IL-2023-000007 - [2025] EWHC 2863 (Ch)

I do not consider there to be any evidence that one real life user in the UK has generated a watermark using either SD XL or v1.6. The Steampunk Musician Image on which Getty Images relies in Annex 8I for SD XL is plainly an image produced during the development of that version of the Model and cannot be attributed to the model weights for SD XL after release. There is no image in Annex 8I for v1.6.

The Getty Watermark Experiments failed to produce a result for either of these Models (even using verbatim and re-worded prompts) and the internal Stability Chats show only that the generation of watermarks* was an issue in the pre-release versions of SD XL. That no examples of watermarks* have been found “in the wild” using these Models appears to me to be strongly indicative of the fact that (as the internal Stability Chats suggest) this issue was resolved using appropriate filters applied to the training data and did not recur in respect of either SD XL or v1.6.

For reasons I have given above, I do not consider that the generation of one watermarked* image from SD XL (the Donald Glover Image) and three from v1.6 (the Gabba Images) in the Output Claim experiments (all of Getty Images watermarks*) is probative. Ignoring the image which included the word “Getty Images” in its prompt and so is excluded from the scope of the proceedings, two of the images (the Donald Glover Image and the First Gabba Image) were produced using verbatim prompts and one was produced using a re-worded prompt (the second image of The Gabba). As I have explained, there is no evidence whatsoever in real life of such use and thus no basis on which I could find that on balance a real user will have used such a prompt in conjunction with SD XL or v1.6, or that, having done so, a watermark* will have been generated.

Ultimately, in respect of these Models, Getty Images invite the court to infer that, given the position in respect of the earlier Models, these later Models must equally have been prone to the production of watermarks*. But to my mind that is not an inference that I may safely draw where (i) there is contemporaneous evidence of steps being taken to address the watermark* issue prior to the release of these models; (ii) there is no evidence whatever of the generation of watermarked* images “in the wild” by these Models after their release – in this context it seems to me to be particularly striking that there is nothing on Reddit given that there is evidence of users of Reddit using the platform to post about watermark* generation in respect of earlier versions of the Model; and (iii) where Professor Brox’s expert evidence is to the effect that, given the results of the experiments in relation to the later Models, he can only assume that the filtering has improved.

On balance, the fact that it is also the Experts’ view that any filter would not be perfect and would leave some images with watermarks in the training data (as is borne out by the watermarks* on the Donald Glover Image and the Gabba Images) does not affect my view. Absent a clear understanding of how many such images may remain in the training data and what (if anything) the consequence of their presence may be (including whether this remaining number makes it statistically likely that the Model will be prone to overfitting or memorisation such that it will generate watermarks* on synthesised images when subjected to real world usage, or not) I cannot properly find on balance that this has in fact occurred. For present purposes I can only infer on the evidence that the filter used on the training data for SD XL (and I infer also for v1.6) must have been sufficiently effective to preclude the possibility of watermarks* appearing in the wild, other than through the use of contrived and unrepresentative prompts.

Getty Images sought to persuade me that the absence of real world evidence of watermarks* being generated is unsurprising and they contend that the situation has analogous difficulties to those which arise in identifying real world evidence of confusion (see by way of example Fine & Country Ltd v Okotoks Ltd [2012] EWHC 2230 (Ch) at [84]-[88] per Hildyard J): users of Stable Diffusion are unlikely to report examples of images bearing watermarks* to Stability or to Getty Images because “[t]hey will just assume this is normal behaviour of the model and/or that the model has been trained on photographs from Getty Images”. Furthermore, say Getty Images, images generated using these Models are inherently ephemeral, they are easily producible and easily expendable – thus a user who generates an unwanted image bearing a watermark* is likely to discard it without seeking to draw the issue to anyone’s attention or complain about it.

While in general terms I agree with Getty Images on the largely ephemeral nature of the images produced by the Models together with the fact that a user generating an unwanted watermark* is unlikely to do anything other than discard the offending image, nevertheless I do not consider these points to assist on the threshold question. Unlike the issue of confusion, where the likelihood of deception is ultimately a question for the Judge, who is entitled to give effect to his or her own opinion (see Fine & Country at [88]), the threshold question in this case requires Getty Images to establish on balance that at least one user in the UK has generated a watermark*. In relation to SD XL and v1.6 (having dismissed the majority of the evidence in Annex 8H as being contrived and unrepresentative), there is not one jot of evidence on which I could properly find on balance that watermarks* have ever been generated in the UK by real world users.

The first of the Models in issue has been available since August 2022. Since then, the evidence shows that, by October 2022, DreamStudio had already amassed more than 1.5 million users who, together (according to Getty Images) had created 170 million images. The evidence in Getty Images’ CEA Notice estimates that by August 2023 across all Stable Diffusion variants (including those outside the scope of this claim) the total number of generations had risen as high as 12.59 billion images. Against that background, I agree with Stability that there is a very striking absence of evidence to support Getty Images’ case in relation to the later Models.

Ms Cameron’s evidence in cross examination was that Getty Images staff and lawyers had conducted a serious search of online materials for evidence of the generation of watermarks*. They had searched Discord, Twitter and Reddit. Mr Stanley explained that Getty Images’ has a global customer base of 700,000 customers, thousands of whom would be “enterprise level” and thus in regular contact. 145 million unique visitors to the Getty Images Websites occur each quarter.

