India’s proposal to make AI firms pay for training on the original work of creators will have more losers than winners

Last week, the Department for Promotion of Industry and Internal Trade (DPIIT) released a working paper on ‘Generative AI and Copyright,’ recommending a ‘hybrid model’ that it claims will balance the need to promote AI development with creator rights. It suggests that AI companies in India should pay a mandatory blanket licence fee (a percentage of their global revenue) for using copyrighted materials to train their models. It recommends the establishment of a body called the Copyright Royalties Collective for AI Training (CRCAT) that will collect licence fees from AI developers for distribution to registered creators through existing Collective Management Organisations (CMOs).

While at first blush this might seem like an elegant solution, not only is this approach deeply flawed, it is likely to do more harm than good to the small creators it is supposed to protect.To better understand this, let’s identify who the winners and losers are in this proposal. First, let’s consider the AI companies. They will now have to pay a licence fee, which, even if it is a small percentage, will likely be a significant amount since it will be based on their global revenue.

However, since AI revenues are derived from subscription and usage-based fees, this is a cost that I expect will be largely passed on to consumers. Which means that, in the long run, this will probably have a minimal impact on their profitability. On the other hand, the proposal shields AI companies from copyright lawsuits, which means that, for a small fee (much of which they can pass on), AI firms can eliminate a significant legal risk to their business model.