WILT TOIKKA KRAFT, LLP

President Trump’s AI Initiative Grows as NSF and OSTP Ask for Comments On January 23, 2025, President Trump, marking the beginning of his second term, signed Executive Order (EO) 14179, titled “Removing Barriers to American Leadership in Artificial Intelligence.” This action fulfilled a campaign promise to rescind Executive Order 14110, also known as the Biden AI EO. The new EO directs the Assistant to the President for Science and Technology, the Special Advisor for AI and Crypto, and the Assistant to the President for National Security Affairs to collaborate with relevant agency heads. They have 180 days—until July 22, 2025—to create an AI Action Plan that will replace the policies rescinded from the Biden Administration. OSTP/NSF RFI To facilitate the development of the AI Action Plan within this timeframe, the National Science Foundation’s Networking and Information Technology Research and Development (NITRD) National Coordination Office (NCO), on behalf of the Office of Science and Technology Policy (OSTP), has issued a Request for Information (RFI) on the Development of an Artificial Intelligence (AI) Action Plan. The deadline for submitting comments is March 15, 2025. This provides a unique opportunity for stakeholders to provide critical feedback. As the RFI notes, the administration plans to use the input to “define the priority policy actions needed to sustain and enhance America’s AI dominance, and to ensure that unnecessarily burdensome requirements do not hamper private sector AI innovation.” There has been a significant increase in AI tool adoption across industries, particularly within health care—both clinical and administrative—as well as in employment decision-making. Epstein Becker Green is actively working with clients to manage enterprise risk and leverage AI innovation strategically. The firm looks forward to contributing to the shaping of the current administration’s AI policies through this and other opportunities for engagement with federal policymakers. Submission Guidelines OSTP is seeking input on the highest priority policy actions for inclusion in the new AI Action Plan. Responses may cover any relevant AI policy topic, including, but not limited to, hardware and chips, data centers, energy consumption and efficiency, model development, open-source development, applications and use (in the private sector or by government), explainability and assurance of AI model outputs, cybersecurity, data privacy and security throughout the lifecycle of AI system development and deployment (including security against AI model attacks), risks, regulation and governance, technical and safety standards, national security and defense, research and development, education and workforce, innovation and competition, intellectual property, procurement, international collaboration, and export controls. Our DC IP lawyers are here to help maneuver that frequently changing environment surrounding AI policy. 

Trump’s Executive Order on Government Efficiency—A Must-Know for Federal Contractors President Trump has signed an Executive Order (EO) aimed at transforming federal spending on contracts, grants, and loans. The order emphasizes that it “commences a transformation in Federal spending on contracts, grants, and loans to ensure Government spending is transparent and Government employees are accountable to the American public.” Here’s what government contractors need to be aware of. The EO primarily targets Agency Heads and outlines that each Agency Head will collaborate closely with their Department of Government Efficiency (DOGE) Team Lead on various initiatives. The EO applies only to “covered contracts and grants,” which are defined as “discretionary spending through Federal contracts, grants, loans, and related instruments.” However, the EO excludes direct assistance to individuals, spending related to immigration enforcement, law enforcement, military operations, public safety, and the intelligence community. Other types of critical or emergency spending may also be exempt as determined by the relevant Agency Head. Agencies are required to notify their DOGE Team Lead about any exclusions. Notably, the EO excludes contracts and grants associated with federal criminal or immigration law enforcement, U.S. Customs and Border Protection, U.S. Immigration and Customs Enforcement, the Uniformed Services, classified information, and other areas that Agency Heads may exempt with written consent in consultation with the DOGE Team Lead and the Director of the Office of Management and Budget (OMB). Agency Heads are required to do the following: - Develop centralized systems to record payments to contractors and grantees. -Review “covered contracts and grants” within 30 days in collaboration with the DOGE Team Lead. - In the same 30-day period, Agency Heads must also review their contracting policies, procedures, and personnel. - Implement a new system for recording approvals for federally funded travel, particularly for conferences or other non-essential purposes. Employees will be prohibited from engaging in federally funded travel unless there is a written justification in the system from the official approving the travel. What Can Contractors Do? - Assess whether their contracts fall under the exclusions outlined in the EO, and consult with legal counsel to explore whether their contracts might be excluded from the EO’s provisions. - Closely monitor the prompt payment requirements under existing contracts. According to the Prompt Payment Act, the government is required to pay contractors within 30 days of receiving a properly submitted invoice. For prime contractors working with small businesses, payments should be made within 15 days. This EO is a significant shift in the way federal agencies manage and track their spending, and our DC Employment attorneys recommend government contractors stay informed and prepared for potential changes.