In my judgment, if evidence of the generation of watermarks* was available, Getty Images had every opportunity to find it. Yet, notwithstanding the “hundreds of thousands, if not millions” of interactions each year described by Mr Stanley as taking place between the global marketing team and customers or potential customers of Getty Images, they have produced no evidence whatever of any real world generation of watermarks using SD XL or v1.6.

Getty Images point to correspondence dating back to June 2024 in support of an argument that had a positive case been advanced by Stability on the “threshold question”, disclosure would have been addressed entirely differently. An issue for disclosure was “[i]n what circumstances does Stable Diffusion generate synthetic image outputs bearing watermarks”. In a letter dated 5 June 2024, Bird & Bird recorded that Stability had over 243 million synthetic images (generated by users of DreamStudio) but that these would take 472 hours to transfer out of CoreWeave and that storage of these images would be “incredibly expensive”. Bird & Bird observed that Getty Images had not yet proposed how it would go about analysing this data and said that a disclosure exercise of this magnitude would be disproportionate. Fieldfisher responded on behalf of Getty Images on 25 June 2024 acknowledging that in light of Bird & Bird’s comments, Getty Images would not be seeking disclosure of the Synthetic Images dataset in relation to this (and other) issues for disclosure.

Given that it has always been Stability’s case that the generation of images in Annex 8H was contrived, it is unclear why Getty Images decided to take this approach and I reject the suggestion that it would have done anything differently had a positive case been advanced by Stability (as opposed to merely a non-admission). Whether a defendant makes a non-admission or pleads a positive case denying a claim, the burden lies with the claimant to establish its case on the balance of probabilities and Getty Images plainly had the opportunity to analyse (or even to sample) vast quantities of real life data. Whatever Stability’s lawyers may have said about proportionality, Getty Images has always sought to highlight the significance of this case, its importance to Getty Images’ commercial activities and the public interest in its outcome. Getty Images chose not to utilise an available repository of evidence apparently owing to cost and cannot now complain that the outcome might have been different had they taken a different approach.

Accordingly I find that the threshold issue is not satisfied in relation to SD XL and v1.6 in respect of Getty Images watermarks*.

Furthermore, as was the case with v2.x, there is no evidence whatever that iStock watermarks* have ever been generated in real life using SD XL or v1.6 and accordingly I also find that the threshold issue is not satisfied in this regard.

Finally, I note that in opening submissions, both parties made submissions about the issue of “consent”, Stability’s case in its pleadings being that Getty Images have consented to all outputs generated by their agents for the purposes of the proceedings such that those outputs (i.e. in Annex 8H) cannot comprise infringements. During closing, however, it appeared that there was really nothing between the parties on this point. Stability accepts that Annex 8H is relevant to the “threshold” question and I have found it to be probative in certain respects in connection with that question. I can see no need to go on to consider any further issues on consent and I did not understand the parties to invite me to do so.

In light of my factual findings on the threshold issue, the question of trade mark infringement arises only in respect of v1.x (insofar as it was accessed via DreamStudio (for v1.4 only) and/or the Developer Platform) and v2.x. Accordingly, I shall address the question of trademark infringement in relation to these versions of the Model only.

Before doing so I observe that, as will already be apparent, the question of trade mark infringement in this case is complicated by the fact that, owing to the stochastic nature of the Models, no two images will be exactly the same and when watermarks* do appear, they will appear in different forms: broadly they may be extremely distorted and/or blurred bearing little real resemblance to the Marks, they may bear only a very loose resemblance to the Marks, or they may look similar, or very similar, to the Marks. This is, of course, very different from the conventional trade mark case in which instances of the offending sign usually look the same, even if the context in which they appear may be different. It also means that the mere fact of an apparent watermark* of some description appearing on a synthetic image may not in itself be sufficient to give rise to a claim, whether under s.10(1), 10(2) or 10(3) TMA. A mere “splodge” or heavily distorted word that might or might not represent an attempt by the Model to generate a watermark* is unlikely to do so, whereas the clearer and less distorted the watermark* becomes the greater the potential for a claim.

By way of example, as Getty Images acknowledge, once the watermark* becomes too distorted or blurred, it will not support a claim of trade mark infringement under s. 10(1) TMA. I set out below an image from Annex 8I generated by version 2.1 (“the Alien Landscape Image”) in respect of which Getty Images concede that there could be no claim under s.10(1):

It is well established that many questions in trade mark law are to be assessed from the perspective of the ‘average consumer’ of the relevant goods and/or services, who is deemed to be reasonably well informed and reasonably circumspect (Lidl Great Britain Ltd v Tesco Stores Ltd [2024] EWCA Civ 262 (“Lidl”) per Arnold LJ at [15])). The average consumer includes “any class of consumer to whom the guarantee of origin is directed and who would be likely to rely on it, for example in making a decision to buy or use the goods” (London Taxi Corpn v Frazer-Nash Research Ltd [2017] EWCA Civ 1729; [2018] FSR 7 per Floyd LJ at [34], cited with approval by the Supreme Court in Iconix Luxembourg Holdings SARL v Dream Pairs Europe Inc [2025] UKSC 25 (“Iconix”) at [29]).

In Lidl Arnold LJ highlighted various key points as to the identity of the average consumer at [16]-[20] (expressly approved in Iconix):

“16.

