The Intersection of AI Training, Copyright, and Network Effects in Japan


Hatched by Glasp

Sep 11, 2023

3 min read


The Intersection of AI Training, Copyright, and Network Effects in Japan


In a bold move, the Japanese government announced that it will not enforce copyrights on data used in AI training. This policy applies to both non-profit and commercial purposes, regardless of the source of the data. While this decision has raised concerns among anime and graphic art creators, the academic and business sectors are eager to leverage Japan's relaxed data laws to establish global AI dominance. Additionally, Japan recognizes the importance of accessing Western data to enhance the quality of AI training data, especially considering the abundance of English language resources compared to Japanese language resources.

The Dynamics of Network Effects:

The concept of network effects plays a crucial role in determining the success and growth potential of businesses. However, these effects are more dynamic than ever before, requiring companies to understand their value proposition, users/inventory, and competitive ecosystem.

1) Value Proposition:

Not all products are created equal when it comes to network effects. Founders must identify the driving force behind their network effects and evaluate whether they are weak or strong. It is crucial to monitor how the value proposition evolves over time. For instance, the introduction of ridesharing apps saw the network effects weaken once the wait time reached a certain threshold, rendering additional drivers irrelevant to riders. Similarly, social networks experienced a shift in value proposition from personal content sharing to news and public content, altering the network effects.

2) Users and Inventory:

The nature of users and inventory significantly impacts the strength and longevity of network effects. Platforms with commoditized inventory, such as delivery or on-demand storage companies, tend to reach a point of network effects saturation once they achieve a base level of liquidity. However, platforms with more differentiated inventory, catering to unique customer preferences while maintaining substitutability, enjoy stronger and longer-lasting network effects. These platforms require effective curation and matching mechanisms to maintain defensibility and sustain the network effects curve.

Additionally, the type of incremental user added to the network plays a crucial role in projecting network effects. Identifying whether users are contaminants, neutrals, or contributors helps shape growth strategies and incentivize desirable users while disincentivizing undesirable ones.

3) The Competition:

Not all markets are created equal, and the presence of competition can impact network effects. Network overlap, where users cannot accomplish their goals using a single platform, weakens network effects. Multi-tenanting on one side of a platform can create pressure on the operator, affecting pricing, features, and necessary liquidity, potentially disrupting network effects.

Actionable Advice:

1) Continuously assess your value proposition and adapt it to evolving user needs and preferences. Stay attuned to the changing dynamics of network effects to maintain a competitive edge.

2) Invest in curating and matching mechanisms to ensure the diversity and quality of inventory while maintaining substitutability. This enhances the overall defensibility and strength of network effects.

3) Understand the competitive landscape and identify potential network overlap. Strive to provide a comprehensive and seamless solution to users' needs, minimizing the risk of weakened network effects.


Japan's decision to waive copyright enforcement on data used in AI training highlights the country's commitment to leveraging data for AI advancements. As businesses navigate the complexities of network effects, understanding the value proposition, users/inventory, and competitive ecosystem becomes paramount. By actively adapting and optimizing these factors, companies can harness the power of network effects to drive growth and success in an increasingly dynamic landscape.

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