While much attention has been paid to President Trump’s Executive Order on Ending Illegal Discrimination and Restoring Merit-Based Opportunity (the “EO”) due to its removal of race and sex-based affirmative action requirements for federal contractors, another aspect of the EO may have even more far-reaching consequences. While specific details of the new contractual requirements are still to be finalized, government contractors are encouraged to begin taking preparatory steps now to mitigate any potential disruptions and minimize liability risks. Below is a Q&A designed to clarify these emerging changes. Q: What exactly does this new contractual requirement entail? A: The EO includes a provision that states, “[t]he head of each agency shall include in every contract or grant award: (A) A term requiring the contractual counterparty or grant recipient to agree that its compliance in all respects with all applicable Federal anti-discrimination laws is material to the government’s payment decisions for purposes of section 3729(b)(4) of title 31, United States Code; and (B) A term requiring such counterparty or recipient to certify that it does not operate any programs promoting DEI that violate any applicable Federal anti-discrimination laws.” This means there are two key components to the new requirement. First, contractors must certify that they do not operate any “DEI-promoting” programs that are in violation of federal anti-discrimination laws. Second, contractors must agree in their contracts (either for new contracts or possibly modifications to existing ones) that their full compliance with all relevant anti-discrimination laws is a “material” factor in the government’s decision to award payments. In essence, contractors must ensure their DEI programs comply with federal anti-discrimination laws to qualify for federal funding. Q: What should contractors do now? A: Contractors should begin preparing now. At a minimum, they should review and evaluate their DEI programs to ensure they comply with anti-discrimination laws. It’s advisable for contractors to conduct these assessments with legal counsel to protect privileged information during the review. Our DC employment attorneys recommend contractors should also notify relevant personnel involved in government contracting to stay informed of potential modifications to contracts, ensuring they fully understand the new requirements and avoid compliance issues.

Earlier last week, a pivotal US ruling regarding fair use in AI-related copyright litigation was delivered by Judge Stephanos Bibas in the case Thomson Reuters v. ROSS Intelligence. Background Thomson Reuters is the owner of Westlaw, one of the largest and most widely used legal research platforms in the US. Subscribers gain access to an extensive range of legal resources, such as case law, statutes, regulations, news, law review articles, and more. ROSS Intelligence, a competitor, sought to license Westlaw’s content for its own legal AI tool. When Thomson Reuters refused, ROSS acquired “Bulk Memos”—which were created using Westlaw’s headnotes—through a third-party legal services vendor. Upon discovering this, Thomson Reuters filed a lawsuit against ROSS for copyright infringement based on its use of Westlaw content to train its AI model. The court granted partial summary judgment in favor of Thomson Reuters. The case was analyzed under the fair use framework established by the US Copyright Act. The court found in favor of Thomson Reuters on the first factor, "the purpose and character of use." In assessing ROSS’s use, the court determined that it was commercial in nature. Although ROSS argued that its use was transformative—since it allegedly “transformed” headnotes into numerical data for its AI system—the court disagreed. The second factor: the nature of the copyrighted work. The court sided with ROSS, finding that although Westlaw’s content has some originality, it is not highly creative. The court ruled in ROSS’s favor on the third factor, the amount and substantiality of the portion used in relation to the copyrighted work. Despite the number of headnotes used, since the material was not publicly available and did not include the headnotes from Westlaw. The most critical aspect of the case came with the fourth factor, the likely effect of the use on the market for the original work the court. The court ruled that ROSS could have developed its own product without infringing Thomson Reuters’ copyrights. The key takeaway for AI developers and deployers is this: they must closely monitor the ongoing litigation surrounding AI and copyright, keeping an eye on how fair use will be applied to both training models and AI-generated output. Given the facts-driven nature of fair use, courts are likely to issue different rulings based on the specifics of each case, particularly where commercial use is involved.

