The District Court for the Northern District of California recently granted, in substantial part, separate motions to dismiss a complaint challenging three defendants’ creation or use of Stable Diffusion, a generative artificial intelligence (“AI”) application used to generate images based on user-supplied instructions.

In Andersen et al. v. Stability AI Ltd. et al., 2023 WL 7132064 (N.D. Cal. Oct. 30, 2023), Plaintiffs filed a putative class action against three sets of Defendants: (i) Stability AI Ltd. and Stability AI, Inc. (“Stability”); (ii) DeviantArt, Inc. (“DeviantArt”); and (iii) Midjourney, Inc. (“Midjourney”). The Plaintiffs, who are artists, allege copyright infringement and right of publicity claims, among other claims, arising from Defendants’ development and use of generative AI products. The complaint alleges that infringement occurs in the course of using copyrighted images as training data for creating generative AI products. Id. at *1 – 3. In addition, the complaint alleges that the generation of output images in response to text prompts infringes copyrights owned by plaintiffs by creating derivative works of the images used in training the model. Id. at *1–3. Finally, the complaint alleges violations of right of publicity under both state and common law, and unfair competition law, as well as breach of contract for use of images in violation of the terms of the licenses governing their use. Id. at *2 – 3.

The court dismissed, with leave to amend, the majority of Plaintiffs’ claims with the exception of one direct copyright infringement claim against Stability based on the use of copyrighted images for training, which the court allowed to proceed. Id. at *5. In dismissing Plaintiffs’ direct copyright infringement claims against DeviantArt and Midjourney based on distribution and use of the models, the court instructed Plaintiffs to amend their pleadings to provide greater clarity and additional facts regarding how the training images are incorporated into the model and reflected in the images that are generated by the model. Id. at *5 – 10. The court dismissed Plaintiffs’ Digital Millennium Copyright Act, right of publicity, and unfair competition law claims, permitting Plaintiffs an opportunity to clarify theories of liability and specify the conduct each defendant is alleged to have engaged in. Id. at *10 – 15. Further details summarizing the court’s treatment of these and other claims are provided below.

Copyright Claims (17 U.S.C. § 106)

• Direct Copyright Infringement

Plaintiffs’ primary theory of direct copyright infringement by Stability is based on Stability’s alleged use of training images scraped from the internet into datasets and then used to train Stable Diffusion. The court denied Stability’s motion to dismiss this claim, finding adequate for purposes of the pleadings Plaintiffs’ allegations that Stability acquired copies of copyrighted images without permission to create Stable Diffusion, and used those images to train Stable Diffusion, with the result of causing those images to be stored at and incorporated into Stable Diffusion as “compressed copies.” Id. at *5.

As to DeviantArt, the court found each of Plaintiffs’ three theories of direct infringement to be deficient. The three theories are “(1) direct infringement by distributing Stable Diffusion, which is alleged to contain compressed copies of the training images, as part of DeviantArt’s DreamUp AI imaging product; (2) direct infringement by creating and distributing their DreamUp, which is itself an infringing derivative work; and (3) generating and distributing output images which are infringing derivative works.” Id. at *5. For the first theory, the court determined that Plaintiffs failed to establish their theory with respect to compressed copies of training images and state sufficient facts of how “Stable Diffusion – a program that is open source, at least in part – operates” with respect to the training images. Id. at *6 –7. As to the second theory, the court determined that Plaintiffs lacked plausible facts regarding, among other allegations, DeviantArt “distributing” Stable Diffusion to its users when users access DreamUp through DeviantArt’s web-based app or through DeviantArt’s website. Id. at *7. And as to the third theory, the court acknowledged that “it is simply not plausible that every” training image “used to train Stable Diffusion was copyrighted (as opposed to copyrightable)” or that all DeviantArt users’ output images are derivative images. Id. at *8. Notably, the court expressed skepticism “that copyright claims based a derivative theory can survive absent ‘substantial similarity’ type allegations.”  Id. at *8.

