A copyright lawsuit over pirated books could result in ‘business-ending’ damages for Anthropic

AI·LawA copyright lawsuit over pirated books could result in ‘-ending’ damages for AnthropicBy Beatrice NolanBy Beatrice NolanReporterBeatrice NolanReporterBeatrice Nolan is a reporter at Fortune covering

Furthermore, Beatrice previously worked as a reporter at Insider, covering stories AI and Big

Additionally, She's based in Fortune's London office and graduated from the University of York with a bachelor's degree in English

Furthermore, SEE FULL BIO The class-action lawsuit against the company centers on Anthropic’s use of potentially pirated books to train its large language model

While a federal judge ruled that training on lawfully obtained books may qualify as fair use, the court will hold a separate trial to address the allegedly illegal acquisition and storage of copyrighted works, in today's financial world

Leading AI lab Anthropic is reckoning with a legal battle that could jeopardize the company’s future

Conversely, The Judge presiding over the case, Judge William Alsup, has recently ruled that training AI models on lawfully-acquired books qualifies as “fair use,” and that AI companies do not need a license from copyright holders to conduct such training, a decision that was viewed as a major win for the AI sector

Additionally, However, the still unresolved issue is how Anthropic obtained and stored the copyrighted books

The judge drew a distinction when it came to the use of pirated materials, advising Anthropic that a separate trial “on the pirated copies” and “the resulting damages” would be forthcoming, in this volatile climate. “The blem is that a lot of these AI companies have scraped piracy sites LibGen…where books have been uploaded in electronic form, usually PDF, without the permission of the, without payment,” Luke McDonagh, an associate fessor of Law at LSE, told Fortune

Santa Clara Law fessor Ed Lee said in a blog post that the ruling could leave Anthropic facing “at least the potential for -ending liability. ” The plaintiffs are unly to ve direct financial harm, such as lost sales, and are ly to instead rely on statutory damages, which can range from $750 to $150,000 per work

That range depends heavily on whether the infringement is deemed willful

Anthropic did not immediately respond to a request for from Fortune, in today's market environment

However, However, the company has previously said it “respectfully disagrees” with the court’s decision and is exploring its options, which might include appealing Alsup’s ruling or offering to settle the case

Moreover, A trial, which is the first case of a certified class action against an AI company over the use of copyrighted materials, is currently scheduled for December 1

Additionally, The verdict could determine the outcomes of similar cases, such as a high-file battle between OpenAI and dozens of and publishers

Moreover, While the courts do appear to be leaning towards allowing fair use arguments from AI companies, there’s a legal divergence regarding the acquisition of copyrighted works from shadow sites

In a recent copyright case against Meta, Judge Vince Chhabria argued that the transformative purpose of the AI use effectively legitimizes the earlier unauthorized downloading

The ruling, according to McDonagh, suggested that the positive, transformative use of the works could “correct” the initial blematic acquisition, whereas Judge Alsup viewed the downloading of books from unauthorized shadow libraries as “inherently wrong,” suggesting that even if the AI training use might be considered fair use, the initial acquisition of works was illegitimate and would need compensation

However, The two judges also diverged on whether AI-generated outputs could be deemed to compete with the original copyrighted works in their training data

Judge Chhabria acknowledged that if such competition was ved it might undercut a fair use defense but found that, in the Meta case, the plaintiffs had failed to vide sufficient evidence of market harm, whereas Judge Alsup that generative AI outputs do not compete with the original works at all

The legal question around AI companies and copyright work has also become increasingly political, with the current administration pushing to allow AI companies to use copyrighted materials for training under broad fair use tections, in an effort to maintain U

Meanwhile, Leadership in artificial intelligence, in light of current trends

McDonagh said the case against Anthropic was unly to leave the company bankrupt, as the Trump administration would be unly to allow a ruling that would essentially destroy an AI company

Judges are also generally adverse to issuing rulings that could lead to bankruptcy unless there is a strong legal basis and the action is deemed necessary

Courts have been known to consider the potential impact on the company and its stakeholders when issuing rulings that could result in liquidation

In contrast, “The US Supreme Court, at the moment, seems quite friendly to the Trump agenda, so it’s quite ly that in the end, this wouldn’t have been the kind of doomsday scenario of the copyright ruling bankrupting anthropic,” he said, considering recent developments

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