First, the average consumer is both a legal construct and a normative benchmark. They are a legal construct in that consumers who are ill-informed or careless and consumers with specialised knowledge or who are excessively careful are excluded from consideration. They are a normative benchmark in that they provide a standard which enables the courts to strike a balance between the various competing interests involved, including the interests of trade mark owners, their competitors and consumers.

17.

Secondly, the average consumer is neither a single hypothetical person nor some form of mathematical average, nor does assessment from the perspective of the average consumer involve a statistical test. They represent consumers who have a spectrum of attributes such as age, gender, ethnicity and social group. For this reason the European case law frequently refers to “the relevant public” and “average consumers” rather than, or interchangeably with, “the average consumer”: see, for example, Case C-252/07 Intel Corporation Inc v CPM United Kingdom Ltd [2008] ECR 1-8823 at [34]. It follows that assessment from the perspective of the average consumer does not involve the imposition of a single meaning rule akin to that applied in defamation law (but not malicious falsehood). Thus, when considering the issue of likelihood of confusion, a conclusion of infringement is not precluded by a finding that many consumers of whom the average consumer is representative would not be confused. To the contrary, if, having regard to the perceptions and expectations of the average consumer, the court considers that a significant proportion of the relevant public is likely to be confused, then a finding of infringement may properly be made.

18.

Thirdly, assessment from the perspective of the average consumer is designed to facilitate adjudication of trade mark disputes by providing an objective criterion, by promoting consistency of assessment and by enabling courts and tribunals to determine such issues so far as possible without the need for evidence…

19.

Fourthly, the average consumer’s level of attention varies according to the category of goods or services in question.

20.

Fifthly, the average consumer rarely has the opportunity to make direct comparisons between trade marks (or between trade marks and signs) and must instead rely upon the imperfect picture of the trade mark they have kept in their mind”.

The legal construct of the “average consumer” has been created “to strike the right balance between various competing interests including, on the one hand, the need to protect consumers and, on the other hand, the promotion of free trade in an openly competitive market” (see Interflora Inc v Marks and Spencer Plc [2014] EWCA Civ 1403, [2015] FSR 10, (“Interflora”) per Kitchin LJ at [113]). In a case concerning ordinary goods and services, the court may be able to put itself in the position of the average consumer without requiring evidence from consumers, still less expert evidence or a consumer survey. In such a case, the judge can make up her own mind about the particular issue she has to decide in the absence of evidence and using her common sense and experience of the world (Interflora at [115]).

As Arnold J (as he then was) observed in Sky Plc v SkyKick [2018] EWHC 155 (Ch) at [275], “[t]he average consumer for the purposes of an infringement claim must be a consumer of the relevant goods and/or services who is both (i) familiar with the trade mark and (ii) exposed to and likely to rely upon, the sign”.

In practice in the present case, Stability admits that Getty Images has a substantial reputation and goodwill as a creator of digital visual content in the UK and as a provider and licensor of such content to customers in the UK. Accordingly, it can safely be assumed that all the potentially relevant consumers are familiar with it. However, the class of average consumer who is “exposed to, and likely to rely upon, the sign” must be considered and, as both parties accept, that class may itself be split into different classes of average consumer with different attributes depending upon the different ways in which each class will encounter the signs in issue on a synthetic image output from Stable Diffusion.

By closing submissions, it was common ground therefore that there are at least three categories of average consumer in this case namely:

In addition, however, Getty Images now contend that ordinary members of the public (i.e. consumers with no, or very little in the way of, technical skills) will be exposed to the Sign on synthetic images generated by Stable Diffusion because (i) they have asked someone else to download the Model for them before using it on their own computer to generate an image; or (ii) they have been shown an output image from the Model by someone else, for example a friend or work colleague (Getty Images describe this as “post-sale context”). Getty Images therefore submits that this is another, distinct class, of average consumer which the court should consider.

I must take care with this contention. Not only have these different ways of being exposed to the Sign not been pleaded (as strictly they should have been so as to alert Stability to the case it needed to meet at trial), but various of the means by which it is suggested by Getty Images that the average consumer will encounter the sign also appear to me to be speculative.

As Mr Cuddigan submitted in closing submissions, I consider it to be unrealistic to posit a scenario where a technically savvy third party will download the Model onto the computer of a technical ingénue, because even operating Stable Diffusion once it has been downloaded requires considerable technical ability together with a computer powerful enough to do so. I can see no reason why someone with the technical ability to operate Stable Diffusion once it is downloaded would need anyone else to download the Models for them, and none was suggested. I have seen no evidence to suggest that this is something that occurs in the real world. As Mr Cuddigan said, “[y]ou have DreamStudio for people like that”.

In closing, Getty Images appeared to suggest the possibility (based on evidence from Mr Stanley) that designers might “screen grab” images with watermarks* on them in order to mock up a design which will be seen by others. Mr Stanley explained that the presence of the watermarks* will enable the designers to identify the source of the image and obtain a licence for it later, if required. However, while I accept Mr Stanley’s evidence about this, it does not assist when one is talking about the use of synthesised images which require no licence. It is not realistic to suppose that a designer using Stable Diffusion to synthesise an image would need to take a screen grab of a watermarked* image in order to use it as an aide-mémoire as to its source. Such a designer knows he has obtained the image using Stable Diffusion, that he does not need a licence for it and, if it includes a watermark*, that watermark* will, in any event, be unwelcome. He will certainly not be using it to remind himself, or others, of the source of the image.

Perhaps more difficult, however, is the question of whether it is realistic to suppose that users of Stable Diffusion will forward images bearing watermarks* to others, or (possibly) share their screen showing such images with others in the ‘post-sale’ context.

