Who said anything about creating a derivative? Surely you don't mean to say that any image created with a model trained on copyrighted data counts as a derivative of it. Edit: Or worse, that the model itself is derivative, something so different from an image must count as transformative work!.
> it’s basically the input data compressed with highly lossy compression.
Okay, extract the images from a Stable Diffusion checkpoint then. I'll wait.
It's not like lossy compression CAN'T be fair use or transformative. I'm sure you can imagine how that is possible given the many ways an image can be processed.
> All the corporations that are offering AI as a paid service?
