Briefing: March 10, 2023

“While still nascent, generative AI has the potential to help fashion businesses become more productive, get to market faster & serve customers better,” McKinsey stated in a note this week, a nod to the inevitability that the AI hype – prompted largely by OpenAI’s ChatGPT – is slated to penetrate the fashion and luxury spaces. The numbers at play here, according to the management consultancy: In the next 3 to 5 years, generative AI – which primarily refers to AI models that are trained to produce various types of content, including text, imagery, audio & synthetic data, in response to user prompts – could add $150B, conservatively, and up to $275B to the apparel, fashion & luxury sectors’ operating profits.

Tech titans like Google & Microsoft are primarily making headlines in connection with quests to invest in/make use of generative AI, but there are use-cases for this type of tech in retail – from optimizing e-commerce support tasks & analyzing data to determine trends in real time to improving marketing output & customer service capabilities. Beyond that, McKinsey analysts assert that fashion, in particular, can benefit from AI-assisted “co-designing and speeding content development processes” as generative AI creates “new space for creativity.”

The onslaught of interest in this type of AI (which appears to come amid reportedly waning interest in/slowing spending for web3 endeavors) has not only shed light on some of the initial opportunities at play (think: “copywriting, answering customer service inquiries, writing news reports, and creating legal documents,” per Harvard Biz Review). At the same time, it has prompted a rise in early legal challenges and highlighted nuanced issues that adopters need to be aware of.

In a nutshell: Most of the existing legal scuffles have centered on the practice of using (c)-protected content (images, text, code, etc.) to train the models. This is what the Getty v. Stability AI case, for instance, is about. 

A few of the other currently-pending cases in this space include: (1) Sarah Anderson, et al., v. Stability AI LTD., et al. – The plaintiffs claim that Stability AI and co. “scraped, and thereby copied over five billion images from websites” without authorization; (2) J. DOE 3, et al., v. GitHub, Inc. et al. – This cases raises some interesting fair use arguments; and (3) an AI and BIPA case: Jack Flora, et al., v. Prisma Labs, Inc.

THE BIGGER PICTURE: So far, these cases have primarily targeted generative AI giants like OpenAI, Lensa-creator Prisma Labs, Microsoft and Github, etc. and their offerings. However, as this space develops further (and a peek at some of the many recent funding rounds suggests that that is absolutely the direction we are headed in), the scope of such suits is expected to broaden further, with Tech Law Partners’ Heather Meeker saying that she “expects a flood of litigation for almost all generative AI products.”

On the litigation front … 

Roblox v. WowWee Group – An N.D. Cal. judge has granted part & denied part of WowWee’s motion to dismiss the copyright-centric suit waged against it by Roblox for allegedly copying its “wildly successful avatar IP to create & sell a line of physical dolls.” The court found (order here) that Roblox adequately pled ownership of a valid (c) and substantial similarity, as well as sufficiently alleged its TM infringement, false designation of origin & false advertising claims. Meanwhile, its contract & interference claims are subject to arbitration.

Jovani v. Jasz Couture, Inc. – Jovani’s latest copyright infringement suit is here. The co. accuses fellow dress manufacturer Jasz Couture of co-opting “original, copyrightable, 2- and 3-D artwork depicted on [its] 3-D garments.”

Faridian v. DoNotPay Inc. – DoNotPay is being accused of engaging in unfair competition for marketing itself as the “world’s first robot lawyer.” In a proposed class action, Jonathan Faridian alleges that DoNotPay is “not actually a robot, a lawyer, nor a law firm.” Instead, it is “merely a website with a repository of – unfortunately, substandard – legal docs. that at best fills in a legal adlib based on info. input by customers.”

In some deal-making news … Saclàb has raised €1.6 million in a seed round led by Estonia’s Trind Ventures and Germany’s G-Fund. The Munich-based reseller focuses on hard-to-get luxury handbags.

Tex.tracer has raised €1.5M in growth capital from ROM InWest, HearstLab, Joanna Invests, and angel investors. The Amsterdam-headquartered SaaS platform “unlocks insightful supply chain info” for fashion/apparel brands & retailers.

Elyn, a Paris-based startup that enables online merchants to offer consumers a try before they buy option at checkout, has raised €2.5M in a pre-seed round.