Business Blog
Can’t lose what you never had: Claims about digital ownership and creation in the age of generative AI
By
Michael Atleson, Staff Attorney, FTC Division of Advertising Practices
August 16, 2023
Let’s say someone walks into an old-fashioned record store looking for the Bright Eyes song “False Advertising.” Upon finding and buying the album, she’d have little reason to fear that store employees might sneak into her house later and take it back from her. She’d also have no cause to think that the album was counterfeit and not by the band at all. Now let’s say instead that the same song inspires an artist to create a mural depicting the FTC’s greatest false ad cases, and the mural gets displayed in a local gallery. The artist might be surprised if the gallery later shuts its doors and refuses to return the mural . . . or if some other company secretly reuses bits of it to make something else.
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When people buy or make digital products, though, it’s not always clear what they really own or control. Such clarity may often depend on intellectual property rights, which are generally beyond the FTC’s consumer protection jurisdiction. But we take note – and can take action – if companies aren’t upfront about what consumers are buying, who made it, how it was made, or what rights people have in their own creations.
What do people think they’re buying?
Companies that offer digital products – such as books, music, movies, and games – will often say that consumers can “buy” those products when they’re really getting only a limited, revocable license to enjoy them. Yes, some people may appreciate this distinction, but others have been surprised when their access to such products suddenly disappears. Companies are always obliged to ensure that customers understand what they’re getting for their money – a basic point we’ve made many times. In 2008, the FTC settled a case on this theme after Sony BMG misled CD buyers via its use of software that limited buyer use of the CDs. That same year, FTC staff resolved a similar matter after buyers who were told that they’d “own” Major League Baseball videos ran into unexpected use restrictions.
What do people think they can do with it?
Owner expectations for digital and Internet-connected products can also be subverted when companies impose limits on the right to repair, remotely exercise power to switch off hardware, use novel subscription models for normal product features, or otherwise unfairly change terms or restrict access post-purchase. Another unexpected limitation can arise when a family member passes on; survivors may be surprised to encounter access restrictions on digital products owned by the deceased. Similar or novel ownership issues may arise if and when the “metaverse” becomes more of a thing, and we’ll be watching those virtual spaces.
What about creative control of one’s own work?
In the record store example above, at least the buyer is reasonably assured that the album is the genuine article. But these days, digital music or text can be generated by AI tools and passed off – with increasing ease and quality – as the work of real artists or writers. We’ve already seen examples of fake new songs supposedly from recording artists, as well as new books sold as if authored by humans but in fact reflecting the output of large language models. Companies deceptively selling such content to consumers are violating the FTC Act. This conduct obviously injures artists and writers, too.
Some creators may develop content specifically for the digital environment, and they may reasonably expect to have some control over what they’ve made and how it’s used or presented. When platforms hosting that content fold up or change their terms, creators can suddenly lose access to what they spent time and effort to build. We may take a close look if such a platform isn’t living up to promises made to creators when they signed up to use it.
What else do artists, writers, and other creators have to worry about these days? Speaking again of generative AI, many models are trained on data that includes people’s creative work, which the models can then spit out in bits and pieces in response to varied inputs. These AI models can also ingest people’s likenesses and other aspects of their identities, in which case the people effectively become digital products themselves. These troubling facts involve complicated issues extending beyond consumer protection law, and they’re playing out now in courts and on picket lines.
Generative AI tools that produce output based on copyrighted or otherwise protected material may, nonetheless, raise issues of consumer deception or unfairness. That’s especially true if companies offering the tools don’t come clean about the extent to which outputs may reflect the use of such material. This information could be relevant to people’s decisions to use one tool or another. It’s not unusual for the FTC to sue when sellers deceive consumers about how products were made, such as with cases involving environmental claims. The information could also be relevant to business decisions to use such a tool for commercial purposes, given that the businesses could be liable if their use of the output infringes protected works.
Companies should keep in mind the following:
- When offering digital products, you must ensure that customers understand the material terms and conditions, including whether they’re buying an item or just getting a license to use it. Unilaterally changing those terms or undermining reasonable ownership expectations can get you in trouble, too.
