Not a lawyer but I imagine the infringement on the input side, during the dataset creation and training would take place wherever the model is being trained? So presumably the us? On the other hand, yeah. Memorizing input data and spitting out protected characters on the output side seems like an issue.
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They clearly can't indemnify that all output is copyright free if the person inputting is describing a copyrighted work either.
Sufficiently advanced Gen AI can generate images / text that looks like copyrighted work from description while being licensed for all training data.