The copyright dilemma of AI: a deep dive into the new Copyright and AI Consultation Paper

The rapid rise of generative AI has exposed growing tensions within Australia’s copyright system—particularly around how AI models use copyright-protected material as training data, and how copyright should apply to AI-generated outputs.

In our previous article published in August, we explored the rising tension between regulating artificial intelligence (AI) and enjoying its benefits.  In particular, we discussed the proposal put forward by the Australian Productivity Commission in its interim report, namely, to amend the Copyright Act 1968 (Cth) (Act) by introducing a fair dealing defence covering text and data mining.

In response to these challenges, the Australian Government has released a new Copyright and AI Consultation Paper, a major policy document that sets out options for reform and invites public feedback.

This article unpacks the Consultation Paper in detail. It explains why the Government is reconsidering earlier proposals (including the previously floated text and data mining exception), outlines the three policy options now on the table for licensing copyright material used in AI development, and examines how the existing Act applies to AI-generated works. It also highlights the key questions the Government is asking stakeholders to address before submissions close on 11 December 2025.

Taken together, these developments mark a pivotal moment for creators, rights holders, AI developers and policymakers. Understanding the proposed pathways—and their consequences for innovation, legal certainty and Australia’s competitiveness—will be crucial as Australia seeks to balance the protection of creative rights with the opportunities and risks of an AI-driven economy.

Copyright and AI Consultation Paper

The Paper, comprised of two parts, focuses upon two key issues with the existing copyright regime in the context of AI. These are:

1. the ability of the current Act to facilitate "legal avenues for using copyright material as inputs for AI in Australia" (Part 1); and
2. the need for government action to clarify how the existing copyright framework applies to material produced using AI tools (AI outputs) (Part 2).  

Importantly, the Paper clarifies that the Government is no longer considering a text and data mining exception, and instead proposes three policy options for licensing copyright material used in AI development.  

Submissions in response to the Paper are due by 11 December 2025.

Part 1 – Facilitating the use of copyright material for AI development in Australia

Generative AI typically requires a vast range of high-quality data to train, test and validate models.  However, the data used often comprises copyright material.  This has fuelled debate around the application of the existing law to uses of copyright material in AI development.  

In response to this, in Part 1 of the Paper, the Government has sought public opinion on three policy options to facilitate the use of copyright material for AI development, whilst ensuring the resulting social and economic value is fairly distributed, and the growth of Australia's valuable and internationally-competitive AI industry is maintained.

Option A – Maintaining the status quo – voluntary licensing

The first policy option outlined involves maintaining the current legal position, whereby any party seeking to use copyright material for AI development in Australia is required to obtain permission from the copyright owner by way of a voluntary licence.  

It is argued that voluntary licensing facilitates the use of copyright material for AI development within Australia, while fairly remunerating rights holders.  Moreover, preserving this framework would ensure that Australia is not pre-emptively amending a complex regime on the basis of "possibly inaccurate expectations about how a fast-developing technology and its local and global commercial environment may develop." ¹

However, the Paper also acknowledges the shortcomings of voluntary licensing arrangements in the current legal climate.  These include the associated costs and administrative burden (which may act as a barrier for smaller market entrants), the likely delay caused to AI projects due to the time expended to secure licences, issues with identifying and contacting all rights owners, and limitations on the variety of copyright material likely to become available under voluntary licensing arrangements.  In turn, this may weaken Australian innovation in a fast paced and competitive international industry.

Option B – A compulsory statutory licence

The second policy option proposed is that the Act be amended by introducing a new compulsory statutory licence regime which provides Australian AI developers with "a clear, comprehensive and readily available legal avenue to access any copyright material within scope in return for paying a fair licence fee under a single licence for the category of material being used." ²

While the Act currently facilitates some statutory licences for government copying, educational copying and communication, and retransmission of broadcasts, it does not facilitate licensing the use of copyright material for AI development.  Establishing such a licence in this space would eradicate the requirement for AI developers and rights holders to negotiate a range of individual licences, thereby improving efficiency.  

However, the Paper notes some apprehension amongst AI developers in Australia because the requirement to pay a licence fee for some uses may place them at a cost disadvantage compared to international competitors who may arguably rely upon a free copyright exception to use such material.  Despite this, it is recognised that there is in fact potential for this regime to provide AI developers in Australia with a comparative advantage over international competitors, given the legal certainty afforded by such licences.

On the other hand, because the licence would be compulsory for copyright owners, this would remove their ability to refuse to make their work available in favour of preserving the right to negotiate their own licensing arrangements, or to refuse to allow their work to be used for AI development at all.  However, this may benefit some rights holders who are willing to licence material, but are not in a position to negotiate such arrangements themselves.

Option C – An extended collective licence

The third policy option outlined explores the potential to amend the Act by establishing a framework whereby organisations (usually collecting societies) may offer extended collective licences for AI development.  Where authorisation is obtained by those organisations, a licence would be granted on behalf of the organisation's members and non-members who own the copyright material within an extended class.  This could enable a broad variety of material to fall within the licence's scope, including material which is unlikely to be licensed on voluntary terms.  

Importantly, the framework proposed ensures relevant rights holders would maintain the option to exclude their material from use under the extended licence, ultimately allowing them to negotiate independent licences without losing bargaining power due to the material also being accessible under a compulsory statutory licence. However, this may diminish the licence's value to AI developers if a significant portion of copyright owners elect to exclude their material.

Part 2 – How the existing regime applies to generative AI outputs

Part 2 of the Paper outlines how AI-generated material may be afforded copyright protection under the existing regime, and seeks public opinion on whether amendments to the Act are necessary to ensure the current position "reflects policy choices about when and how the application of skill, labour, intellectual effort and creativity assisted by AI should be rewarded and incentivised".³ Non-legislative responses, for the Government's consideration, are also encouraged.

Additionally, the Paper recognises the likely enforcement issues for parties who assert their copyright has been infringed in AI outputs, and seeks feedback on potential avenues to ensure Australian laws adequately deal with infringement issues related to AI outputs.  Alternatively, the Paper welcomes suggestions for non-legislative action the Government could take to provide clarification or practical guidance to solicitors.  

Where to from here?

In order for Australia to reap the full social and economic benefits of AI technology, whilst encouraging the progression of its valuable and internationally-competitive AI industry, the copyright law framework needs to ensure that AI developers have a clear and practical means to utilise a range of data without comprising the rights of creators.  

The Paper proposes a number of options for doing this, including by amending the existing Act.  However, while it will be interesting to review the public responses to the Paper, it remains to be seen which of the options proposed in the Paper will be pursued, and whether any amendments to the Act will be made.

The inevitable advancement of this technology will also likely raise new queries around copyright and AI while governments and courts try to solve existing ones.

Authors

Katrina Chambers | Partner | +61 7 3338 7948 | kchambers@tglaw.com.au

Georgia Campbell | Senior Associate | +61 7 3338 7541 | gecampbell@tglaw.com.au

Sophia Anderson | Law Graduate

¹ Australian Government, Copyright and AI Consultation Paper (October 2025), page 8.

² Australian Government, Copyright and AI Consultation Paper (October 2025), page 12.

³ Australian Government, Copyright and AI Consultation Paper (October 2025), page 20.