Anthropic Settles AI Training Case for $1.5 Billion +

The Anthropic settlement shows just how costly copyright missteps can be in AI development. Anthropic has agreed to a $1.5B settlement after a court found that keeping a permanent library of pirated books was not fair use—even though training its AI model on those same works was.   On this episode of The Briefing, Weintraub attorneys Scott Hervey and Matt Sugarman discuss the ruling, the settlement, and what it means for future copyright claims against AI companies. Show Notes:  Scott: In a previous episode, we broke down a key ruling in the Anthropic AI Training case. That one asked, what happens when an AI company trains its model on millions of books? Some purchased, some pirated. In that closely watched decision, a federal judge said, the training itself was fair use, comparing it to how humans learn by reading. But keeping pirated copies of those books in a permanent digital library, that crossed the line. I'm Scott Hervey, a partner with the law firm of Weintraub Tobin. I'm joined today by my partner, Matt Sugarman. Today, we are going to talk about the one big question that ruling left open. What's the price tag for that mistake? That answer just came in, and it's a big one on this installment of the briefing. Matt, welcome back to the briefing. It's good to have you. Matt: Thank you, Scott. It's good to be here. Scott: Great. Well, this one's a good one. I know you and I both talk a lot about these AI training cases, and we covered the meta case previously. But why don't you give us a quick backstory on this case. Matt: Okay, Scott, let's rewind for a second. In 2021, Anthropic trained its Claude model on a massive data set of books, articles, websites, you name it. But instead of licensing the books, they grabbed millions of copyrighted works straight off the pirate sites. Scott: Right. They did license them by some, but for sure, they pirated millions of books. Like you said, we're not talking about a few. We're talking about more than seven million pirated books. And those works include some very notable authors. At the same time, they bought millions of print books, they scanned them, and they built this huge searchable digital library. Matt: That's correct, Scott. And that's what set off the lawsuit. The author said that Anthropic infringed their copyrights in three separate ways: downloading the pirated books, using them to train Claude, and keeping digital copies in a permanent internal library. Scott: So when Anthropic moved for summary judgment on fair use, Judge William Alsup, of the Northern District of California, didn't really give them a clean win. Instead, he carved up their conduct into three categories. Matt: That's right. Training AI on books, scanning and digitizing legally-purchased print books, and then the big problem, keeping pirated books in a permanent digital library. Scott: And the judge treated each one differently. Matt: Correct. First, training Claude with the books, the court said that was fair use. And not just fair use, he called it spectacularly transformative. Scott: That's right. He did call it spectacularly transformative. Even if Claude absorbed a lot of the underlying materials, the judge pointed out that the model wasn't spitting out verbatim chunks of the author's books. Matt: Well, the second point was digitizing purchased printbooks. The authors argued that converting them into searchable PDFs was also in free trade. Scott: But the court pushed back. Because Anthropic lawfully bought the books and then destroyed the physical copies and only kept one digital version for internal use, that passed muster as fair use. Matt: Scott, the judge even went out of his way to say that this use was more transformative than in Texaco. Google Books and Sony Betamax, and clearly different from the Napster case. Scott: Right, clearly different from the Napster case. That brings us to the third use,