AI-generated George Carlin triggers right of publicity lawsuit

A “comedy AI” tool has created an “impersonation” of George Carlin that has triggered a lawsuit by his estate, claiming violations of the late comedian’s right of publicity and copyright, reports Variety. BVWire watched the video on YouTube, but it has since been removed (the estate asked the court to order it removed).

Harmless impression? Speaking at the beginning of the video, the AI tool, called Dudesy, says: “I listened to all of George Carlin’s material and did my best to imitate his voice, cadence and attitude as well as the subject matter I think would have interested him today.” Dudesy makes it clear that what you hear is an impersonation that was developed “the exact same way a human impressionist would,” such as Andy Kaufman doing Elvis (or Rich Little doing everybody).

This lawsuit is among the first of what is likely to be many that will involve AI-generated images that are alleged to run afoul of copyrights or an individual’s right of publicity.

The right of publicity is a form of intellectual property that covers not only a person’s name and image, but also the signature, voice, and so on. It is an issue that often is overlooked because of a lack of awareness. The concept does not only apply to famous people—the average person has the right of publicity, and it has a value. Fundamental valuation techniques are used, but it requires the judgment and experience of someone who works with the right of publicity regularly.

Learn more: One of the foremost experts in this area is Mark Roesler (markroesler.com), who worked on the valuation of rights of publicity for the estates of Prince, Michael Jackson, and others. Roesler explained his methodology for the Jackson case (in Tax Court) during a BVR webinar (recording available). He also wrote a chapter on the topic in BVR’s Comprehensive Guide to Economic Damages, 7th edition (Chapter 28, “Damages and Right of Publicity Infringements”).

Court KO’s market comp analysis due to industry choice

What business is your subject company in? That’s a fundamental question, but it could be a major stumbling block in a valuation—as a new case shows.

New case: In an Illinois divorce case, the husband and wife were equal partners in a company, iTouch Biometrics, which offers live scan systems (inkless, digital fingerprinting for law enforcement, schools, etc.). The software is not sold separately but is part of an integrated package that includes hardware, installation, maintenance, etc. (a web search shows the company’s SIC and NAICS codes are for business services).

The wife’s valuation expert used an “investment method” based on his M&A experience with software-based companies and came up with $5.1 million. The husband’s expert used a capitalized cash-flow analysis (single period) to value the company at $1.2 million, using the factors in Revenue Ruling 59-60 to back up his opinion.

Wrong biz: The trial court found that the wife’s expert did not establish that the company was primarily a software company, so his market comps were not valid. The court rejected his analysis entirely and found that the husband’s expert provided the “only credible fair market value opinion presented to the court with proper foundation and basis.” The wife appealed but she did not prevail.

The case is In re Marriage of Bornhofen; 2023 Ill. App. Unpub. LEXIS 2062, and a case analysis and full opinion will be available on the BVLaw platform.

Survey results: Data collection tools

More than two-thirds (78%) of valuation experts use an online tool to collect documents and other information from clients, according to the first in a series of “Two-Minute Practice Builder” surveys. Practice management advisor Rod Burkert (Burkert Valuation Advisors), who initiated the survey, points to one respondent’s comment as to the reasons why valuation experts use a portal: “One reason is encryption and security. The other is professional branding, looking tech savvy. The third reason is to give clients confidence in the firm.”

The respondents’ tool of choice is ShareFile, used by over a third of respondents (36%), with SharePoint coming in at second place (see chart below). In the “Other” category are Smartsheet, Drake, Egnyte, DealRelations, FileInvite, and Client Axcess.

ShareFile	36%
SharePoint	20%
Dropbox	8%
Suralink	8%
OneDrive	8%
Other	20%

Of those who are not currently using a file-sharing tool for client information, over half (55%) say they are considering one. In addition to the reasons stated above, one commenter said: “Clients increasingly expect us to offer/use a portal for information sharing.” Of those who are kicking tires, half of them are looking at SharePoint and others are considering Dropbox or JetPack (or are not sure). But one commenter noted that Dropbox is a problem due to “confidentiality/integrity concerns.” Another respondent extolled the virtues of Suralink as a “fantastic platform for secure data exchange. It provides status of each outstanding request and comments can be swapped to cut down on back-and-forth emails. Highly recommend.”

Our thanks to all who participated—and we will have a new survey on another topic in the next issue.

USPAP Q&A addresses AI

AI tools are not a substitute for an appraiser’s judgment. That’s one of the main takeaways from a recent series of Q&As regarding the Uniform Standards of Professional Appraisal Practice (USPAP). Regardless of whether a valuation expert is required to comply with USPAP, it contains some useful information. In the new Q&As, this question was posed: “What is an appraiser’s USPAP obligations when using artificial intelligence (AI) in an appraisal assignment?”

Reliance: “When using a computer assisted valuation tool, an appraiser must not simply rely on the output of technology without an understanding that the output is credible,” says the response. This also goes for the use of a chatbot tool (which, as we’ve seen, can “hallucinate”).

Confidentiality: AI tools can also cause an appraiser to run afoul of USPAP’s confidentiality rules with respect to client information. “Although an AI chatbot is not a person, creating an inquiry with a chatbot that includes confidential information may allow the chatbot to capture that information for responses to inquiries by other human users, or the chatbot developers.”

Additional USPAP guidance on this issue can be found in Advisory Opinion 18, Use of an Automated Valuation Model (AVM), and Advisory Opinion 37, Computer Assisted Valuation Tools in the Guidance and Reference Manual (GRM). USPAP is administered by The Appraisal Foundation (TAF), which has a task force that examines automated valuation models and has issued two white papers on the subject.

Reminder: The 2024 Pepperdine private cost of capital survey is open

Each year, Pepperdine University conducts an annual survey of expected rates of return with respect to private companies. This year’s survey is now open, and input is sought from anyone involved in the funding of private businesses, including funding providers, recipients, investors, intermediaries, and advisors. The information you provide is confidential. For a direct link to the survey, click here. The results are used to produce the annual “Private Capital Markets Report,” which is free if you fill out the survey—plus, you’ll get it a week early. Reports from prior years are available if you click here.

To retain good BV people, give them a purpose, advises Borrowman

BVWire has heard from young BV professionals that they are sometimes in the dark about the work they are doing. It’s not that they don’t know their job; it’s that they don’t know how it fits into the bigger picture. They urge managers and supervisors to give them this context about the work they are doing.

Give a purpose: This underscores the good advice given by recruiter John Borrowman (Borrowman Baker LLC), who has been sourcing talent in the business valuation and litigation support areas for over 20 years. “Your team members naturally seek purpose in what they do,” Borrowman writes in in his latest newsletter. “They want to understand how their work contributes to your deliverable. They want to know where and how they fit in. They don’t have the bird’s-eye view that you have. It would help if you shared it with them. Purpose-driven employees are more likely to stay and do their best.”

In addition to giving them purpose, two other elements will help with retention: autonomy (trust their abilities) and mastery (encourage new challenges), which Borrowman explains further in his newsletter.