In the UK, where policymakers are positioning artificial intelligence as a beacon of responsible innovation, a landmark lawsuit in the United States has sharpened the debate over intellectual property, training data and what small firms can safely produce with generative tools.

In June 2025, Disney and NBCUniversal filed a federal copyright infringement action against Midjourney, alleging that the AI image generator was trained on protected works and produced outputs closely resembling iconic characters across Disney and Universal franchises. Filed in a Los Angeles court, the case framed the issue as more than a technological dispute—it is a test of how AI data harvesting intersects with longstanding copyright protections.

The studios’ complaint includes specific examples of allegedly infringing outputs linked to Star Wars, The Simpsons, Marvel and DreamWorks properties. They are seeking injunctive relief and damages. “We are bullish on the promise of AI technology... but piracy is piracy,” said Horacio Gutierrez, Disney’s chief legal officer. NBCUniversal’s general counsel, Kim Harris, added: “The studios are suing to protect the hard work of all the artists whose work entertains and inspires us.”

The case lands amid a wave of global scrutiny of how AI models are trained. Analysts say the outcome could shift incentives for creators and developers alike. According to CNBC, Disney and Universal accused Midjourney of “pirating the libraries” of their works to train its system and continue generating high-quality infringing images even after legal warnings—underscoring the high stakes of AI-enabled content creation.

For UK small and medium enterprises, the legal implications are immediate. What protections apply when using AI to design logos, marketing materials or social media content? A crucial difference between the US and UK lies in the treatment of fair use. While US law allows for a broader, context-driven defence, the UK’s “fair dealing” regime is more restrictive, requiring careful evaluation of the purpose, amount used and impact on the original market.

UK courts also apply a stricter test of “fairness” and proportionality, weighing whether the use is truly necessary and commercially harmless. For British businesses, that means AI-generated images resembling protected works—such as Disney or Marvel characters—can still infringe copyright if they affect the market or lack a legally justified purpose.

The government has already begun shaping policy responses. A consultation launched in December 2024 and updated in February 2025 proposed greater transparency in training data, increased creator control and clearer mechanisms for remuneration. Alongside this is a drive to build licensing frameworks and labelling requirements for AI-generated content. The goal: to foster innovation while providing legal certainty.

Real-world implications are already visible on platforms UK SMEs rely on. If an AI-generated design too closely resembles a protected work, marketplaces like Etsy, Amazon or Instagram may remove it without waiting for a legal ruling. This commercial and reputational risk makes it vital to embed IP checks in any AI workflow. The Disney–Midjourney case offers a cautionary tale. AI outputs are not automatically free of IP risk just because they are machine-made. The lawsuit underlines that mimicking recognisable characters or brands can still raise copyright issues if used commercially. Though based in the US, the case is likely to influence how courts in common-law jurisdictions, including the UK, interpret transformative use and derivative content.

SMEs can take several practical steps to reduce legal exposure. Avoid prompting AI tools to imitate known characters or franchises. Seek early legal advice. Run reverse image searches to flag similarities. Use tools and licences that provide commercial rights and clarity on training data. Treat all AI-generated content as potentially sensitive IP until confirmed otherwise.

The UK’s policy direction supports this cautious, transparent approach. Officials and commentators agree that market-based licensing systems and fair compensation channels are essential to protect rights while unlocking AI’s potential. For SMEs, this could lead to a more predictable environment in which AI supports branding, design and marketing—without breaching copyright.

As the UK continues to promote responsible AI innovation, the Midjourney lawsuit stands as a high-profile marker of the legal boundaries. It reinforces the need for a clear, enforceable framework that protects creators while enabling businesses to innovate confidently. For SMEs, the message is clear: align with UK copyright rules, understand your AI tools, and tread carefully.

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