It's a fine line that's been drawn, but this ruling says that AI can't own a copyright itself, not that AI output is inherently ineligible for copyright protection or automatically public domain. A human can still own the output from an LLM.
The argument is that converting static text into an LLM is sufficiently transformative to qualify for fair use, while distilling one LLM's output to create another LLM is not. Whether you buy that or not is up to you, but I think that's the fundamental difference.
This is a well known blindspot for LLMs. It's the machine version of showing a human an optical illusion and then judging their intelligence when they fail to perceive the reality of the image (the gray box example at the top of https://en.wikipedia.org/wiki/Optical_illusion is a good example). The failure is a result of their/our fundamental architecture.
I still can't believe the guy went to Indonesia, went into the monkeys' habitat, gained their trust, set up the camera on a tripod in a way the monkeys would have access to it, adjusted the focus/exposure to capture a facial close-up -- basically engineered the entire situation specifically for that outcome, and simply because he didn't physically hit the shutter he lost credit for the photo. Meanwhile I can open my phone's camera, spin around three times, take a photo of whatever the hell happens to be in its viewfinder and somehow that is sufficient human creativity to deserve copyright protection.
Not sure I've ever seen a company openly take this position. This is a crazy policy.