Adequate Human Input May Enable Copyright Protection for AI Outputs After several months of delays, the U.S. Copyright Office has released part two of its three-part report addressing the copyright concerns raised by artificial intelligence (AI). Titled “Copyrightability,” this section examines whether AI-generated content can be eligible for copyright protection in the U.S. According to the report, an output generated with the aid of AI can be copyrightable if there is adequate human involvement. The report clarifies that copyright law does not require any changes to support this conclusion. The Supreme Court has explained that individuals are entitled to copyright protection when they translate an idea into a fixed, tangible form. If an AI model generates all of the creative content without any human contribution, there can be no author, and thus, no copyrightable work. However, when an AI model assists a human in expressing their creativity, that human is considered the author. The Copyright Office compares this to joint authorship, noting that a work can still be copyrightable even if one person is not solely responsible for its creation. The level of human contribution is determined by what the individual provides to the AI model. The Copyright Office argues that simply inputting a prompt is not enough to qualify someone as an author. This is likened to a person hiring an artist: while the person may have a general vision, it is the artist who creates the work. Additionally, because AI models often operate as a “black box,” users cannot exert the necessary level of control to be considered authors themselves. However, when a user provides a prompt in conjunction with their original work, the resulting AI-generated output can be copyrightable for the material derived from their expression. The user’s own work helps guide the AI and limits the scope of possible outputs. Lastly, AI-generated content may be eligible for copyright if it is arranged or modified with human creativity. For instance, while an AI-generated image itself may not be copyrightable, a compilation of such images along with a human-written story could qualify for copyright protection. Our DC IP attorneys are keeping an eye on the Copyright Office is currently preparing the third part of its report, which is expected to be published later this year and will explore the consequences of using copyrighted works to train AI models.

DOJ Initiates New DEI Enforcement Actions On the evening of Wednesday, February 5, 2025, Attorney General Pam Bondi issued a set of memos to various divisions within the Department of Justice (DOJ). One of the memos emphasized the DOJ’s commitment to enforcing President Trump’s directive to dismantle unlawful diversity, equity, and inclusion (DEI) programs, as outlined in Executive Order 14173 (“Ending Illegal Discrimination and Restoring Merit-Based Opportunity”). Titled “Ending Illegal DEI And DEIA Discrimination And Preferences,” the memo directs the DOJ’s Civil Rights Division to investigate, eliminate, and penalize illegal DEI “preferences, mandates, policies, programs, and activities” in both the private sector and educational institutions receiving federal funds. By March 1, 2025, the Civil Rights Division and the Office of Legal Policy are required to present a report with recommendations on how to “encourage the private sector to end illegal discrimination and preferences” related to DEI. The report will also aim to identify the most “egregious and discriminatory DEI and DEIA practitioners in each sector of concern.” A key takeaway from the memo is the potential for criminal penalties for certain private companies engaging in DEI practices. Additionally, Bondi calls on the DOJ to collaborate with the Department of Education to eliminate DEI initiatives at universities, following the Supreme Court’s 2023 ruling in Students for Fair Admissions, Inc. v. Fellows of Harvard Coll., 600 U.S. 181 (2023). Importantly, the memo does not seek to ban educational, cultural, or historical observances that “celebrate diversity, recognize historical contributions, and promote awareness without engaging in exclusion or discrimination.” Examples of such observances include Black History Month and International Holocaust Remembrance Day. Our DC Employment attorneys recommend employers stay informed on the evolving DEI landscape and consult with legal counsel to ensure their practices comply with federal non-discrimination laws.

