Outsourcing AI Creation: The Business Risks of Generative AI Under Indian and U.S. Copyright Law

Generative AI, copyright, outsourcing, authorship, fair use, fair dealing, India, work made for hire, indemnity, AI governance

Enterprises in the United States increasingly buy creative and technical work (software, marketing copy, training manuals, design assets, research summaries) from Indian service providers whose delivery teams now produce much of that work with generative AI. The contracts governing these relationships were written for a world in which a human employee of the vendor authored the deliverable and a signed assignment moved title to the client. That world is disappearing, and the copyright rules on both sides of the arrangement have not kept pace. This Article maps the resulting exposure. It argues that outsourced AI creation generates four distinct legal risks: liability for the inputs used to build and adapt the model, liability for memorized or retrieved material in the output, an authorship gap that may leave the deliverable without any copyright to transfer, and output infringement that the client cannot shift upstream. The two legal systems handle these risks very differently. The United States insists on human authorship, a position fixed by the Supreme Court's refusal in March 2026 to review Thaler v. Perlmutter, yet its courts remain divided on whether training is fair use. India, by contrast, has since 1994 named "the person who causes the work to be created" as the author of computer-generated works, and in July 2026 the Delhi High Court provisionally treated LLM training as fair dealing in ANI Media v. OpenAI. These asymmetries, together with India's strict assignment formalities, the narrowing of secondary liability in Cox Communications v. Sony Music, and the conditional nature of vendor indemnities, mean that the risk lands on the parties least able to price it. The Article proposes a framework of Layered Provenance Allocation that assigns each risk to the party holding the cheapest information about it, replaces title warranties with process warranties, and treats documented human contribution as a balance-sheet asset.