How AI is Transforming Fashion and the Law

*Originally Published in Retail Leader
ArentFox Schiff’s Chairman Anthony Lupo, AI, Metaverse & Blockchain Industry Group Co-Leader Dan Jasnow, along with Associates Felicia Xu and Emily Caylor, have co-authored an article for Retail Leader on the transformative impact of artificial intelligence (AI) on the fashion industry and its legal implications.

The integration of generative artificial intelligence (Gen AI) in the fashion and retail industry is revolutionizing business operations by automating design processes, creating hyper-personalized consumer experiences, and managing labor costs. With a predicted $150 billion to $275 billion in operating profits over the next few years, businesses must embrace Gen AI to remain competitive, and those that fail to do so risk losing their current market share or going out of business altogether.

While the advantages of Gen AI are certain, it is critical to understand the novel legal implications that its use raises. Courts are currently in the process of determining how to apply existing laws to address infringement and rights of use issues, ownership of Gen AI creations, and the use of unlicensed content in training data. Diverse applications of Gen AI within the fashion and retail landscape highlight the associated legal risks.

Use of Gen AI in the design process

Generative design is a key aspect of AI in the fashion and retail industry, enabling designers to generate variations of existing designs or merge elements from prior designs in minutes. The U.S. Copyright Office and courts have established that content generated solely by AI does not qualify for federal copyright protection due to the lack of human authorship, and no level of human prompting can lead to a protectable AI-created work.

However, the situation becomes more complex when Gen AI is only a part of the creative process. The copyright office has shown willingness to grant copyright protection for works created by Gen AI but modified by humans, provided the new work displays a sufficient amount of original authorship. The determination of whether a human-modified Gen AI work meets this criterion will require a case-by-case analysis and likely detailed documentation of both human and Gen AI contributions. No guarantee also exists that a Gen AI tool does not use or reference a protected design. If a Gen AI work is “too close” to the referenced design, it could expose the user of the AI-generated work to infringement claims.

At-scale hyper-personalized marketing

Through proprietary algorithms, machine learning, and data analysis, AI can identify patterns and preferences in consumer behavior, allowing companies to create hyper-personalized marketing campaigns almost instantaneously. To avoid the unintentional disclosure of trade secrets and other proprietary confidential information, businesses should ensure AI tools comply with their internal data security and confidentiality guidelines, as certain third-party software may retain and utilize proprietary prompts and other data submitted by users. Businesses should carefully examine the relevant terms of use, inquire about access to tools or features that offer enhanced privacy, security or confidentiality, and contemplate whether to limit or restrict access to tools that do not meet retailer data security or confidentiality requirements on company networks.

Virtual models and influencers

The use of virtual AI models and influencers in the fashion industry has gained traction as a unique and cost-effective marketing strategy. These lifelike digital models not only showcase clothing without the need for physical photoshoots or compliance with labor laws, including child entertainment regulations, or collective bargaining agreements, but can also engage with audiences on social media platforms, thus streamlining the production process and reducing associated challenges and expenses. 

The emergence of virtual AI models and influencers raises legal implications pertaining to intellectual property rights, privacy, advertising and publicity. As Gen AI models become increasingly realistic, the potential for confusion and misappropriation of real-life models’ likeness arises. The issue of copyright ownership for these virtual models also adds complexity, as copyright protection is not granted to Gen AI content without human authorship. Retailers must navigate these legal challenges when considering the use of virtual AI models and influencers in their marketing efforts.

Enhancing customer experience

AI capabilities can also be used to enhance customer experience by providing personalized, seamless and engaging shopping experiences. Innovations include virtual mirrors for customers to virtually try on clothing and accessories, AI-powered chatbots for instant support, and AI-driven product recommendation systems that analyze customer preferences, browsing history, and purchase behavior to suggest relevant products.

These AI tools present potential privacy and data protection concerns arising from the collection, analysis and storage of personal data. Retailers must ensure compliance with data protection regulations, such the General Data Protection Regulation (GDPR) and the California Consumer Privacy Act (CCPA), to avoid potential penalties and reputational damage. As businesses continue to embrace AI, they must position themselves to quickly adapt to existing and inevitable changes in the legal landscape.


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