What You Need to Know from the U.S. Copyright Office’s January 2025 AI Report The U.S. Copyright Office has released Part 2 of its report on Copyright and Artificial Intelligence. Here are two key takeaways: 1. No Change to the “Human Authorship” Requirement In line with its stance in recent rulings and cases, the Copyright Office reaffirmed that human control over creative expression is required for copyright registration of generative AI outputs. The Office emphasized that user prompts (instructions given to the AI) are insufficient to demonstrate the level of human control needed for copyright eligibility. As a result, even extensive prompt engineering will not result in copyrightable work using current generative AI technology. The Copyright Office reaffirmed that copyright protection is available for: (a) Human-created works used as inputs/prompts that are perceptible in the AI-generated output; (b) Creative selection, coordination, or arrangement of material in the output (i.e., compilations); (c) Creative modifications of the output; and (d) The prompts themselves, provided they are sufficiently creative (though not the outputs generated in response to the prompts). 2. Foreign Laws Mostly Align with U.S. Positions The Office also conducted a comparative analysis of the copyrightability of AI-generated works in countries including South Korea, Japan, China, the EU, the UK, Hong Kong, India, New Zealand, Canada, and Australia. It concluded that most of these nations “that have addressed this issue so far have agreed that copyright requires human authorship.” An interesting note from the report was the Office’s reference to a 2023 decision by the Beijing Internet Court, which granted copyright protection for an AI-generated image in an infringement case. The Court determined that the “selection of over 150 prompts combined with subsequent adjustments and modifications demonstrated that the image was the result of the author’s ‘intellectual achievements,’ reflecting his personalized expression.” Given the Copyright Office’s position on prompts, it remains unclear whether this decision aligns with the U.S. view—though it may be partially consistent concerning the “adjustments and modifications.” Some commentators have cited this case as an example of China diverging from the U.S. approach by allowing copyright protection for AI-generated images. The Office also pointed out that legal stances on AI-generated works are evolving in many countries, and in some cases, remain unclear. As we await Part 3 of the report, our DC IP lawyers see it’s clear that questions surrounding AI copyright infringement and fair use are heating up, especially as numerous AI copyright infringement cases are moving through U.S. courts. Preliminary answers may soon be on the horizon.

The Federal Workforce Under Trump’s Executive Order: What to Expect On his first day back in office, President Donald Trump signed an executive order requiring all federal employees to return to in-person work. Shortly after, the administration introduced a “deferred resignation” offer, which could serve as a buyout for those who either do not wish to return to the office or are simply ready to resign. Federal employees were sent an email with the offer, giving them the chance to resign by February 6. The resignations would take effect on September 30, ensuring the employees receive their full pay until that date. The offer applies to all full-time federal workers, except for military personnel, U.S. Postal Service employees, and individuals working in national security or immigration enforcement. On Tuesday, the Office of Personnel Management (OPM) issued a memo that reiterated the offer and provided an alternative method for employees to resign in case they had not responded to the initial email. The White House forecasts that up to 10% of the federal workforce may accept the buyout, potentially resulting in a payroll savings of about $100 billion, according to reports. Here’s a breakdown of the federal workforce: There are more than 2 million federal civilian employees, according to a report by the Congressional Research Service. The Department of Veterans Affairs employs the largest number of these workers, with about 486,500 employees, according to the most recent data from the Office of Personnel Management. How Many Federal Workers Work From Home? By May 2024, approximately 1.1 million federal civilian employees, or about 46% of the federal workforce, were eligible to work remotely, according to a report from the Office of Management and Budget. Of these, 228,000 workers, or about 10% of the federal civilian workforce, were in fully remote positions. Those who were eligible to telework, but not in remote roles, spent an average of 39% of their time working remotely. The report also detailed the number of telework-eligible employees and remote workers across 24 federal agencies. The Department of Defense had the largest number of telework-eligible employees, at over 241,000, along with the highest number of remote workers, approximately 62,000. The Department of Veterans Affairs and the Department of Homeland Security followed, with 128,000 and 119,000 eligible employees, respectively. Our DC employment lawyers know that millions of federal workers are in for significant changes as the Trump administration takes charge and rolls out new executive orders and policies, and we are here to help. 

