Not sure where they’re getting the bit about copyright disallowing derived works as that’s just not true. You can get permission to create a derived work, but you don’t need permission to create a derived work so long as the final result does not substantially consist of the original work.

Unfortunately what constitutes “substantially” is somewhat vague. Various rulings have been made around that point, but I believe a common figure used is 30%. By that metric any given image represents substantially less than 30% of any AI model so the model itself is a perfectly legal derived work with its own copyright separate from the various works that were combined to create it.

Ultimately though the issue here is that the wrong tool is being used, copyright just doesn’t cover this case, it’s just what people are most familiar with (not to mention most people are very poorly educated about it) so that’s what everyone reaches for by default.

With generative AI what we have is a tool that can be used to trivially produce works that are substantially similar to existing copyrighted works. In this regard it’s less like a photocopier, and more like Photoshop, but with the critical difference that no particular talent is necessary to create the reproduction. Because it’s so easy to use people keep focusing on trying to kill the tool rather than trying to police the people using it. But they’re going about it all wrong, copyright isn’t the right weapon if that’s your goal. Copyright can be used to go after the people using generative AI tools, but not the people creating the tools.