What Can the 'Real Slim Shady' Teach Us About Contracts in the AI Era?

At the turn of the century, one question, and one question alone was on everyone’s lips: Will the real Slim Shady please stand up? In 1998, the rapper Eminem was the hottest thing on the charts. His records, on vinyl, cassette and compact disc (CD), were selling like hotcakes, and he was rocketing up the charts. At the same time, the use of mobile phones was exploding, and although it seems strange to think about it now, not everyone had a cellphone. They were treated as a luxury rather than the necessity that they are today. 

Early mobile phones were just about able to download tinny 8bit renditions of popular songs as their ring tones, and pop music fans were happy to pay $1.99 for the pleasure of ruining their favorite songs. The market for such ringtones was small, and the distribution costs were very low. So, it will come as no surprise that when Eminem’s record label renegotiated his contract, they were happy to include the following terms: 20% royalty payment for all records, such as vinyl, cassette and CD, sold “through normal retail channels” and 50% royalty payment for all music distributed through any other means. At the time, these other means consisted of the tinny 8bit downloads, movie soundtracks, and TV and radio advertisements.

By 2003, custom ringtone sales had overtaken CD sales, and to add insult to injury, a small service for downloading digital music, called iTunes was launched. The net result was that the 50% royalty section of the contract accounted for the lion’s share of the payments that Eminem was due to receive. His record label disagreed and contended that these new digital distribution methods were normal retail channels and that he should only receive 20% of the massive digital sales.

Naturally, much litigation followed and, in the end, the Supreme Court refused cert. for an appeal of the 9^th Circuit’s ruling in favor of Eminem, overturning the trial court’s finding that the record label was entitled to the vast sums. Eminem got the money, but it was on a knife edge for a while.

This incident, largely forgotten by contractual draftsmen, provides us with a number of lessons. The most important of which is that future proofing contracts is vital to anyone dealing with a contract that will last for a substantial period of time. That includes endorsement contracts, business tie-ins, data processing contracts and more. 

In 1998, the year of Eminem’s contract, nobody could have conceived that five years later iTunes would be the dominant way of obtaining music, or more incredibly yet, that custom ringtones would overtake CD purchases. Technological development risk is a part of life, and a part of all businesses. Generative AI and other similar technologies, such as deepfake and retail availability of complex machine learning tools, make it very difficult to predict how markets will work in the next year, yet alone within the time horizon of most contracts.

To combat this uncertainty, the broadest possible terms to account for any future situation are required. A contractual term will not be ruled unenforceable for over broadness, so long as its meaning is clear. If, for example, you are endorsing a product, ensure that your contract terms account for any likeness of you, even if it is deepfake or AI generated. Make sure any digital avatar or chat bot speaking in your voice is covered, even in text or AI generated fashion. Finally, ensure that any large language model, generative AI dataset, or other analyzed dataset that uses ANY data derived from or inspired by you, is covered. 

There are many intangible assets associated with companies and individuals which are currently going into building AI models and providing value to the owners of those models without any compensation to the underlying assets used to teach the model. This is value that can be extracted if correctly accounted for in a contract.

Thought has to be given to the business sector in which one operates but the best possible contracting method is to control all of the value that you provide into a contract rather than the channel and methods by which that value is exploited. This method allows for proper management and allocation of risk associated with unforeseeable technological developments.