I pause to acknowledge that there is inevitably an overlap between this issue and the issue of context to which I shall come in a moment. However, I take the issue of ‘post-sale context’ at this stage so as to address Getty Images’ submissions on the existence of an additional category of technically unsophisticated average consumer.

There is no dispute on the legal principles to be applied. As recently confirmed in Iconix at [40], when the court is considering post-sale context it is concerned with the “realistic and representative way in which the average consumer will encounter the sign”.

While there may be many trade mark cases in which the court’s assessment of post-sale context is uncontroversial and needs no supporting evidence, perhaps because the sign was invisible at the point of sale (as with the mark traditionally placed upon the cork in a bottle of wine) or because (although the average consumer did not purchase the product) he or she admires it being worn by a friend or acquaintance (see Montres Breguet at [84] and Iconix at [40]), the facts of this case are not so straightforward. As Getty Images’ pleaded case appears to acknowledge, the realistic and representative way in which the average consumer will encounter the Sign is likely to be immediately following the generation of an image which then appears on his or her computer screen.

I start from the premise that it must certainly be the case that users of Stable Diffusion will, on (many) occasions, share the images they generate with others – at least in the work context that may very well be the purpose of generating the images. Equally, however, as is common ground, those users will not be trying to generate images which bear watermarks*. Stable Diffusion is used by people who want to generate images for use in a presentation or a project or an artwork, as Ms Varty confirmed. They want images that “look good” and, even assuming that Stable Diffusion is also used for leisure purposes (i.e. “for fun”), it is likely that such users will have the same aim in mind – at least they will want images that correspond to their text prompts. They will not want their generated images to be marred by the presence of a watermark*. I consider it to be reasonable to infer that it is images that “look good” and respond most accurately to the imagination of the user as reflected in his or her text prompt, that the user will normally wish to generate and (potentially) to share.

The Reddit Exchanges illustrate that users will be irritated if they generate an image that is spoilt by the presence of a watermark of any kind and will want to get rid of it. The user with the tag namesareunavailable describes the experience of generating watermarks as “quite annoying”, while Antique_Plane_130 asks: “What’s the best way to remove a watermark from an image”. Suggestions in the various exchanges include changing words, or using specific phrases, in the prompt or trying to use “negative weight prompts”; or using a model “trained to remove watermarks”. There is no evidence that anyone wants to generate images with watermarks*. As I have already indicated, Getty Images posits a case in its pleadings that the average consumer may use Stable Diffusion “to generate an image which is the same as or similar to the Claimants’ Content but in respect of which it will not have to pay a licence fee”. But, even assuming this to be correct (and as I have said there is no evidence to support this proposition), it makes no sense that such a user would be trying to produce a watermarked* image or that he or she would then want to make any use of such an image, or show it to someone else.

The only evidence of users sharing watermarked* images appears to be with a view to pointing out the anomaly of the watermark* appearing. Again this is clear from the Reddit Exchanges. These show a handful of users sharing watermarked* images and/or their experience of generating watermarked* images with other (often well-informed) users on a forum devoted to discussion about the Models. This appears to be in circumstances where there is a common understanding across the vast majority of these users that this is unusual or extraordinary and that the watermarks* are a consequence of the data used to train the Model.

Given the evidence, I do not consider that I can find (as Getty Images invite me to do) that it is realistic and representative to suppose that there is a class of unsophisticated average consumer who will be shown images generated by Stable Diffusion which bear a watermark* by someone else. Indeed, Getty Images’ submissions to this effect appear to me to be somewhat inconsistent with their submissions (recorded earlier in this judgment) that watermarked* images are likely to be discarded as unwanted by users.

Further, if Getty Images wished to advance such a case then it should have been pleaded and the circumstances in which they said it was likely to occur should have at least been identified. I note in this context that this particular scenario was mentioned purely in one line in Getty Images’ opening skeleton argument for trial. There was nothing in the List of Issues to even hint at the possibility that this was a serious point that Getty Images was intending to advance.

Returning to the three categories of average consumer identified above, I accept Stability’s submission that it is reasonable to infer that the first two categories of average consumer have a familiarity with AI models. I consider the evidence to show, and I find, that a significant proportion of these average consumers will understand how the Model was trained and that the generation of watermarks* is a function of the data on which the Model was trained. Users in the first category will also know that the Model they are running is operating on their local GPU. However, I reject Stability’s case that these two classes of consumer will understand that Stability has “no control” whatever over the images that are generated, or to put it another way, that they (the users) have complete control over those images, whatever is generated – a point which appears to me to be inconsistent with the evidence in the Reddit Exchanges to which I have referred above.

The average consumer using the Model via DreamStudio will not necessarily, in my judgment, have a similar level of understanding of AI models. A significant proportion will not appreciate how the Model has been trained or why it might produce watermarks*. I did not understand Stability to suggest otherwise.

Getty Images accept that the degree of care and attention that may be exercised by these various categories of average consumer may be different and contends that in relation to “business consumers” (by which I understood them to mean consumers accessing the Model for a particular purpose connected with business) that level of attention may be moderate, whereas in relation to “members of the general public” (by which I understood them to mean anyone else who was likely to use Stable Diffusion to generate an image) will pay only a low degree of attention. Getty Images pray in aid Mr Stanley’s evidence to the effect that Getty Images’ customers “who are busy people” may not notice details in a watermark itself.

