This is a bad argument.

Think of a rewrite (by a human or an LLM) as a translation. If you wrote a book in English and somebody translated it into Spanish, it'd still be a copyright issue. Same thing with translations.

That's very different to taking the idea of a body of work. So you can't copyright the idea of a pirate taking a princess hostage and a hero rescuing her. That's too generic. But even here there are limits. There have been lawsuits over artistic works being too similar.

Back to software, you can't copyright the idea of photo-editing software but you can copyright the source code that produces that software. If you can somehow prompt an LLM to produce photo editing software or if a person writes it themselves then you have what's generally referred to as a "cleanroom" implmentation and that's copyright-free (although you may have patent issues, which is a whole separate issue).

But even if you prompted an LLM that way, how did the LLM learn what it needed? Was the source code of another project an input in its training? This is a legal grey area, currently. But I suspect it's going to be a problem.

Suchir Balaji, the OpenAI researcher who was found dead in his flat just before testifying against his employer, published an excellent article somehow related to this topic:

When does generative AI qualify for fair use?

https://suchir.net/fair_use.html

Balaji's argument is very strong and I feel we will see it tested in court as soon as LLM license-washing starts getting more popular.