Further AI Guidance from U.S. Copyright Office to Begin in January 2025 On December 16, 2024, the U.S. Copyright Office announced that it would delay the release of Parts 2 and 3 of its report on copyright and AI until after January 1, 2025. The report follows an August 2023 Notice of Inquiry about AI-related copyright issues, which sought input on whether AI impacts areas not currently protected by copyright law, such as publicity rights. The inquiry gathered over 10,000 comments from various stakeholders, helping to assess the current legal landscape and identify issues needing congressional action. Part 1 of the report, released on July 31, focused on “digital replicas”—digitally created or manipulated images and recordings of individuals. It argued that existing laws, including privacy and right of publicity, are inadequate for protecting digital replicas and recommended new federal legislation to protect individuals from unauthorized distribution of such content. The Copyright Office described this as an “urgent” issue due to its potential for misinformation and exploitation. Parts 2 and 3, still pending, are of significant interest to content creators and AI developers, as they may influence copyright ownership and protection. Part 2 will address the copyrightability of AI-generated works, focusing on how human involvement in creation affects registrability. Current law requires human authorship for a work to be copyrighted, though assistive tools (like cameras or software) are commonly used in creation. The Copyright Office aims to clarify how this applies to AI-generated content. Part 3 will explore issues related to training data for AI models, which often use copyrighted materials to learn and generate outputs. Lawsuits, such as the one filed by The New York Times against Microsoft and OpenAI, challenge whether using this data constitutes copyright infringement, with key debates over fair use and whether AI’s use of data is “transformative.” The Copyright Office’s guidance will help clarify these complex issues. AI holds vast potential to enhance culture, yet its impact on copyright law, particularly regarding authorship and creators’ rights, remains to be fully addressed. The outcomes of Parts 2 and 3 will be crucial for shaping the future of AI and copyright legislation. Our DC IP attorneys will be keeping a close eye on the release of Parts 2 and 3. 

Ways Employers Can Offer Aid to Employees Affected by the Los Angeles Wildfires Over the last two weeks, wildfires have caused significant damage and destruction to homes and communities in Los Angeles, California, and the surrounding areas. In the aftermath of this devastation, employers may look for ways to offer financial support to employees affected by the disaster. Qualified Disaster Relief Payments – Under Section 139 of the Internal Revenue Code. Employers can provide these payments to employees affected by disasters like the Los Angeles wildfires, free from taxes. These qualified disaster relief payments can take the form of reimbursements or cash advances, and they are not subject to payroll taxes. Furthermore, employers can treat these payments as ordinary and necessary business expenses, allowing them to be deducted from the employer’s taxes. For a payment to qualify as a “qualified disaster relief payment,” the following criteria must be met: The payment should cover reasonable and necessary expenses, such as personal, family, living, or funeral expenses, or costs associated with repairing or replacing a personal home or its contents, as long as these expenses were incurred due to the disaster and are not covered by insurance or other resources. The payment must not be intended to replace lost income (e.g., lost wages, business income, or unemployment benefits). Employers do not need a formal written plan to make these payments. However, it’s advisable for employers to establish a process to ensure compliance with the legal requirements. While formal substantiation is not mandatory, it is recommended that employers ask employees to provide an attestation statement confirming their eligibility for the tax-free relief. Retirement Plan Options – Employer-sponsored defined contribution retirement plans can also offer relief to “qualified individuals” affected by a qualified disaster. A “qualified individual” is someone whose primary residence is in the disaster area during the incident period and who has experienced an economic loss due to the disaster. The following options are available through employer-provided retirement plans: Distributions of up to $22,000 from the plan without incurring the usual early withdrawal penalty. These distributions must be taken within 180 days of the disaster declaration. Increased loan limits, allowing up to 100% of a participant’s account balance, up to $100,000. An extended loan repayment period of one year for any outstanding loans as of the disaster declaration date. This extension allows repayment until January 8, 2026. Conclusion – Our DC employment lawyers know there are employers who wish to offer financial assistance to employees impacted by the recent wildfires should consider the various tax-advantaged programs available through the IRS.