Getty Images did not seek to identify how these submissions are to be applied to the three categories of average consumers, but I can only assume that their case is that within each category there will be both business users and “others”, whose levels of attention will be different.

Stability rejects this characterisation of the degree of attention that an average consumer would pay, arguing that the average consumer using any one of the three access mechanisms (whether for business or otherwise) would pay “the highest degree of attention”, because the very purpose of using the Model is to generate bespoke images in response to a user created text prompt.

In my judgment, while some average consumers (who are seeking to generate an image for use in a work context such as a presentation) may indeed pay a high degree of attention to the synthetic images generated (as Mr Cuddigan elegantly put it “[t]hey are curating through their prompts an extraordinarily powerful image creation technology”), I consider that not all would do so. This applies to all three access mechanisms and is (of course) dependent upon the purpose for which the images are being generated.

I reject Getty Images’ submission that any class of average consumer will ever give only a low degree of attention to images generated by the Model. Anyone using the Model to generate bespoke images in response to text prompts is likely, in my judgment, to give those images at least a moderate degree of attention, whatever the intended use of the images and notwithstanding that he or she has had to pay nothing, or only very little, for them. I do not consider that this conclusion is affected by Mr Stanley’s evidence. Getty Images’ customers do not merely comprise individuals using their GAI to generate images and I do not consider Mr Stanley’s evidence to assist on the level of attention that a user of Stable Diffusion would give to the images that he or she generates when using the Model.

It is common ground that the court must consider the actual use of the sign complained of in the context in which it has been used. As Kitchin LJ (as he then was) said in Specsavers International Healthcare Ltd v Asda Stores Ltd [2012] EWCA Civ 24 (“Specsavers”) per Kitchin LJ at [87]:

“In my judgment the general position is now clear. In assessing the likelihood of confusion arising from the use of a sign the court must consider the matter from the perspective of the average consumer of the goods or services in question and must take into account all the circumstances of that use that are likely to operate in that average consumer’s mind in considering the sign and the impression it is likely to make on him. The sign is not to be considered stripped of its context”.

However, the parties are not in agreement over the application of this principle. Getty Images submit that the court must avoid an over-expansive view of context which might turn an otherwise infringing use into a non-infringing use. They contend that context in the circumstances of this case is limited to what is on the screen when the image bearing the watermark* appears and they rely in particular upon the observations of Arnold LJ in Lifestyle Equities v Royal County of Berkshire [2024] EWCA Civ 814 [2024] FSR 32 (“Lifestyle Equities”) at [51]-[58]. Arnold LJ begins at [51] by explaining that the use of the allegedly infringing sign must be considered in context. He then goes on to say:

“52 This principle is perhaps most clearly illustrated by Case C-533/06 O2 Holdings Ltd v Hutchison 3G UK Ltd (C-533/06) [2008] E.C.R. 1-4231. 02 was the proprietor of trade marks consisting of images of bubbles registered in respect of telecommunication services. H3G used similar images of bubbles in respect of identical services in a comparative advertisement. The CJEU held that the bubble images had been used by H3G directly in relation to O2's services and indirectly in relation to H3G's own services. That gave rise to the question of whether the latter use was infringing use. The Court held that there was no likelihood of confusion because the national court had found that the comparative advertisement as a whole was not misleading and did not suggest that there was any form of commercial link between O2's services and H3G's services. The Court stated at [64] that "the referring court was right to limit its analysis to the context in which the sign similar to the bubbles trade marks was used by H3G, for the purpose of assessing the existence of a likelihood of confusion". It also stated at [67] that "the assessment must be limited to the circumstances characterising that use". This suggests that the assessment is limited to what might be termed the immediate context in which the sign has been used. The Court nevertheless implicitly rejected the argument that distinguishing context was irrelevant if the signs themselves were confusingly similar to the trade marks and used in relation to identical services.

53 The decision in O2 Holdings Ltd v Hutchison 3G UK Ltd (C-533/06) was considered in some detail by Kitchin LJ in Specsavers at [80]-[84], and formed the basis for his statement of principle at [87] which I have set out in paragraph 12 above.

54 Although the principle is clear, its application can cause difficulty. The difficulty usually arises where the defendant relies upon context as negating a likelihood of confusion in a case where, absent whatever is relied upon as constituting the relevant context, the identity or similarity of the mark and the sign and the similarity or identity of the respective goods or services would give rise to a likelihood of confusion. While it is clear from O2 Holdings Ltd v Hutchison 3G UK Ltd (C-533/06) that this is legally possible in an appropriate case, it is not clear how far the principle extends outside the special circumstances of comparative advertising.

55 The judge cited two passages from the judgment of Daniel Alexander QC sitting as a Deputy High Court Judge in PlanetArt LLC v Photobox Ltd [2020] EWHC 713 (Ch); [2020] F.S.R. 26 which addressed this question. After citing Och-Ziff Management Europe Ltd v Och Capital LLP [2010] EWHC 2599 (Ch); [2011] F.S.R. 11 and Specsavers, Mr Alexander QC went on:

"24.