As to Midjourney, Plaintiffs offered similar theories of direct infringement, which the court found deficient, explaining that Plaintiffs needed to clarify whether their theory is based on Midjourney’s use of Stable Diffusion, on Midjourney’s own independent use of training images to train the Midjourney product, or both. Id. at *9.

• Vicarious Infringement

The court dismissed Plaintiffs’ vicarious infringement claims against defendants DeviantArt or Midjourney based on Plaintiffs’ failure to properly allege claims of direct infringement. Id. at *9. As to Stability, the court dismissed the claim, explaining that to potentially hold Stability vicariously liable for the use of its product, DreamStudio, by third parties, Plaintiffs would need to clarify their theory and add plausible facts regarding “compressed copies” in Stable Diffusion and how those copies are “present . . . in or invoked by” the Defendants’ products offered to third parties. Id. at *10.

Digital Millennium Copyright Act (“DMCA”) (17 U.S.C. §§ 1201-1205)

Defendants raised similar arguments against Plaintiffs’ DMCA claims, including that Plaintiffs fail to allege removal of any “copyright management information” (“CMI”) from any particular work of the Plaintiffs, and fail to allege facts plausibly showing that when the images were scraped and included in training datasets Plaintiffs’ CMI was removed. The court agreed, explaining that Plaintiffs need to identify the “particular types of their CMI from their works that they believe were removed or altered” and allege “plausible facts regarding which defendants they contend did the stripping or altering in violation of the DMCA and when that occurred.” Id. at *11.

Right of Publicity (Cal. Civ. Code § 3344)

The court dismissed Plaintiffs’ right of publicity claims for insufficient allegations including the failure to provide facts specific to the three named plaintiffs plausibly alleging that any defendant has used a “named plaintiff’s name to advertise, sell, or solicit purchase” of their respective commercial products. Id. at *12. DeviantArt separately moved to dismiss Plaintiffs’ claim based on a First Amendment defense by contending the First Amendment requires the balancing of Plaintiffs’ publicity rights against the right of free expression by considering the “transformative use” of DreamUp’s output. Id. at *13. The court deferred ruling on the applicability of this defense in favor of a developed evidentiary record. Id. at *14.

Unfair Competition Law (“UCL”) (Cal. Bus. & Prof. Code § 17200)

Plaintiffs’ UCL claim is asserted under the federal Lanham Act, under the common law, and under California state law, including unlawful prong claims based on copyright infringement and violation of the DMCA. The court dismissed the copyright infringement claims based on preemption grounds, and the others based on Plaintiffs’ need to allege additional facts and clarify various theories. Id. at *14 – 15.

Other Claims

Defendants argued that Plaintiffs’ declaratory relief claim, based on allegations that Defendants violated various statutes, fail because Plaintiffs’ other claims fail and because the claim is facially duplicative of Plaintiffs’ other claims. The court dismissed these claims as duplicative, acknowledging Plaintiffs’ opportunity to amend the complaint and clarify the scope of their statutory claims. Id. at *15.

Plaintiffs separately alleged a breach of contract claim against DeviantArt with respect to DeviantArt’s website Terms of Service (“TOS”) and privacy statement. DeviantArt contended that Plaintiffs failed to allege acts that DeviantArt took or failed to take that could constitute a breach of specific provisions of its TOS or privacy statement. Id. at *16. The court agreed, explaining that Plaintiffs failed to identify the exact provisions in the TOS supporting a breach of contract terms. Id. Additionally, the court rejected Midjourney’s separate move to strike Plaintiffs’ class action allegations, concluding as premature pleading-stage challenges to class certification allegations. Id. at *16 – 17. Finally, the court deferred ruling on DeviantArt’s separate move to strike, under California’s anti-SLAPP statute, Plaintiffs’ right of publicity claims, based in part on its dismissal of the right to publicity claim. Id. at *17.

In sum, the court granted Defendants’ motions to dismiss in full, except for the direct copyright infringement claim asserted by one of the named Plaintiffs against defendant Stability, and otherwise granted Plaintiffs leave to amend (except with respect to the dismissal of copyright claims for failure to meet the registration requirement).