Authored by: Allison Guenther

Imagine your favorite Disney princess or Marvel superhero. Your brain may visualize Snow White, Cinderella, Iron Man, Captain America…. You see them clearly in your head. If you saw an image of that character, you would recognize them instantly. Artificial intelligence has begun penetrating countless fields, particularly the entertainment industry. By its nature, AI learns from inputs across myriad sources, providing an output intended to factor in the maximum amount of context possible. AI uses publicly available information–whether copyright protected, or in the public domain–to do this. Copyright owners, like the owners of those Disney and Marvel characters, understandably, are taking notice.

Sampling preexisting works to generate output may seem like clear copyright infringement.  But one must consider the similarities between AI’s design and the way the human brain works. Just as you might imagine Rapunzel when instructed to visualize a long-haired princess, AI might offer an image resembling a character from the Disney movie Tangled. AI was designed to work like a brain; when prompted, both humans and AI will “imagine” responses often bearing a striking resemblance to preexisting images.

Human artists, too, are often inspired by other artists’ work, making new twists on pre-existing works. How much of a copyright protected work can other artists use in their own creations before their use becomes unfair? This question involves many gray areas, has led to endless copyright litigation, and has resulted in a settled body of fair use factors and considerations.  But what about fair use when it comes to AI?

In June 2025, Disney and Universal brought suit against Midjourney, an AI firm, in Disney Enterprises Inc. et al v. Midjourney Inc. This marked the first case involving Hollywood studios acting against AI for copyright infringement. On June 11, Disney, along with Universal, Marvel, DreamWorks, Twentieth Century Fox, MVL Film Finance LLC, and Lucasfilm Ltd. LLC, filed a complaint asserting copyright infringement occurred through artificial intelligence copying, reproducing and distributing unauthorized copies of the plaintiffs’ works.

When determining fair use of a copyrighted work, four factors are considered:

  1. Purpose and character of the use
  2. Nature of the copyrighted work
  3. Amount and substantiality of the portion used, and
  4. Effect of the use upon the potential market

One of the most beneficial aspects of AI is that it can be used to entertain, to educate, to simplify tasks, and more. The breadth of AI’s application, and the way AI uses copyrighted works, make traditional fair use analysis difficult.

Purpose and Character of the Use. A court will typically examines whether the use is for profit, or for educational purposes. A court will usually prefer , nonprofit educational use is favored over for-profit use. A court also considers whether the work is “transformative,” meaning significantly altered to give it a new function or meaning. According to the Disney complaint, Midjourney’s use rendered a handsome profit: subscriptions last year totaled over $300 million.  Midjourney’s services can recreate iconic characters with impressive accuracy, and the company reaps great financial reward for its accuracy. On the other hand, it cannot be definitively stated that subscribers are drawn to Midjourney for the accuracy of its Disney characters. Furthermore, the majority of users likely are not using the images generated for an infringing purpose. Most use AI for personal entertainment or educational purposes.

Nature of the Copyrighted Work. This factor examines whether the original work is creative, and whether it has been published. Generally, courts have protected creative or fictional works over nonfiction. Courts also traditionally deem it unfair to take someone’s work if the work has not yet been published. Disney, Universal, and the others suing Midjourney have made countless creative works. However, Midjourney might argue that Disney stories frequently come from fairytales squarely in the public domain. And although Disney holds the copyrights for its specific adaptations, the general descriptions of many characters are public domain as well.

Amount and Substantiality of the Portion Used.  AI samples all publicly available inputs to generate its output.  The Disney complaint includes many photographic examples as evidence of how similar the output can be to a copyright protected original. While this is compelling evidence, it raises a very important policy question: Should AI be forced to exclude all copyrighted works from its knowledge base because AI might create a nearly identical output? Like a human brain, AI factors in all the context it has in order to generate informed output. If we remove valuable inputs from AI’s information pool, are we hindering potentially one of the most powerful tools of the era?

Effect on the Original’s Potential Market. Disney may argue that AI generated images could be used to create knock-off merchandise, or for videos or games that usurp demand for Disney’s entertainment services. Midjourney in response might argue that fans’ consumption of its AI-assisted content would not diminish demand for Disney’s original content.

This case will likely be decided on these traditional factors, and perhaps other considerations as well.  The court has the opportunity to limit AI’s potential or allow it to flourish.  I predict the Nature of the Copyrighted Work to be held in favor of Disney, and the rest of the factors in favor of Midjourney. The Purpose and Character could be seen as transformative in the context of AI uses, the Amount and Substantiality of the Portion Used could vary widely, and the Effect on Disney’s Market is likely not substantial enough. It is also worth noting that California courts may favor public policy supporting advancement of powerful technology like AI in a competitive global race. Regardless of the ruling, this will be a pivotal case shaping how future copyright cases involving AI will be decided for years to come.

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Allison Guenther is a 2L at American University Washington College of Law, and will graduate in May 2027. She is currently a Junior Staffer on American University Business Law Review. Her previous work in cybersecurity, along with her love of art and music, sparked her desire to pursue a career in intellectual property law. She is particularly focused on topics including music and copyright, musicians and right of publicity, IP issues arising with developing AI, and video.