In my view, Arnold J, as he then was, in Och-Ziff Management Europe Ltd v Och Capital LLP was saying that the CJEU took the view that, in considering infringement of a registered trade mark, it was not appropriate to look so broadly at the context that use which was prima facie infringing was nonetheless to be regarded as non-infringing because other, separate, acts of the defendant had countered actual deception. An extreme example is where a defendant uses a well-known brand for counterfeit goods but nonetheless makes it very clear that the goods are in fact counterfeit so that no actual purchaser is confused. There may be no actual confusion as a result of the use of the sign but there is nonetheless trade mark infringement because the court must focus on the use of the sign in question not the other statements by the defendant as to the trade origin of the goods.

25.

Accordingly, while it is right to take the context in which the given sign will be seen into account, I am not persuaded that it would be right to expand the view so broadly as to take account of the fact that a given sign only appears in this case after a different sign has been used. To that extent, each use of the signs must be examined separately in what might be described as its 'local' context.

…

164.

I have also considered, in accordance with the guidance in Specsavers International Healthcare Ltd v Asda Stores Ltd, and generally whether there is anything about the context of presentation of the marks which negates that result. In my view there is not. It is also necessary for the court to be cautious in adopting an overly expansive approach to taking account of context in a trade mark claim. One purpose of registered trade mark protection (in which it is distinguished from passing off) is to provide an element of exclusivity in the use of a registered mark, regardless of the wider context in which it is used, so long as the conditions for protection are fulfilled."

At [56] and [57] Arnold LJ points out that there are other answers to the problem identified by Mr Alexander at [24]. At [58] he concludes:

“58.

Having cited PlanetArt LLC v Photobox Ltd, the judge said at [67] that "[t]here are sound policy reasons for not taking an over-expansive view of the context of the allegedly infringing use". While I have some sympathy with that point of view, the issue of how far context extends is a difficult one for the reasons explained above. It follows that it is best decided in a case where it actually matters. It does not matter in this case, because the crowded market is relevant to the distinctive character of the Trade Marks regardless of how narrowly or broadly the context of the allegedly infringing use is drawn”.

Further, Getty Images drew my attention to Shorts International Ltd v Google [2024] EWHC 2738 (Ch) [2025] ETMR 3 (“Shorts International”), per Michael Tappin KC, sitting as a Deputy High Court Judge. At [186] Mr Tappin KC identified that a question in that case was whether context can include matter which is not visible to the user at the time at which the sign is used. He then set out various observations made by Arnold J in Och-Ziff Management Europe Ltd v Och Capital LLP [2010] EWHC 2599 (Ch) (“Och-Ziff”) (including at [77] to the effect that “the context and circumstances are limited to the actual context and circumstances of the use of the sign itself”, that circumstances are “circumstances characterising the use” and not circumstances more generally and that “circumstances prior to, simultaneous with and subsequent to the use of the sign may be relevant to a claim for passing off…but they are not generally relevant to a claim for trademark infringement”), before referring to the passages in LifeStyle Equities which I have quoted above. At [189] he said this about those passages:

“It appears to me that Arnold LJ was expressly not approving (or disapproving) what Mr Alexander said in the passages from PlanetArt which he cited, and leaving open the question of the proper scope of “context”. I propose to proceed on the basis that the law permits, and indeed requires, the court to consider each use of the sign taking into account the context in which consumers will see the sign, but that the law does not permit the court to take into account matter which is not visible to the consumer when that use of the sign is being made. That is particularly the case where not all consumers will have been exposed to such matter”.

Mr Tappin KC applies this conclusion to the facts of that case at [227] where he takes into account as “part of the context of the use” the fact that the YouTube name and logo is always present on the screen when a particular sign appeared; and at [229], deciding that, by contrast, he should not take into account, as part of the context of use of the sign “the fact that the user accessed the Shorts feed through the YouTube app and via the home page of the app. In any event…it is entirely realistic that some consumers will be shown another’s screen with the Shorts feed already open”.

Stability submits that the passages to which I have referred in the authorities say no more than that the question of context must be considered on the facts of the case and is an open question. I agree. The touchstone, as is clear from Specsavers, is to identify the circumstances that are likely to operate in the mind of the average consumer when considering the sign and the impression it is likely to make on him or her. Nothing said by the judge in Shorts International appears to me to contradict this proposition. On the facts of that case, the court found that there was a realistic category of consumers who would be shown the sign without having gone through the prior stages within the app, which had been alleged to provide relevant context. I have already determined that the only three categories of average consumer in this case (as pleaded) would all have accessed the Model themselves via one of the three access mechanisms and accordingly the key question for me will be the relevant context in respect of each of those access mechanisms.

In this regard, I again agree with Stability that the Court of Appeal in Specsavers did not place any temporal limit on relevant context but, rather, specified “all the circumstances” likely to operate in the average consumer’s mind. I also note that in a passage at [86] of his judgment in that case, Kitchin LJ observed that it was not clear to him what Arnold J and the parties had in mind in Och-Ziff by the phrase “circumstances prior to, simultaneous with and subsequent to the use of the sign” and he went on to explain that the phrase was to be seen “in light of the particular and rather specific issue in that case”. It was against this background that Kitchin LJ then set out the “general position” in [87] to which I have referred above. The limitation of the phrase used by Arnold J in Och-Ziff to the facts of that case is entirely consistent with the Court of Appeal recognising that “all the circumstances” likely to operate on the average consumer’s mind must be considered. Indeed, at first instance in Specsavers ([2010] EWHC 2035 (Ch); [2011] FSR 1), Mann J held that a circumspect consumer encountering the Specsavers sign in an Asda store will know that he is in that store, just as the consumer who encounters the Specsavers logo online will know that he or she has entered an Asda site already (Specsavers at [137]). These findings were not challenged in the Court of Appeal. I note also Arnold LJ’s observation in Montres Breguet SA v Samsung Electronics Co Ltd [2023] EWCA Civ 1478, [2024] ETMR 13 (“Montres Breguet”), at [76] to the effect that it is not necessary to confine attention to the “immediate” context in which the signs were used. Everything will depend on the facts of the particular case.

