It sounds glamorous: film deals, streaming platforms, and AI writing your next screenplay while you sip coffee and wait for Hollywood to call. For many creators and founders, the promise of generative AI feels like a “cheat code” for the industry. However, there is a hard truth you need to face before you hit “generate.” Entertainment law is not for the faint of heart, and using AI carelessly in creative or business work can quietly destroy the value of everything you are building.
In a recent episode of Letters of Intent, Carbon Law Group attorneys Pankaj Raval and Sahil Chaudry sat down with Nadia Davari, a veteran entertainment attorney and film producer, to pull back the curtain on the modern entertainment business. What they revealed applies far beyond the red carpet. If you are a small business owner, a creative entrepreneur, or a founder using AI to move faster, this conversation is a warning you need to hear. Because in many cases, AI-created work is not just risky; it may be legally worthless.
The AI Copyright Problem: Why Non-Human Work Cannot Be Owned
One of the most dangerous misconceptions about AI is the idea that if you prompted it, you own the result. Under United States copyright law, a work must be created by a human to receive copyright protection. This principle existed long before AI entered the picture, and courts have remained incredibly consistent on this point.
The Legal Precedent: Why Your Prompt Isn’t “Authorship”
To understand why this matters, we must look at how the U.S. Copyright Office views “authorship.” Historically, the office has denied protection to works allegedly created by spirits, nature, or animals (notably the “monkey selfie” case). AI falls into this same category. The law views the AI as the generator and the human prompter as someone merely providing a suggestion. Because the human does not control every “pixel” or “word” the machine spits out, the machine is considered the creator.
Consequently, if a screenplay, book, article, logo, or design is generated by a non-human system, it cannot be copyrighted. This lack of protection creates a domino effect of business failures:
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No Exclusive Ownership: You cannot stop others from using, selling, or modifying your work.
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No Enforceable Rights: You cannot sue for infringement, meaning your “competitors” can copy you with impunity.
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No Meaningful Asset: Investors, venture capitalists, and studios generally avoid unprotected IP because it offers no “moat” around the business.
The Filmmaker’s Nightmare
During the podcast, Nadia shared a real example that should make every creator pause. A filmmaker was excited about a television project he had finally cracked, complete with outlines, episode arcs, and a pilot structure. There was just one catch: he used AI to generate the bulk of it.
When Nadia explained that the material was legally “public domain,” his reaction was pure shock. He had spent months “working” with the tool, assuming his guidance counted as ownership. It did not. Unfortunately, if you spend months refining a screenplay with AI and a studio later “borrows” the concept, you may have no legal claim because you never owned the foundation.
Dirty Data and the Privacy Trap
Copyright is only half the problem; the other half is privacy. When you input information into many public AI systems, you are essentially shouting your secrets into a void that remembers everything. Most free versions of AI tools use your inputs to train future iterations of the model.
The Risks to Small Business Operations
For small business owners, this raises massive confidentiality concerns. Think about the types of data routinely fed into these tools:
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Client Information: You may inadvertently violate Non-Disclosure Agreements (NDAs) by sharing sensitive client data with a third-party bot.
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Contract Terms: You might expose your specific negotiation levers or pricing tiers to a model that your competitors also use.
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Trade Secrets: Feeding your “secret sauce”, whether a recipe, a manufacturing process, or a unique marketing strategy, into a public algorithm removes the “secrecy” required for trade secret protection.
Nadia referred to this as “dirty data.” It feels productive and looks polished, but it is legally contaminated. Once this data is mixed into your business, perhaps appearing in your internal manuals or customer-facing apps, separating it becomes expensive and painful. Essentially, using public AI tools for sensitive work is like brainstorming your business strategy in a crowded coffee shop while speaking through a megaphone.
The ChatGPT Contract Trap: Why Cheap Drafting Becomes Expensive Cleanup
Furthermore, the allure of “free” legal drafting is leading many founders into a dangerous trap. There is a common belief that a contract is just a “form” you fill out. Nadia shared a story where a client asked for an operating agreement template. Instead of engaging counsel, the client used ChatGPT to answer complex governance questions and draft the clauses.
While the result looked professional with bullet points, numbered sections, and confident language, it was actually legal gibberish. * Missing Provisions: It failed to address what happens if a partner dies or wants to leave the company.
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Jurisdictional Errors: It cited laws that didn’t apply to the state where the business was incorporated.
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Conflicting Terms: The “Ownership” section contradicted the “Voting Rights” section, creating a document that was impossible to enforce.
