A client generates a striking hero image in Midjourney, drops it straight onto their product packaging, and ships. Six months later, a rights-holder's solicitor sends a letter. The packaging is pulped. The cost of that shortcut — the failure to ask one question before pressing "generate" — is always more than the cost of getting it right first.
That question is not "does this look AI-made?" It is: do we have the rights we need, and have we created avoidable exposure in the process?
The real decision you are making
The surface question — can you use AI-generated art commercially? — hides a narrower, more actionable one: under what conditions is it safe to rely on AI-generated art for a specific commercial purpose?
The answer depends on three distinct layers:
- The tool's terms — what contractual permission the platform grants you.
- Intellectual property law — whether copyright subsists, whether you own it or only hold a licence, and whether the output steps on someone else's rights.
- Other legal obligations — misleading conduct under the Australian Consumer Law, and privacy compliance if real people's images are involved.
These layers interact. A platform might grant you broad commercial use rights, yet an output that resembles a competitor's brand still exposes you to a trade mark claim. Understanding which layer is the live risk in your situation is the decision that actually matters.
It is also worth being precise about what "commercial use" covers. Using an AI image in a paid ad, printing it on packaging, selling merchandise featuring the image, licensing it to a client, or building it into a brand identity are all commercial use — and each carries a different risk profile.
What shapes your rights to the image
Whether the platform actually grants you commercial rights
AI image platforms vary considerably in what their terms permit. Some grant users a broad, royalty-free licence to use outputs commercially; others restrict commercial use to paid plans; others reserve rights to reuse your inputs or outputs in ways that affect any claim to exclusivity. A few platforms take an assignment-style approach and treat outputs as yours; most do not go that far.
Before you rely on any AI-generated image in advertising, packaging, or products, confirm:
- you hold a right to use outputs for the specific purpose (ads, resale, sublicensing, etc.)
- that right applies to your account type (free vs paid plans often differ)
- the platform has not reserved a licence that undermines your exclusivity
Keep a dated record of the terms you relied on. Platforms change their terms of service, and a screenshot taken at the time of generation can matter in a dispute.
Whether copyright subsists — and who holds it
This is the most misunderstood issue. Many businesses assume: "I generated it, so I own it." That assumption is not reliable under Australian law.
Copyright protection in Australia requires a human author. Under the Copyright Act 1968 (Cth), copyright subsists in original works that originate from human authorial effort. Two significant cases establish what happens when that ingredient is absent or minimal.
In IceTV Pty Ltd v Nine Network Australia Pty Ltd [2009] HCA 14, the High Court affirmed that originality requires the work to originate from the independent intellectual effort of a human author — mere labour or the use of a process is not enough.
In Telstra Corporation Limited v Phone Directories Company Pty Ltd [2010] FCAFC 149, the Full Federal Court held that no copyright subsisted in telephone directories because their material form was shaped by software rather than by identifiable human authors. The humans who operated the system did not supply the independent intellectual effort needed to attract protection.
Applied to AI-generated images: a purely AI-generated output, produced in response to a short text prompt with no substantial human creative input shaping the final expression, is unlikely to attract copyright protection in Australia. If there is no copyright, you cannot stop others from using a similar or identical image — even if the platform's terms say you "own" the output.
The practical implications depend on how you intend to use the image:
| Use | Copyright gap matters most when... |
|---|---|
| Background image on a website | Lower risk — exclusivity rarely critical |
| Social media campaign imagery | Moderate — duplicate images can be embarrassing but rarely actionable |
| Product packaging or merchandise | Higher — investment is significant; copies damage brand value |
| Logo or core brand element | High — building a brand on unprotectable IP is a structural problem |
| Licensing the image to clients | High — client expects enforceable rights you may not have |
The more central the image is to commercial value, the more the absence of copyright protection matters.
Whether the output infringes someone else's rights
Even if you have no copyright in your output, someone else may have rights in what the output resembles. AI models are trained on large datasets that include copyrighted works. The output can, in some circumstances, be substantially similar to an existing artwork, character design, photograph, or brand element.
Copyright infringement risk arises where an output is substantially similar to a protected work. This is a fact-specific assessment, but risk is elevated when prompts reference specific artists, recognisable styles strongly associated with one creator, film or television characters, or franchise imagery.
Trade mark infringement and passing off become relevant in packaging and logo contexts. An AI-generated "clean icon" can inadvertently approximate a competitor's registered mark. If consumers are likely to be confused about the commercial origin of goods or services, both trade mark infringement and passing off claims are live.
Practical checks before publishing:
- Does the image contain a recognisable character, logo, or franchise element?
- Does it closely resemble a known artwork or photograph?
- Could it be confused with a competitor's branding?
If any answer is uncertain, regenerate, commission a custom version, or take advice before investing in packaging or inventory.
Whether the image could mislead consumers
Using an AI image in advertising introduces obligations under s 18 of the Australian Consumer Law (Schedule 2 of the Competition and Consumer Act 2010 (Cth)), which prohibits conduct in trade or commerce that is misleading or deceptive or likely to mislead or deceive.
The ACL test is objective: what impression would a reasonable consumer form? Visual representations are assessed on the same basis as written claims. Specific risk scenarios include:
- Product capability images: AI images that show a product doing something it cannot actually do, or delivering results that are not typical, can constitute misleading conduct — the same way that an exaggerated "before and after" photograph would.