- Selling digital items created via AI tools is obviously not okay if you’re trying to fool people into thinking that the items are the work of particular human creators.
- When offering a platform for creators to develop and display their work, be clear and upfront about their rights to access and take this work with them, as well as how the work will be used and presented. Again, don’t change the terms later.
- When offering a generative AI product, you may need to tell customers whether and the extent to which the training data includes copyrighted or otherwise protected material.
In the 1960s, four American musicians toured South America, pretending to be the Beatles, a scheme that worked until people saw their faces and heard them play. That kind of scam wouldn’t likely get off the ground today, but through a mixture of deepfakes, voice synthesis, and text generation, one could now create some fake, “long lost” Beatles music or footage and put it out in the world. At least Sir Paul McCartney, who has been using AI himself for artistic ends, would have the resources to deal with it. But many other artists would not be so fortunate if their work gets digitally faked or misused. In any event, if you sell ersatz Beatles music, suggesting it’s the lads from Liverpool when it’s really the Fabricated Four, it would surely be no defense that consumers weren’t actually “buying” anything at all.
Tags:
- Consumer Protection
- Bureau of Consumer Protection
- Intellectual Property
- Technology
- Advertising and Marketing
- Advertising and Marketing Basics
- Artificial Intelligence
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For Release
FTC Sending Refunds to Consumers who Invested in Deceptive Sanctuary Belize Real Estate Development Scheme Operated by Repeat Offender Andris Pukke
August 16, 2023
Tags:
- Consumer Protection
- Bureau of Consumer Protection
- Investment
- deceptive/misleading conduct
- Real Estate and Mortgages
- Advertising and Marketing
- Telemarketing
The Federal Trade Commission is sending refunds totaling approximately $10 million to consumers nationwide who bought deceptively marketed overseas real estate lots in what the sellers pitched as Sanctuary Belize, a supposed luxury development being built in southern, coastal Belize. Today, the FTC is mailing 1,198 refund checks to defrauded investors. The average amount of each check is $8,286.47.
The FTC filed its complaint in November 2018 charging that Andris Pukke, a prior FTC defendant, and several other corporate and individual defendants deceived consumers who invested in Sanctuary Belize by promising they were investing in a luxury development and resort. The defendants, however, failed to deliver on the promised amenities, and consumers who invested in Sanctuary property lost money and could not resell their lots.
Following a trial in 2020, the FTC won a verdict that the scheme took in more than $100 million. As the court found, the defendants duped consumers into buying Sanctuary Belize lots by falsely claiming it would be a safe investment, that the development would include luxury amenities and be completed soon, consumers could resell their lots, and that Pukke was not involved.
The defendants appealed, but the Court of Appeals confirmed the deceptive scheme and the monetary judgment against Pukke and his associates, Peter Baker and John Usher. The District Court has now ordered the receiver to send an initial round of refunds, with the money coming from previous settlements.
Consumers who receive checks should cash them within 120 days, as indicated on the check. Consumers with questions about their refunds should email the receiver, Marc-Philip Ferzan, who is being supported by Ankura Consulting Group, LLC, at info@sanctuarybeliezereceivership.com. The application process for requesting a refund is closed, and the receiver is no longer accepting applications from consumers.
The Commission’s interactive dashboards for refund data provide a state-by-state breakdown of refunds in FTC cases. In 2022, Commission actions led to more than $392 million in refunds to consumers across the country.
The Federal Trade Commission works to promote competition and to protect and educate consumers. You can learn more about consumer topics and report scams, fraud, and bad business practices online at ReportFraud.ftc.gov. Like the FTC on Facebook, follow us on Twitter, get consumer alerts, read our blogs, and subscribe to press releases for the latest FTC news and resources.
Press Release Reference
At FTC’s Request, Court Halts Massive “Sanctuary Belize” Real Estate Investment Scam
Contact Information
Media Contact
Mitchell J. Katz
202-326-2161
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