Alcon Entertainment, LLC v. Tesla, Inc.

District court denies motion to dismiss copyright infringement claim against Tesla and owner Elon Musk based on their use of images from the movie Blade Runner 2049 to create an AI-generated image that was displayed at an event promoting the Tesla Cybertruck.

Plaintiff Alcon Entertainment LLC owns the copyright to the motion picture Blade Runner 2049. In 2024, Tesla owner Elon Musk displayed an image at a Tesla promotional event intended “to solicit investment and advertise . . . new Tesla products to consumers.” The image Tesla used bore some similarities to “the publicity image for theatrical release promotion” of Blade Runner 2049, which Alcon alleges is the film’s “most recognizable still image” and is used in trailers for the film on YouTube and other platforms.

Alcon filed a copyright infringement suit, alleging that Tesla and Musk created the image using an AI image generator after Alcon rejected Tesla’s request to use Blade Runner 2049 imagery at Tesla’s promotional event, giving defendants “only five hours or so to adjust their Event plans.” Alcon asserted claims for direct copyright infringement against Tesla and Musk and contributory copyright infringement against co-defendant Warner Bros. Discovery Inc.

Tesla and Musk moved to dismiss, arguing that Alcon could not demonstrate substantial similarity between the Blade Runner 2049 image and the image used at the Tesla event, that Alcon’s “literal copying” theory was implausible, and that using the image constituted fair use.

The district court denied the motion to dismiss. As to the literal copying theory, it found Alcon’s allegations “sufficiently plausible,” noting the “general similarities” between the Blade Runner 2049 image and the image used at the Tesla event, as well as Alcon’s allegations that Musk “directly or indirectly owns and operates . . . the AI company X.AI Corp.[, which] runs ‘Grok,’ an AI image generator.” The district court further pointed out that Tesla had previously been provided a high-resolution digital copy of the Blade Runner 2049 image.

Tesla and Musk argued that Alcon’s literal-copying theory amounted to nonactionable “intermediate copying” because the Blade Runner 2049 image was only alleged to have been used to create a new and different image using AI. The district court rejected this argument, distinguishing it from its prior ruling in DuMond v. Reilly, in which it stated that “the method of copying . . . matters not at all” in the context of allegations focused solely on substantial similarity between an end product and the copyrighted work. The court explained that Alcon alleged infringement not just by virtue of Musk’s publication of the AI-generated image at the Tesla event but also “literal copying” of the Blade Runner 2049 image (or the film in its entirety) in the course of creating the AI-generated image.

To this end, the district court contemplated the evolving legal landscape surrounding AI technology, noting that “at least now that the age of AI is upon us, copyright infringement lawsuits involving what might be understood as ‘intermediate copying’ are proceeding, at least suggesting that looking only to end-products as ‘infringing works’ in that context is not the only means by which a plaintiff might seek to protect its copyright rights.” Citing the recent Northern District of California decision in Bartz v. Anthropic PBC, the district court observed that “[c]ase law preceding that technological revolution … might be of limited utility in the current era.”

As for the fair use argument, the district court acknowledged that “fair use may be fully-analyzed on the pleadings in appropriate circumstances and where the outcome is clear” but concluded that this approach did not fit here. Rather, the district court agreed with Alcon “that a proper and complete assessment of fair use in this case is most-likely to occur no earlier than at summary judgment,” citing McGucken v. Pub Ocean Ltd., in which the Ninth Circuit held that fair use is a “mixed question of law and fact” that is “often resolved at summary judgment.”

The district court identified three of the four statutory fair use factors as requiring factual development: “(1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes; (2) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and (3) the effect of the use upon the potential market for or value of the copyrighted work.” On the market-harm factor, the district court noted Alcon’s allegations that it was producing a derivative Blade Runner 2049 television series “and discussing with a car brand an exclusive licensed affiliation,” such that defendants’ alleged “infringements interfere with Alcon’s ability to grant license exclusivity, damaging BR2049’s value to Alcon.” Alcon further alleged that “[t]here was and is an established market for automobile brands to license from motion picture or TV rights holders the right to use copyright-protected elements of the works to promote car products and brands” and that “car brands bid competitively for licensed affiliation with BR2049.”

The district court emphasized the Ninth Circuit’s frequent commentary on the “flexibility, malleability, and even uncertainty of the fair use test and required analysis,” noting that the doctrine has been described as “the most troublesome [doctrine] in the whole law of copyright,” with factors criticized as “billowing white goo.” The court also noted that defendants would ultimately have the burden of convincing the court to accept the affirmative defense of fair use.

The district court concluded that “[f]air use is not ripe for determination at this procedural stage in this particular case” and that “a substantial similarity-based analysis will not resolve at least one major aspect of [p]laintiff’s infringement allegations.”

Summary prepared by Tal Dickstein and Ezra Isaacson