Technology

Say I train an LLM directly on Marvel movies, and then sell movies (or maybe movie scripts) that are almost identical to existing Marvel movies (maybe with a few key names and features altered). I don’t think anyone would argue that is not a derivative work, or that falls under “fair use.”

I think you're failing to differentiate between a work, which is protected by copyright, vs a tool which is not affected by copyright.

Say I use Photoshop and Adobe Premiere to create a script and movie which are almost identical to existing Marvel movies. I don't think anyone would argue that is not a derivative work, or that falls under "fair use".

The important part here is that the subject of this sentence is 'a work which has been created which is substantially similar to an existing copyrighted work'. This situation is already covered by copyright law. If a person draws a Mickey Mouse and tries to sell it then Disney will sue them, not their pencil.

Specific works are copyrighted and copyright laws create a civil liability for a person who creates works that are substantially similar to a copyrighted work.

Copyright doesn't allow publishers to go after Adobe because a person used Photoshop to make a fake Disney poster. This is why things like Bittorrent can legally exist despite being used primarily for copyright violation. Copyright laws apply to people and the works that they create.

A generated Marvel movie is substantially similar to a copyrighted Marvel movie and so copyright law protects it. A diffusion model is not substantially similar to any copyrighted work by Disney and so copyright laws don't apply here.