"Verbatim" is an interesting term since I'm not certain it matters. In this case OP here demonstrated DALL-E generating a trademarked watermark on top of an image. I doubt the courts, looking at that, would believe that that's not close enough to their trademark to infringe.
The art world's copyright suits are all over the place in terms of what's sufficient to meet the threshold of "fair use" or "not a copy".
It's hard for me as a layperson to see works by Richard Prince[1] as substantially transformative (clearly one work is derived from the other) and even the different courts couldn't agree on this as it was initially found in favor of the plaintiffs but then Prince won his appeal.
My approach to this kind of thing is simply this: Does this technology inherently open me up to lawsuits in undecided or highly unreliable legal territory? If yes, steer well clear of using it in any capacity.
The art world's copyright suits are all over the place in terms of what's sufficient to meet the threshold of "fair use" or "not a copy".
It's hard for me as a layperson to see works by Richard Prince[1] as substantially transformative (clearly one work is derived from the other) and even the different courts couldn't agree on this as it was initially found in favor of the plaintiffs but then Prince won his appeal.
My approach to this kind of thing is simply this: Does this technology inherently open me up to lawsuits in undecided or highly unreliable legal territory? If yes, steer well clear of using it in any capacity.
[1]: https://www.artnews.com/art-in-america/features/richard-prin...