More creators and AI firms will recognize the benefits of blockchain and adopt it for IP licensing. It could become the standard solution for addressing IP licensing issues in generative AI, driving the healthy development of the generative AI industry.
In conclusion, generative AI firms face a severe IP licensing crisis, while blockchain technology offers a powerful solution. By leveraging blockchain’s decentralization, security, transparency, and smart contracts, among other features, generative AI firms can address IP licensing challenges, protect creators’ rights, and achieve sustainable development. Although challenges remain in areas like technology, regulation, and market adoption, with ongoing advancements in blockchain technology and increased collaboration among stakeholders, blockchain is expected to play an increasingly significant role in resolving generative AI’s IP licensing issues. It will pave the way for the healthy growth of the generative AI industry and foster innovation and development in the digital economy era.
Source: https://www.securities.io/8-ways-blockchain-can-revolutionize-ip-licensing-for-ai-firms/
Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author- “NFT: From Zero to Hero” and “Blockchain Revolution 2030”.
Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.
An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.
