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100% a problem. but tight legal regulations never really work long term when technology overpowers it. AI is clearly exposing how fragile IP/copyright is and something a lot more extraordinary needs to exist for it to work properly. Perhaps cryptography related

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Perhaps, but I'm curious about what the person meant by "it's always been silly that it prevents derivitive works". AI may have exposed something (although the photocopier could've exposed something similar, so I don't know yet what the problem is) but IP protections are definitely important. As you say, perhaps there will now need to be a way to better protect IP, but that comes with downsides too.

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