As Sahil put it during the episode, “Please don’t give us the nightmare of your ChatGPT work.” A contract is not just a collection of words; it is a legal system designed to function under stress. AI lacks “judgment”, the ability to know why a certain clause is there and how it interacts with the specific goals of the founders.
Entertainment Law Reality Check: Glamour Versus Volatility
Entertainment law is often romanticized through the lens of red carpets and multimillion-dollar deals. However, the reality Nadia described is far more volatile. In Hollywood, projects fall apart daily. Financing collapses at the eleventh hour, distribution deals are retracted, and payments are frequently delayed or disputed.
Risk Management for Every Industry
This volatility is not unique to entertainment. Small business owners face similar uncertainty every day. Partners disappoint you, markets shift, and global events disrupt supply chains. The lesson from entertainment law is not about Hollywood glitz; it is about risk management. Every business operates on assumptions. When those assumptions fail, the legal structure you built at the beginning determines whether you survive or fold. In entertainment, that means knowing exactly where revenue will come from before a single frame is shot. In business, it means ensuring your IP is ironclad before you spend a dollar on marketing.
Negotiation Strategy: The Art of Reading the Room
Beyond the technicalities of IP, the podcast delved into the art of the deal. Nadia made a critical distinction between negotiating with a major studio versus an independent producer.
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Studios: These are massive bureaucracies with deep pockets. They have accounting systems designed to protect their margins. Here, aggressive negotiation and holding out for specific points often make sense.
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Independent Producers: These entities often operate with “hard caps.” If they only have $1 million to make a movie, you cannot negotiate for $1.2 million. They simply do not have the flexibility.
Similarly, in the business world, negotiating with a Fortune 500 company is fundamentally different from negotiating with a local partner. Misreading this dynamic, or asking for the impossible, can kill a deal before it starts. This is where experienced counsel provides the most value. Lawyers do not just draft documents; they read deal dynamics and identify pressure points to ensure you actually close the deal without leaving money on the table.
The Death of Pre-Sales and the New Revenue Reality
Another major shift discussed by the panel is the decline of traditional film financing models. Historically, filmmakers could use “pre-sales”, selling the rights to different countries before the movie was even made, to guarantee a certain level of revenue.
Today, that model is crumbling. Streaming platforms have collapsed the traditional “release windows” (the time between a movie being in theaters and being available at home). Digital piracy and changing audience behaviors have made predicting revenue harder than ever.
The Parallel for Modern Business
This uncertainty mirrors what many businesses experience in the digital economy. Revenue models shift overnight. One day, you are profitable on social media ads; the next day, an algorithm change triples your customer acquisition cost.
In this environment, ownership clarity becomes your survival tool. If your revenue is unpredictable, the one thing you must control is your assets. Businesses that rely on vague “handshake” agreements or AI-generated, unprotected IP are the first to collapse when the market tightens.
AI in Law: A Tool for Efficiency, Not a Replacement for Judgment
Finally, the conversation addressed how lawyers themselves use AI. Professional tools like Lexis+ AI or Westlaw are transforming the industry by allowing attorneys to find precedents in seconds rather than hours. These tools increase efficiency and help streamline the “grunt work” of research.
However, these professional tools are distinct from public bots. They are closed systems that protect client data. More importantly, they do not replace human judgment. A tool can find a case, but it cannot tell you if a specific judge is likely to be sympathetic to your client’s unique story. The “cowboy” approach, where a non-professional uses AI as a substitute for a lawyer, creates messes that cost ten times more to clean up than they would have cost to prevent.
Practical Takeaways: How to Use AI Safely
If there is one takeaway from this conversation, it is this: Speed without protection is a liability. AI can be a powerful partner if used correctly. To protect your creative and business future, follow these “Rules of the Road”:
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The Human-Plus Rule: Use AI for brainstorming, outlining, or generating rough ideas. However, ensure that the final product (the script, the code, the logo) is substantially refined or recreated by a human. This creates the “originality” needed for copyright.
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Audit Your Inputs: Never put confidential business plans, trade secrets, or client data into a public AI tool. If you wouldn’t post it on a public forum, don’t put it in the prompt box.
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Verify, Don’t Just Trust: If AI generates a “contract” or a “legal strategy,” treat it as a suggestion, not a fact. Always have a qualified attorney review any document that governs your money or your rights.
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Know Your Ownership: Before you build a business around an AI-generated asset, ask: “If a competitor stole this tomorrow, could I actually stop them?” If the answer is no, you haven’t built an asset; you’ve built a liability.
- Website: nadiadavari.com / davarilaw.net
- Instagram: @nadiadavari