The Human Tax: How Thaler v. Perlmutter is Entrenching Corporate Dominance in the AI Era

The integration of Artificial Intelligence (“AI”) into commercial art has moved from a speculative experiment to a lucrative business. Today, most companies use AI in their artistic branding and commercialization; small startups use AI products like Adobe Firefly to generate instant branding, while multinational corporations like Coca-Cola go as far as encouraging their customers to use AI in marketing campaigns. The wide-scale integration of AI, seen by 94% of companies leveraging AI tools at the end of 2025, has outpaced the legal framework intended to protect it. As more artists turn to AI to supplement their work, and artistic content becomes less human, a fundamental legal question remains–who owns the art created by a machine? 

 In the wake of the recent Supreme Court denial to review Thaler v. Perlmutter, unintended and uneven consequences for AI use will spread across the creative marketplace. Small businesses that rely on AI tools face new legal vulnerabilities, while large corporations and independent artists may benefit from strengthened intellectual property protections. Following Perlmutter copyright law requires art to be made by a human author, and copyright eligibility acts as a “human-centric” gatekeeping mechanism. As a result, courts are protecting traditional creative labor, risking entrenching the market dominance of large corporations who can afford the “human tax” required for intellectual property protection. As the use of AI continues to expand across all industries, it is important for businesses to understand how developments in the legal world will impact their ability to promote and grow their business.

“Authorship” in Copyright Law

Copyright law originates in Article I, Section 8 of the United States Constitution, which enables Congress to promote the “Progress of Science and useful Arts,” by granting “Authors” exclusive rights in their “writings” for a limited time. Under this authority, Congress enacted the Copyright Act of 1976, which protects “original works of authorship fixed in any tangible medium of expression.” Notably, neither the Constitution nor the Copyright Act explicitly define the word “author”. Instead, authorship has been defined primarily through case law. In the 1884 case of Burrow-Giles Lithographic Co. v. Sarony, the Supreme Court ruled that a photograph of Oscar Wilde was protected because it reflected the photographer’s creative choices. Even though a machine–the camera–created the work, the “author” was a human because the ideas and creative choices that lead to the photograph came from the photographer. However, in 2018, the courts further clarified that copyright protection only applies when the photographer is human. In Naruto v. Slater, the Ninth Circuit determined that Naruto, a monkey, could not claim copyright infringement of a selfie that he took. Because the “author” was a monkey, Naruto lacked standing under copyright law. In light of Sarony and Naruto, Copyright protection only applies to machine generated work when the “author” is human.​​ Picture Credit: here

Thaler v. Perlmutter

Thaler v. Perlmutter applied the human authorship requirement for the first time to an AI author seeking copyright protection. In May 2019, Dr. Stephen Thaler submitted a copyright application for a two-dimensional artwork titled “A Recent Entrance to Paradise” where his AI system the “Creativity Machine” was listed as the work’s sole author. The application further explained that the work was “created anonymously by machine.” His application was denied on the ground that “a human being did not create the work.” Dr. Thaler sought reconsideration twice, filed suit in the District Court for the District of Columbia, and ultimately appealed to the D.C. Circuit. 

In March 2025, the Circuit court affirmed that the term “author” in the Copyright Act refers to a human creator, not a machine. Because Thaler’s application identified only the Creativity Machine as the author of the work, the image could not qualify for copyright protection. The court emphasized that copyright law has consistently been built around the concept of human creativity and that extending authorship to machines would represent a significant departure from longstanding doctrine. On March 2, 2026, the Supreme Court denied to hear the case, leaving the D.C. Circuit decision intact. While the Court’s refusal to take up the appeal is not meant to serve as an endorsement of the decision, it effectively leaves the D.C. Circuit holding as the most authoritative judicial statement on AI authorship in the United States. As the world of intellectual property law remains steadfast that legal protection only extends to human authorship, business owners and artists who feel the pressure to use AI in their creative development face unique risks because IP protection falls short of new creative tools. 

The Contrasting Needs for both AI and Copyright Protection.

The recent Perlmutter ruling is particularly important for businesses throughout the United States. IP protection remains a vital tool in innovation, where artists and businesses alike rely on IP law to protect their brand, products, and competitive advantage. As former U.S. President Barack Obama noted, "Our single greatest asset is the innovation, the ingenuity and creativity of the American people...but it’s only a competitive advantage if our companies know that someone else can’t just steal that idea." As a result, over 700,000 copyright applications are filed in the United States each year. IP protection remains a fundamental and necessary component of U.S. business and artistic development.

Similarly, the use of AI has become an increasingly important component of marketing in the U.S. AI-generated art, music, and other media are commonly used by businesses to develop marketing strategies, test new branding ideas, reduce costs on labor, and make concept art for media like logos, advertisements, and other publications. Small businesses specifically are using AI to keep up with the pace of larger corporate competitors. Due to less labor and a smaller budget, small businesses have found it increasingly necessary to rely on AI art to fill gaps in their media and marketing efforts.

As innovation and efficiency continue to be prioritized in the U.S. market, AI reliance will continue to grow. But unlike traditional creative tools, such as a camera, modern AI systems are capable of generating works with minimal or no human involvement. Even so, because of the emphasis that the United States places on IP rights, artists and businesses are increasingly seeking the same legal protections, like Copyright, for AI-generated ideas. But Perlmutter’s human involvement mandate now puts at odds AI use and copyright protection. Businesses and artists relying on AI may not get Copyright protection for exclusively authored AI works. As a result, there are significant changes in the marketing industry that will impact small business owners, large corporations, and creatives differently.