Given their differing approaches to the question of context, the parties do not agree on whether the various features of each of the three access mechanisms in this case are relevant to the court’s consideration of context, including whether the average consumer would read information/terms and conditions set out in the Model Cards, on the GitHub and Hugging Face pages, the Stability AI API Terms of Service and in the Terms of Service for a DreamStudio account. I set out in Appendix B to this judgment the (largely uncontroversial) factual circumstances encountered by the average consumer in accessing version 1.x (via DreamStudio and the API) and v2.x of the Model (via each of the three access mechanisms).

Getty Images contends that Stability’s analysis of these factual circumstances involves considering “an artificial context in which the average consumer would interact with the sign for the purposes of negating infringement”, that it is wrong in law and that, in any event, it falls down on the facts.

My conclusions as to the relevant context in which watermarks* would be encountered by the average consumer using each of the three access mechanisms are set out below.

Stability submits that the features set out at Appendix B, including the Model Cards and the License terms, form part of the relevant context in the Specsaver sense, because a reasonably circumspect average consumer would have regard to them prior to downloading the Model.

I accept that the technically sophisticated average consumer accessing the Model by this means is likely to read the Model Card together with the GitHub and Hugging Face pages (not least because these set out useful and important information about how to get the most out of using the Model and will also be relevant to the user’s choice of Model). While there is no reason to suppose that this will happen at any time after the Model has been downloaded onto a local computer (at which point the Model Card is no longer visible), I do not consider that one can properly ignore the general understanding that the average consumer will have gleaned from this information and it would be artificial to do so.

I consider that the technically sophisticated average consumer using this means of access will at all times understand from his interaction with the Model Card and the GitHub and Hugging Face pages that, once he has downloaded it, he is using a cutting edge AI model to generate synthetic images using his own prompts and that the Model is not designed to produce out-of-scope images i.e. factual or true representations of people or events (whether he chooses to try to do so or not). He will also understand that the image generated on his own computer has been generated without the intervention of Stability and that downloading the Model enables him to add bespoke elements to it. I have already said that this average consumer (owing to his level of technical sophistication) will understand how the Model is trained (and this is also addressed in the Model Cards) and why watermarks* may be generated.

Stability also contends that the terms and conditions of the License are relevant context, because the average consumer using this access mechanism would read those terms and conditions. Specifically Stability submits that, given the rationale for the average consumer’s characteristics of striking the right balance between the protection of consumers and the promotion of trade, there can be no justification in protecting the incautious – hence the requirement that the average consumer is “reasonably circumspect”. Apparently in recognition of the fact that (as Getty Images contend) many people will not routinely read terms and conditions, Stability says that the “reasonably circumspect” test must be applied “regardless of how many consumers might achieve that standard in the real world” and it prays in aid Morley’s (Fast Foods) Ltd v Nanthakumar [2025] EWCA Civ 186 (“Morley”).

In Morley, the Judge at first instance had identified a class of average consumer for a chicken shop as including late night and early morning revellers, a significant subset of whom she said “will be intoxicated”. On appeal, Arnold LJ held that the Judge had been wrong in her identification of the class of average consumer and that she had wrongly focused on consumers who were intoxicated “and therefore by definition not reasonably well informed and circumspect” (at [16]-[17]). Stability says that, by analogy, this court should not have regard to the fact that many consumers may not read terms and conditions. It points out (without reference to any particular dictionary definition) that the ordinary meaning of the word ‘circumspect’ is someone who is “careful not to take risks” or someone who is “showing caution, cautious, wary: taking everything into account” and it says that such a consumer would not proceed to generate images using Stable Diffusion “without regard to the terms on which they did so”.

On balance, in the case of this particular access mechanism, I disagree with Stability that the average consumer would read the License terms when accessing the Model.

I did not understand Getty Images to dispute the meaning of the word ‘circumspect’ and I accept that it is intended to encompass a careful consumer who does not take risks. The question here, however, is where one sets the bar. On the facts of the present case, that depends on whether the reasonably well-informed and circumspect average consumer will read terms and conditions in circumstances where (i) they are not set out on the web pages from which the source code and weights for the Model can be downloaded; (ii) it is not anywhere suggested on those web pages or in the Model Cards that users wishing to download the Model must read the terms and conditions set out in the License; (iii) it is necessary to click on a hyperlink to see the License; (iv) even if a user does use the hyperlink to reach the License, the terms and conditions are extremely dense; and (v) there is no specific requirement (or even recommendation) anywhere on the web pages or in the Model Cards for a consumer to confirm that the terms and conditions of the License have been read and/or accepted prior to downloading the Model.

In my judgment, while some particularly rigorous consumers will no doubt read the License, a significant proportion will not. I do not consider that, in the circumstances of this case, this significant proportion will fall outside the category of the reasonably well-informed or circumspect consumer and I do not consider there to be any sensible analogy to be drawn with “intoxicated” consumers who could not in any circumstances be described as ‘circumspect’. In her closing reply submissions, Ms Lane referred me to Schutz (UK) Ltd v Delta Containers Ltd [2011] EWHC 1712 (Ch), in which Briggs J (as he then was) considered a “reasonable but less than rigorous inspection” of products would not have led the average consumer to understand the message conveyed by disclaimers which were not prominently printed on labels affixed to the products. While Briggs J did not there consider whether the average consumer would have read the disclaimers, I obtain some support from this decision for the distinction between “a rigorous” and “a reasonable” approach.

