Generative AI models require massive amounts of training data to enable their systems to produce advanced results. But the data they feed into often comes from sources subject to copyright restrictions.
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San Francisco-based startup Story announced Wednesday that it has raised $80 million in funding for a blockchain designed to prevent artificial intelligence makers like OpenAI from taking over creators’ intellectual property without permission.
According to sources familiar with the matter, the company, which was founded two years ago, is valued at $2.25 billion. These sources preferred to remain anonymous because the information has not been made public.
Story said it raised the money in a Series B funding round — typically the third major funding round in a private startup’s growth journey after seed and Series A — led by Andreessen Horowitz, also known as a16z. Polychain, a crypto-focused venture capital firm, also invested in the funding round.
Story, which is not profitable and does not disclose its revenue, is based on backers’ hopes that its solution will give creators the ability to be attributed and compensated for their work that powers popular artificial intelligence platforms such as OpenAI’s ChatGPT and Perplexity’s AI-powered search engine.
Building a “Legoland IP”
A blockchain is a distributed database that maintains an immutable record of activity. It is the technology behind cryptocurrencies, such as bitcoin and ether.
Story acts as a blockchain network that allows creators to prove that they created content and own the intellectual property by storing their intellectual property on the platform.
The company’s technology aims to protect the intellectual property of individuals and entities by embedding associated terms, such as licensing fees and royalty-sharing agreements, into smart contracts.
Smart contracts are digital contracts stored on a blockchain that execute automatically once a certain set of conditions are met.
This makes copyright holders’ intellectual property “programmable,” Story co-founder and CEO SY Lee told CNBC, because it sets rules for how their content can be used and the price to be paid to reproduce or remix their works.
The advantage of this approach, Lee said, is that it effectively cuts out the middlemen typically involved in copyright theft disputes in the media landscape.
“Now, intellectual property has become a Lego of intellectual property,” Lee told CNBC. “Now you don’t have to go through lawyers. You don’t have to go through agents. You don’t have to go through long, long business development negotiations. You just put your licensing terms and royalty-sharing terms into little contracts.”
Story makes money by charging network fees for any action that takes place on its network.
One example of a company using Story is Ablo, an AI tool that allows users to create their own custom fashion items using designs from well-known brands, including French clothing house Balmain and Italian luxury fashion house Dolce and Gabbana.
Brands are compensated for their use of fashion designers’ intellectual property through various licensing and revenue sharing agreements.
Fighting AI Copyright Theft
Story is now trying to tackle a timely problem with its technology: the theft of copyrighted media from the internet by powerful generative AI models like OpenAI’s ChatGPT.
These models, which power many AI chatbots increasingly used as an alternative to search, require massive amounts of training data to enable their systems to produce advanced and informative responses to user queries.
But the data that powers these AI models often comes from sources subject to copyright restrictions.
Last year, the New York Times wrote: Microsoft and OpenAI with a copyright infringement lawsuit seeking damages for misuse of the newspaper’s intellectual property.
In the complaint, the Times cited several examples of cases where GPT-4 produced altered versions of documents originally published by the newspaper.
Big tech companies like Microsoft, which has invested $13 billion in OpenAI and is reportedly entitled to a 49% stake in the company, “are essentially stealing your intellectual property for training purposes and actually capturing all the benefits,” Lee said.
In a motion to dismiss part of the Times’ complaint in March, Microsoft said such allegations were “meritless” and that the complaint presented a false narrative of “apocalyptic futurology.”
The content used to train these models, Microsoft’s lawyers argued, “does not replace the market for works; it teaches the language of the models.”
Microsoft was not immediately available for comment on Lee’s comments when contacted by CNBC.
Good intellectual property is necessary to train such AI models, Story’s Lee told CNBC, but he added that AI companies risk losing out in the long run if they don’t adequately compensate the publishers and creators from whom they source vast amounts of intellectual property data.
“For AI to grow sustainably, it needs high-quality intellectual property. Without high-quality human-generated data, AI models won’t be able to self-train and improve,” Lee said.
Few startups are building technologies specifically designed to combat AI-driven intellectual property theft.
A University of Chicago project called Glaze is offering a free app for artists to combat AI theft of their intellectual property with technology that makes subtle changes to artworks designed to disrupt the AI models’ ability to read data about artworks and mimic the style of the artwork and its artist.
Story, founded in 2022, plans to use the new funding to expand its IP network infrastructure and onboard more developer partners. The company already has more than 200 developers using its platform to enable content creation using programmable IP.
Lee added: “There’s a huge, incredible digital renaissance that’s making everyone a creator or a studio, but at the same time, if no one is actually compensating and monetizing IP properly, it’s going to be suicidal for AI in the long run.”