The Impact of Perlmutter on Small Business Owners

While Perlmutter’s ruling impacts all businesses seeking copyright protection for AI-generated content, the disparity between small businesses and large corporations presents a unique challenge in today’s commercial world. Large corporations with greater capital and more robust legal departments can afford to avoid Perlmutter’s effects because they can hire humans to do work that AI might otherwise replace, but smaller entities that rely on AI to fill in hiring gaps will remain unprotected. For example, a business endeavoring to design a new copyrightable logo must now employ an artist to render the design, while large corporations with adjustable budgets can afford the expense of additional labor, medium and small-scale businesses will not be able to afford to do the same. This problem extends beyond logo design and affects written materials, marketing plans, and even music used in advertisements which are all candidates for copyright protection, and will each independently require a human author to be hired. 

Perlmutter’s ruling not only limits small businesses seeking copyright protection, it also exposes them to aggressive litigation from large corporations. Smaller businesses may not have well-developed legal departments, which means large corporations are further empowered to sue these small businesses over copyright claims. The legal department of small businesses do not have the same resources as large corporations; many small businesses may not even know they are impacted by Perlmutter’s ruling without an attorney familiar with copyright law. Any business using AI to create a logo or other branding has no recourse should a competitor create something similar. Furthermore, while Perlmutter paradoxically provides a defensive shield by allowing small businesses to argue that a plaintiff's AI-generated work is not copyrightable, the staggering cost of litigating such a defense often renders this 'victory' a hollow one, as large corporations can weaponize the discovery process to exhaust a smaller competitor's resources before a judge ever reaches the merits of the case. Accordingly, small businesses relying heavily on AI-generated content as part of their branding or business product will need to adjust their strategies to avoid liability, and find the protection needed for their works. 

The Impact of Perlmutter on Large Businesses

While small businesses are left to face uncertain futures and make difficult budgeting decisions to deal with the consequences of Perlmutter, large companies can reap the benefits of better protection against AI. Perlmutter’s ruling arrives at a time when large corporations are strengthening their arsenal against AI and litigating these issues in the court. Recently, Disney initiated a lawsuit against Midjourney, an AI-powered content generation company that enabled users to produce images nearly identical to Disney IP. Disney joined several other companies in the lawsuit, all of whom asserted that Midjourney’s creations were violations of copyright law. This litigation, along with the holding from Perlmutter, highlight an emerging trend in AI-based litigation: larger companies with better resources have both better control over their own copyright and strong legal backing to assert copyright infringement. This trend gives these corporations more leverage in the market place to secure deals and avoid litigation where other, smaller companies may not. For example, Disney actually made a deal with OpenAI to allow certain characters, like Mickey Mouse, in their video generation software. Ultimately, large corporations are simply better equipped to handle the waves of the shifting AI regulation than their smaller counterparts, and can take advantage of court rulings like Perlmutter more effectively. 

The Impact of Perlmutter on the Creative Industry

Another effect of Perlmutter’s ruling is that it benefits and strengthens protections for artists and independent content creators who are threatened by AI. Since the rise of AI in creative spaces, artists and other creatives have fought against AI large language models who “train” on copyrighted or otherwise legally protected materials. While courts have held that the training of AI constitutes fair use, under Perlmutter the actual product from AI is not protected by copyright. Accordingly, artists of all kinds now have better leverage to assert their value to businesses after fearing for years that AI generated content will replace their jobs. 

For example, 2023 saw a massive strike from Sag-Aftra, the largest writers and actors guild in the US, where some of their demands included better protections and informed consent around the use of AI in the industry. Even deceased actors were included in the demands, as Sag-Aftra demanded that their images and likenesses deserved the same protection. By reclaiming the “human” asset in both past and present actors, the creative industry has established a double layer of protection for creators. In light of Perlmutter, this framework works from both ends: it denies copyright protection to machine generated outputs, while simultaneously penalizing the unauthorized exploitation of the human persona used as input. Authors, too, have protested against the use of AI in the industry by publishing blank books en masse. With the Supreme Court refusing to hear Perlmutter, for the time being, these creatives now have a stronger legal framework to rely on when asserting their worth to their patrons and employers. 

What’s Next

Perlmutter’s holding leaves open a question of quantity: how much AI is too much AI? Currently, the courts hold that the “first instance of authorship must come from a human,” or in other words, that the creative thrust must come from a human. Effectively, merely typing in a prompt to generate an image or other response is not enough to be afforded copyright protection. This standard leaves several questions for the courts to address in the future around the use of AI as an assistant in the creative process. For example, Adobe’s photo editing tool Photoshop can now include a host of AI-powered options to edit images, varying from actual image creation to refining an image’s resolution. While certainly an image entirely produced and edited by AI would not receive copyright protection, courts have yet to resolve clearly how much editing could be done by AI before the requirement of human authorship fails. Pending cases like Allen v. Perlmutter in Colorado, which distinguishes itself from Thaler v. Perlmutter by asserting that AI is a shared author of the work, will further define how much AI is too much AI. Where AI functions as a tool directed by the human creative process, courts may still find that the resulting work satisfies the Copyright Act’s authorship requirement.

Conclusion

As the use of AI continues to expand across all industries, it is important for businesses to understand how developments in the legal world will impact their ability to promote and grow their business. While some businesses might have an easier time adapting to this rapidly evolving landscape than others, Perlmutter's ruling ultimately benefits large businesses and strengthens protections for independent artists, but leaves small businesses in murky waters.

*The views expressed in this article do not represent the views of Santa Clara University.