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Anthropic faced potential liabilities in the billions due

to

piracy ruling

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OpenAI, Microsoft ( MSFT ), Meta battling similar lawsuits

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Fair use defense remains contentious in AI copyright cases

By Blake Brittain

Aug 27 (Reuters) - Anthropic's class action settlement

with a group of U.S. authors this week was a first, but legal

experts said the case's distinct qualities complicate the deal's

potential influence on a wave of ongoing copyright lawsuits

against other artificial-intelligence focused companies like

OpenAI, Microsoft ( MSFT ) and Meta Platforms ( META ).

Amazon ( AMZN )-backed Anthropic was under particular

pressure, with a trial looming in December after a judge found

it liable for pirating millions of copyrighted books. The terms

of the settlement, which require a judge's approval, are not yet

public. And U.S. courts have just begun to wrestle with novel

copyright questions related to generative AI, which could prompt

other defendants to hold out for favorable rulings.

Anthropic was in "a unique situation," said Cornell Law

School professor James Grimmelmann, with as much as $1 trillion

in piracy damages at stake in its worst-case scenario.

"It's possible that this settlement could be a model for

other cases, but it really depends on the details," he said.

The authors in Anthropic's case accused the AI company of using

millions of pirated books without permission or compensation to

teach its AI assistant Claude to respond to human prompts.

Anthropic, like other AI copyright defendants, countered

that its actions were legal under the doctrine of fair use,

which allows the use of copyrighted works without permission in

some circumstances.

U.S. District Judge William Alsup in San Francisco ruled in

June that Anthropic made fair use of the authors' work to train

its AI, but said the company violated copyright law by saving

pirated books to a "central library" that would not necessarily

be used for AI training. That created potential liabilities of

billions of dollars for Anthropic, which faced an upcoming trial

in December.

The two sides told the court on Tuesday that they had

settled the case in principle, the first accord reached in

a copyright lawsuit over generative AI training. Alsup, who must

approve the settlement, ordered the parties to submit details to

the court by Sept. 5.

Chris Buccafusco, a law professor at Duke University, said

he was surprised Anthropic chose to settle. Anthropic was "in a

position of decent strength" because of Alsup's fair-use

determination, Buccafusco said, despite the piracy decision.

"Given their willingness to settle, you have to imagine the

dollar signs are flashing in the eyes of plaintiffs' lawyers

around the country," he said.

Anthropic and an attorney for the authors did not

immediately respond to requests for comment on Wednesday.

Universal Music Group, which has separately sued

Anthropic over its alleged misuse of song lyrics to train

Claude, also did not respond to a request for comment.

OpenAI, Meta and Microsoft ( MSFT ) did not respond to questions

about how the Anthropic settlement could shape their ongoing AI

litigation.

FAIR USE QUESTIONS

The fate of the pending generative AI lawsuits could hinge on

fair use, a still-evolving concept that no court had addressed

in the cases until June.

Grimmelmann said Anthropic's settlement removes an early

opportunity for a federal appeals court to consider fair use and

issue a decision that would be binding on other cases and likely

tee up the issue for the U.S. Supreme Court.

Two days after Alsup's ruling on fair use and piracy,

another judge in the same San Francisco court took a different

approach in a similar author lawsuit against Meta. The decision

by U.S. District Judge Vince Chhabria mostly ignored piracy

issues like those Alsup addressed, but found that Meta's conduct

may not be protected because its AI could be used to "flood the

market" with replacements for the authors' work.

Chhabria ruled for Meta on fair use but said he did so only

because "these plaintiffs made the wrong arguments." Alsup,

meanwhile, downplayed fears of market displacement in the

Anthropic case.

An attorney for the authors suing Meta declined to comment

on Anthropic's settlement.

Reuters News has licensed its content to Meta for AI use,

and its parent company Thomson Reuters ( TMSOF ) is involved in a

lawsuit against Ross Intelligence that argues Ross misused

copyrighted material to train an AI-powered legal search engine.

Decisions on fair use in dozens of other AI cases are

unlikely before next year. Given the stakes, unpredictability

surrounding the rulings could provide an impetus to settle,

experts said. But it could also encourage them to hold out in

hopes of a sweeping win like Google obtained from the

2nd U.S. Circuit Court of Appeals in 2015 in a fair-use dispute

over its Google Books project.

"The one thing that was clearly going to help was an

across-the-board, as-a-matter-of-law fair use ruling" in the

Anthropic case, Buccafusco said. "That would have been the real

solution for all of the AI platforms."