Having regard to the points I have made, the circumspect consumer (who I have already found will read the Model Cards and web pages in full and so will be reasonably well-informed at the point of downloading the Model) will not consider it a “risk” to proceed without reading the License terms – indeed their familiarity with AI models of this type is likely to confer confidence that absent any specific injunction to read the terms and conditions of the License, there is no need to do so. They will instead conclude from the content of the web pages and relevant Model Card that the key features of use of the Model of which they should be aware are there set out and that it is not a requirement of use that they read or accept the License.

Ms Varty did not herself download the Models by this means but she confirmed that the individual who downloaded the Models for her had not drawn her attention to any terms and conditions. There is no evidence from Ms Kabba-Kamara that she (or anyone else) read the License terms before conducting inference.

During closing submissions, I understood Mr Cuddigan to say that the real point he was making in relation to this access mechanism was that average consumers who download the Model using this means will understand from the context that they are “using a tool on their account”. If this simply means that they will understand that they are generating images by using their own bespoke prompts on their local machine then I do not disagree and I did not understand Getty Images to disagree either. I consider this to be a function of the sophistication of the average consumer using this access method. However, if this was intended to suggest that such a consumer considers himself or herself to be in total control over, and entirely responsible for, the output of the Model, including the generation of watermarks* (whatever they may have gleaned from their reading of the relevant materials), then I reject that submission for reasons to which I shall return later in this judgment.

Finally, in so far as the Diffusers Method requires use of further software in order to set up the Model on a local computer, I agree with Getty Images that these steps have nothing whatever to do with the context in which the user will see the Sign on the synthetic image generated.

Stability accepts that (as I have found) the DreamStudio platform makes Stable Diffusion available to less technically sophisticated users but it points out that this is contingent upon active agreement to the Terms of Service. Further it points out that the DreamStudio user is repeatedly presented with a series of trade marks which indicate that the origin of the service provided is Stability. This occurs at registration, at login, in the Terms of Service, in the web address and at the head of the page when images are generated.

I accept that these are locations where the average consumer would expect to find an indication of origin of the online service which he or she is using, as Mr Stanley confirmed in his evidence and also that western users will start to read a page from the left hand side. The images appear in a section of the page that is dedicated to outputs of the Model, directly under and by reference to the prompt which has been chosen and input by the user.

Further, Stability submits that users are repeatedly reminded that they are using a service which generates artificial images:

Mr Stanley accepted that the corresponding branding on the GAI was intended to make clear that the service was producing AI outputs. In my judgment, the average consumer using DreamStudio will at all times understand that he is on Stability’s website, that the images are generated by an AI model and that the Model produces the images in response to his own prompts. Many consumers will also understand from the context to which I have referred that the Model is designed only to generate “artificial images”, although I consider that a significant proportion will not.

In my judgment, the average consumer, who is required to accept terms and conditions before accessing the Model, will also have read, or at least skim-read, the Terms of Service before accepting them. Ms Gagliano said under cross examination that she had not read the terms “in detail”, but she did not say that she had not looked at them – and that is what I would expect in circumstances where a consumer is required to accept the Terms of Service before using the Model. Given that the Terms of Service say that the user “must review and follow the terms of the License”, I also consider that the average consumer will have read, or at least skim-read the License. However in my judgment the average consumer is unlikely to recall the detail of the Terms of Service or the License or necessarily to understand their potential significance in connection with the generation of any particular synthetic image. Specifically, I reject Stability’s case that the average consumer using DreamStudio will understand that any attempt to generate a photorealistic image is ‘out of scope’ for the Model. Those who understand that it is designed only to create artificial images may understand this, but a significant proportion will not. In this context I note that the Terms of Service contain no reference to “out of scope” use.

As I have found, an average consumer using the Model via this means is technically skilled. For similar reasons to those that apply for the DreamStudio access mechanism, he or she will, in my judgment, have read, or at least skim-read, the Stability AI API Terms of Service prior to accepting them, although I do not consider that the average consumer will have read the License terms. Unlike the Terms of Service applicable to the use of DreamStudio, there is no requirement to do so in the API Terms of Service and, accordingly (for similar reasons to those given above in relation to the download mechanism) the average consumer (who for this access mechanism is technically savvy) who has looked at the API Terms of Service will not consider it a risk not to examine the License terms. Some rigorous consumers may do so but a significant proportion will not. The average consumer who has read the API Terms of Service is unlikely to recall the detail of those terms or appreciate their potential significance in connection with the generation of any particular synthetic image.

Although there is no evidence of any specific name or logo being visible when images are generated using this means of access, I consider that the average consumer using this access mechanism will understand that the images are generated by an AI model provided by Stability and that the Model produces the images in response to their own prompts. The average consumer will also understand that the images produced are artificial. I reject the suggestion that the average consumer will understand or remember that attempting to generate photo-realistic images is ‘out of scope’ for the Model, or what, if anything, the significance of that might be. Many may, but a significant proportion will not. The API Terms of Service make no direct reference to out of scope use.