Generative AI has the potential to transform corporate innovation, but intellectual property (IP) created without sufficient human input is ineligible for protection by IP systems. We model a firm’s choice of AI versus human-capital use when investing in innovation, with IP protection granted based on a noisy signal of human-capital use. We derive a sufficient statistic for the IP policy’s effect on incentives and characterize when the IP system can "kill" AI use. Alternatively, low AI costs can "kill" the IP system or shift its role to providing a human-capital subsidy, depending on signal noise and the social value of human-capital use in innovation. When consumers value human-created works, human-capital use is distorted by an adverse selection discount. The IP policy can mitigate this by deterring high-cost firms' investment, or by acting as a credible signal of incentives for human-capital use that triggers a positive feedback loop through consumer beliefs.