My take: It is newsworthy but not surprising that images generated by a text-to-image AI using a text prompt with no input image, with no human-led post-generation modification, would not be considered protected by copyright in the USA, per the legal experts quoted in various links in this post of mine.

The fact that Stable Diffusion v1.x models memorize images is noted in the various v1.x model cards. For example, the following text is from the Stable Diffusion v1.5 model card:

>No additional measures were used to deduplicate the dataset. As a result, we observe some degree of memorization for images that are duplicated in the training data. The training data can be searched at https://rom1504.github.io/clip-retrieval/ to possibly assist in the detection of memorized images.

The copyright registration has not been cancelled. Instead, an initiation of registration cancellation was done by the U.S. Copyright Office. The registration for the work is still listed when doing a search at the U.S. Copyright Office site. Lawyer(s) for Kris Kashtanova sent this letter to the Office. The Office will make a decision whether to cancel. See this blog post from a lawyer for more details.

Trained artificial neural networks usually don't memorize images in the training dataset.