Examining Legal Rights over AI Generated Trademarks and Trade Secrets

David Rabinowitz
David Rabinowitz , PARTNER , Moses & Singer LLP
11 Jul 2023

As the influence of artificial intelligence continues to extend its reach across a diverse range of industries, the question remains: What legal rights do AI users have in output generated by AI systems?

In a previous post, I reported on the recent announcement by the U.S. Copyright Office, which took the position that most AI output would be unprotectable by copyright because it is created by a machine rather than a person.

This article explores other legal rights in AI-generated output, principally trademark and trade secret rights, that may be available to AI users.

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First, let’s consider trademarks. A trademark is anything, usually words or pictures, that serves to identify the source, origin, or sponsorship of goods or services. While trademarks can be registered with governmental trademark agencies, in the United States trademark rights arise from use – use of the trademark in connection with goods or services. An “intent-to-use” applicant in the U.S. can reserve a trademark for a period of time, but if that period runs out without the applicant’s commencing commercial use, the reservation lapses.

Because ownership of a trademark is acquired by use, anything produced by AI that could function as a trademark is available for adoption and ownership as a mark.

A potential trademark produced by AI is not free for use if the same or a confusingly similar trademark is already owned and being used by someone else. First, there can be no assurance that the AI did not copy the trademark from its training data. Second, even if the AI originated the trademark independently of the training data, the prior owner can prevent adoption by the AI user if the AI user’s use is likely to produce confusion in the marketplace. As with all new trademarks, a search should be conducted before adopting it to see if there are prior users of the trademark.

Whether an existing trademark blocks adoption of a new trademark is a complicated question that depends on the similarity of the marks, the relatedness of the goods or services of the two trademark users, and a number of other factors. The blocking issue is the subject of a multitude of court decisions and is beyond the scope of this post.

Subject to those qualifications, AI output can become a trademark. How far do trademark rights extend? Can they extend to anything other than the exact picture (or words) used by the AI user as a trademark?

Yes. Trademark rights are based on a single principle: Avoid confusion of source, origin, or sponsorship of goods or services. Once AI output is established as a trademark through commercial use, it will be protected from use by others of the same or similar trademarks that produce a likelihood of confusion of source, origin, or sponsorship.

Without trying to cover all of the possible ways in which likelihood of confusion is deemed to arise even without use of the exact same trademark, a few basic principles can be stated.

Assume someone starts using a trademark that is similar but not identical to a preexisting trademark. The more similar the new trademark, the more likely the use will be prohibited. The more closely related the goods and services of the trademark users, either in the nature of the goods or services or the geographic proximity of the uses, the more likely the new use will be prohibited. The closer the preexisting trademark is to a pure description of the AI user’s goods and services (e.g., “Best Appliances” or “Superior Plumbing”) the less likely the new use will be prohibited. There are other factors that can come into play, but the point is that a trademark’s power normally extends to a range of words or pictures that are similar but not identical to the trademark.

Example: Disney owns a trademark in Mickey Mouse. What does that mean? Disney can prohibit use of a picture having some resemblance to Mickey Mouse that will lead consumers to believe that the goods or services associated with the new picture are made, sold, or endorsed by Disney. (Copyright can become involved where, like Mickey Mouse, the trademark is copyrightable, but we are not commenting on copyright here. For copyright considerations, please see our prior post regarding if AI output is protected by copyright.)

Trade Secret
A trade secret is virtually any kind of information that provides a business advantage over other businesses that are not aware of the secret. It can be as high tech as AI or as mundane as customer information.

The catch is that the information must be kept secret. For this reason, pictures or words generated by AI cannot both be publicly displayed and still owned as a trade secret.

What if an AI is asked, “what is the best way to solicit customers for my [fill in the blank] business?” If the output is useful, can the AI user own trade secret rights in the output?

Very likely. Trade secrets need not be created by the trade secret owner. They need only provide a business advantage and be kept confidential.

What if others already know the secret? It can still be a trade secret as long as it is not generally known in the industry. Trade secret law originates in the realm of fiduciary duty. Although trade secret protection resembles patent protection, the heart of trade secret law is the fiduciary duty of, for example, employees to keep the employer’s confidential business practices secret. Trade secrets can only be violated by disclosure in violation of a duty of confidentiality, such as under a non-disclosure agreement, or by spying.

Thus, the fact that competitors may know the very same secret does not destroy trade secret protection. Competitors who do not know the secret violate trade secret law if they obtain the secret either through someone’s breach of duty of confidentiality or by spying. However, information is not a trade secret unless it gives the owner an advantage over competitors. If the “trade secret” is generally known in the industry, trade secret protection fails because the information provides no advantage over competitors.

If the AI merely delivers to the user an idea that the AI obtained from its training data, can the trade secret be deemed secret? Possibly. If the idea is just a copy of something in the training data, presumably someone else already has the idea. Still, the answer is a conditional “yes” – the AI user can obtain a trade secret in the idea unless the training data was obtained in violation of a duty of confidentiality or by spying and the idea otherwise qualifies as a trade secret.

By the same token, the trade secret owner does not own an idea in the same way that a patentee owns a patented invention. Anyone else can possess the same trade secret if they do not obtain it through someone violating a duty to keep the idea secret or through spying.

What about the owner of the AI? Does the AI owner, as opposed to the AI user, have any rights in an idea generated by use of the AI? Not unless the Terms and Conditions of the AI say so. If the AI owner happens to be privy to the idea due to its control of the AI, that may make it impossible to protect the idea as a trade secret against the AI owner because the AI owner knows the idea without use of improper means, but it does not make the AI owner an owner of the idea.

Qualifications: Patents and User Terms and Conditions
The foregoing discussion concerning trade secret protection is subject to patent law. Patents can prevent the use of inventions that might otherwise be trade secrets. If the trade secret generated by the AI is covered by a patent, its use would constitute infringement. Even if the trade secret is not copied from the patentee’s information via AI training data, the patent would still prevent its use.

The rights of the AI user are also subject to any Terms and Conditions governing the use of the AI. For example, if, by analogy to open source software, the owner of the AI prohibits users from claiming ownership in the output of the AI, such a condition should be effective to preclude ownership of the output and its protection via trade secret law would be questionable.

Trademark and trade secret protection are available for output from AI, subject to the qualifications stated above. Potential trademarks or trade secrets need not be created by the trademark or trade secret owner, as opposed to being created by the AI, unlike copyrightable works. AI-generated trademarks and trade secrets are subject to the same rules as other trademarks and trade secrets – at least until the United States Patent and Trademark Office says otherwise.

David Rabinowitz is a partner at Moses & Singer LLP’s Litigation, Intellectual Property and Law Firms practice and has been a partner with the firm since 1985. He believes in investing heavily in understanding their clients’ businesses and developing close working relationships with them. David focuses in the substantive areas of financial industry litigation, including corporate trusts and letters of credit, trusts and estates, intellectual property, contracts and employment. David is recognized as a New York Metro Super Lawyer. He is an AV® Preeminent™ Rated lawyer and one of New York’s Top Rated Lawyers in his field according to Martindale-Hubbell.

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This article is intended for informational purposes only, and doesn't constitute tax, accounting, or legal advice. Everyone's situation is different! For advice in light of your unique circumstances, consult a tax advisor, accountant, or lawyer.