In late 2025, major rights holders struck deals licensing their IP or works to AI companies to enable their users to generate derivative AI outputs. Among the most notable were Disney’s now-canceled deal with OpenAI, which would have allowed users to create Sora videos and ChatGPT images with Disney characters, and Udio and Suno’s respective deals with music labels to allow users to remix opted-in songs.
The expected capabilities described in the Suno and Udio deals are still forthcoming, though Disney is exiting its deal after OpenAI announced it was shutting down Sora, its short-lived short-form AI video app.
These deals — and any like them that could emerge — raise the newer prospect of a large and growing number of authorized AI outputs based on licensed IP or content. As these licensed derivative outputs proliferate, the question of ownership becomes more consequential. What rights apply to AI outputs derivative of licensed IP or works, and who owns those rights — the user who requested the output, the platform that generated it or the rights holder that owns the original works or IP?
Yet who owns rights to these derivatives under the law is a separate question from who does under specific licenses.
“I think fundamentally when trying to understand who actually controls AI derivatives in practice, contracts usually matter more than copyright law,” said Michael Jury, adjunct professor of AI/IP law at USC Gould. “Not because copyright is irrelevant, and it can certainly inform negotiating position, but because, with respect to AI and copyright in derivatives, it’s uncertain and developing, territorial and harder to enforce at scale.”
Thus, it’s likely the rights that apply to these derivative outputs will be foremost controlled contractually, under contracts that rights holders negotiate with AI companies, whose terms then reflect in AI companies’ terms of service.
In this sense, licensing contracts and AI service terms are more definitive, immediate, actionable and universally (cross-borders) applicable than the variable and ill-defined copyright status of the AI derivative under the law.
Legal Status of AI Outputs Is Complex
Who owns these derivatives under the law is layered and open-ended. Rights holders are unlikely to seek copyright on AI outputs users generate. For one, AI outputs resulting solely from text prompts cannot be copyrighted at all in the U.S. under guidance from the Copyright Office.
Meanwhile, users will own any inputs they provide the AI company to generate output, such as the text prompt itself or an image of themselves. Rights holders still own copyrights to underlying IP that has only been allowed to appear in the AI output under the license (e.g., Disney still owns its characters).
Who legally owns the output gets murkier when it doesn’t contain identifiable expressive elements from the original IP or work, such as an AI remix of an existing original song (in contrast with a “sufficiently delineated” character). These outputs could also contain real-world artists’ likeness or voice, further complicating the underlying legal rights potentially inherent in this class of authorized AI derivatives.
License Terms Reflected in AI Terms of Service Will Supersede Copyright Status of AI Derivatives
AI companies’ terms of service often indicate information about rights to AI outputs. Yet often, AI platforms have claimed any rights to AI outputs or granted them to the user, albeit it’s unclear and unlikely that the AI platform in fact has any legal rights to the output.
Now, it’s likely that rights holder licensors will seek rights to AI outputs that derive from their IP or owned content to be stated in the terms of service — and this has likely been central to negotiations with AI companies, agreed several IP lawyers who spoke with Luminate Intelligence. They anticipated that AI companies would update their terms of use to include rights holders as new capabilities launch.
Notably, Udio terms of service now indicate that “the Company and/or its licensors own all right, title and interest” in AI outputs that users generate. In effect, the user is permitted to generate and engage with the content, but ultimately either the platform or its licensors own any derivatives the user makes. Suno terms do not yet mention its licensor UMG; neither did OpenAI terms mention Disney prior to the deal ending.
Licensing contracts have likely allowed rights holders to exert control over IP-derivative AI outputs in two main ways:
- Prevent harmful outputs from being generated by stipulating technical guardrails that will reject user requests for undesired uses of licensed material in the output;
- Prevent harmful uses of the output by prescribing terms of use (i.e., what end users are and aren’t allowed to do with outputs they generate, such as commercialize them).
IP lawyers who spoke with Luminate Intelligence further agreed that enforcing the terms of use under contractual obligations with rights holders becomes the next big open question and challenge.
