Is turnabout fair play? Defendant Nanoble must think so.
In answering the copyright claims filed by Disney, Universal City Studios, and Warner Brothers against Nanoble and other companies associated with the Hailuo AI generator, Nanoble has filed two counterclaims against the movie studios.
Yes, Nanoble is suing the movie studios, which are suing Nanoble for copyright infringement.
Nanoble alleges that the movie studios violated Hailuo AI’s terms of use by generating the allegedly infringing examples of the movie studios’ copyrighted characters that form the basis of their complaint. Nanoble alleges that the movie studios had to click to show their consent to these terms before using their platform, as shown in a screenshot appended as Exhibit B:
Naboble claims: “The Terms impose obligations on all users, including that their prompts and resulting outputs must not infringe intellectual property rights, violate the legal rights of others, contain material that could give rise to civil liability, or violate applicable law. The Terms also prohibit conduct that ‘may harm the Company . . . or expose [it] to liability,’ and require each user to ‘defend, indemnify, and hold harmless’ Nanonoble against any claim ‘arising out of or relating to’ the user’s use of the tool, including prompts, outputs, and information obtained through the tool.” (emphasis added)
If Nanoble is found liable for infringing the movie studios’ copyrighted characters, then, under Hailuo’s AI’s term of use, the movie studios (including through their agents, such as the lawyers and investigators who generated the allegedly infringing outputs cited in the studios’ complaint) must indemnify Nanoble.
Therefore, under this counterclaim, if Nanoble is held liable for copyright infringement based on the movie studios’ copyright claims, the movie studios would have to pay the amount of any damages presumably to themselves. That might be taxable income, however, so the movie studios could end up losing money if they won their copyright lawsuit against Nanoble.
In other words, if Nanoble’s indemnity theory prevails, the case could end up having the following scenario with a victory for both the movie studios’ copyright claims and Nanoble’s counterclaim:
Figure 1. Diagram of one possible scenario under Nanoble’s counterclaim:
Another possible scenario if the indemnity claim has merit: the court could dispose of the case on summary judgment without the need for any computation of damages. Indemnity might moot the need for such figures at least for the alleged infringement derived from the movie studios’ alleged breach of the terms of service of Hailuo AI.
Either way, the indemnity theory is intriguing to say the least.
The case is Disney v. Minimax before Judge Blumenfeld Jr.
Excerpt from Nanoble Defendants’ Answer and Counterclaims:
DOWNLOAD DEFENDANTS’ ANSWER IN DISNEY V. MINIMAX, INCLUDING COUNTERCLAIMS
Exhibit A: Terms of Service
Exhibit B: Screenshot of signing up for service