- Implied endorsement: An AI image that resembles a real person, or that implies a known figure endorses your business, can mislead consumers about the nature of the relationship.
- Environmental or quality claims: Visual cues (colour, iconography, implied settings) can carry implied product claims that the ACL requires to be accurate.
Treat every AI image you use in advertising the same way you treat a written marketing claim. Ask whether a customer could reasonably rely on that visual representation to form a belief about the product — and whether that belief is accurate.
Whether personal data is involved
If your business collects images from customers to feed into an AI tool — for example, "upload your photo and we'll generate a personalised avatar" — you are handling personal information under the Privacy Act 1988 (Cth).
Under APP 3 (collection of solicited personal information), you may only collect personal information that is reasonably necessary for your functions or activities. Under APP 5 (notification), you must take reasonable steps to notify individuals of the purposes for which their information is collected and whether it will be disclosed to third parties — including AI vendors.
The Office of the Australian Information Commissioner has published guidance on privacy and commercially available AI products confirming that photographs and images of identifiable individuals constitute personal information, and that organisations using AI tools to process such images must comply with the APPs.
Separately, even where no image is uploaded, an AI output that resembles an identifiable real person can raise privacy questions — particularly if the image is used in advertising in a way that implies consent or endorsement.
Whether someone else created the art on your behalf
AI-generated art often enters a business through a contractor, agency, or employee. This creates a contractual layer that many businesses neglect.
Key exposures:
- A freelancer may generate images using a personal account whose terms do not permit commercial use — and the business has no way of knowing.
- A marketing agency contract may not transfer IP rights or include any warranty of non-infringement.
- An employee may generate material without following any internal policy, creating unmanaged risk.
If you engage contractors or agencies to produce marketing assets, your agreements should address: who holds rights to outputs; what tools may be used; a warranty that the work does not infringe third-party rights; and how liability is allocated if a claim is made. For staff who produce content, an employment contract supported by a clear internal policy can provide the control the business needs.
Risk profile by use case
The table below captures the typical risk profile across common use cases. It is a guide, not legal advice — the facts of each situation matter.
| Use case | Copyright gap risk | Third-party IP risk | ACL risk | Privacy risk |
|---|---|---|---|---|
| Background/decorative web images | Low | Low–moderate | Low | Low |
| Social media campaign visuals | Low | Moderate | Moderate | Low–moderate |
| Product packaging or labels | Moderate–high | High | High | Low |
| Logo or brand identity | High | High | Low | Low |
| Client-facing licensed images | High | High | Low | Low |
| Customer photo-to-avatar features | Low | Low | Low | High |
The single clearest boundary: if the asset is central to your brand or you intend to enforce exclusive rights against others, you need either (a) substantial, documentable human creative input that supports copyright subsistence, or (b) trade mark registration protecting the distinctive elements of the final mark. Relying on a platform licence alone for core brand assets is not a robust position.
How Artificer Legal can help
The legal risks around AI-generated art are not uniform — they depend on what the image is, how it will be used, who created it, and what the business needs from it. An Artificer Legal practitioner can help you:
- Assess the specific exposure for a proposed use or existing asset, including reviewing platform terms, flagging infringement risks, and identifying whether your contracts properly address IP ownership.
- Strengthen your IP position by advising on the level of human creative input needed to support copyright subsistence, or by pursuing trade mark registration where the asset is commercially significant.
- Draft or review contracts with contractors, agencies, and employees to ensure your business actually holds the rights it thinks it has and that liability is allocated appropriately.
- Advise on ACL compliance for advertising that uses AI visuals, including where product claims, endorsements, or results are implied by imagery.
- Put privacy compliance in place where your business collects customer images or other personal information as part of an AI feature.
Your focus question for AI generated art in commercial situations
The question that resolves most decisions about using AI-generated art commercially is this: what does this image need to do for the business, and for how long?
For a short-run social campaign or a disposable background image, the legal overhead of exhaustive verification rarely justifies itself. Confirm the platform permits commercial use, avoid prompts that reference known IP, and keep a record.
For anything that anchors your brand — a logo, packaging, a mascot, a hero visual you will invest significant marketing spend behind — the economics reverse. The cost of getting the IP wrong (reprinting packaging, rebranding, defending a trade mark dispute) almost always exceeds the cost of involving a lawyer and a professional designer before you commit.
That threshold — the point at which an asset becomes central enough to your commercial value that its legal foundation deserves real scrutiny — is where most of the risk actually lives.
Key points from this article
- Platform terms determine your contractual right to use AI outputs commercially, but do not resolve the copyright subsistence question or protect you from third-party IP claims.
- Under Australian law, a purely AI-generated image with minimal human creative input is unlikely to be protected by copyright, meaning you may be unable to enforce exclusive rights in it.
- IceTV [2009] HCA 14 and Telstra v Phone Directories [2010] FCAFC 149 establish that originality for copyright purposes requires independent intellectual effort from an identifiable human author.
- Even without copyright infringement, an AI-generated image used in advertising can breach s 18 of the Australian Consumer Law if it misleads consumers about a product's features, results, or endorsements.
- Where customer images or other personal information are collected and fed into AI tools, Privacy Act obligations under APP 3 and APP 5 apply.
- For core brand assets, trade mark registration provides more reliable protection than uncertain copyright ownership.
- When contractors or agencies produce AI art on your behalf, your contracts must clearly address IP ownership, permitted tools, and non-infringement warranties.