Anthropic Reaches $1.5 Billion Author Copyright Settlement (2)

Anthropic PBC will pay at least $1.5 billion plus interest to resolve an authors’ copyright lawsuit over the AI company’s downloading of millions of pirated books, one of the largest settlements over artificial intelligence and intellectual property to date.

A request for preliminary approval of the accord, involving one of the fastest-growing AI startups, was filed Friday with a San Francisco federal judge who had set the closely watched case for trial in December.

The settlement is among the first in dozens of copyright lawsuits filed against AI leaders including OpenAI Inc., Meta Platforms Incand Midjourney Inc. and alleging misuse of proprietary online content. Anthropic had said in a court filing that it felt “inordinate pressure” to cut a deal to avoid a potentially business-ending trial that could have put the company on the hook for as much as $1 trillion in damages.

The startup recently reached $5 billion in run-rate revenue and raised $13 billion in investment at a $183 billion valuation. But Anthropic is still ultimately unprofitable due to the high costs of developing AI.

“We remain committed to developing safe AI systems that help people and organizations extend their capabilities, advance scientific discovery, and solve complex problems,” an Anthropic spokesperson said in a statement.

A lawyer representing the plaintiffs said the accord “far surpasses any other known copyright recovery.”

“This settlement sends a powerful message to AI companies and creators alike that taking copyrighted works from these pirate websites is wrong,” Justin Nelson of Susman Godfrey said in a statement.

The case was brought as a class action on behalf of the authors of as many as 7 million books who claimed that the startup illegally used downloaded pirated versions of their copyrighted texts to train its large-language AI models — even though it was unclear whether those materials were actually used for training. A lawsuit of that size could have driven the company to bankruptcy if it were to lose in trial.

Under the terms of the deal, Anthropic will pay about $3,000 for each of about 500,000 books in the class. If more claims are submitted, the total payout would grow. The company also agreed to destroy data it was accused of illegally downloading. A hearing on the proposed settlement is set for Sept. 8.

“This is a landmark event, the first major settlement in a case against a generative AI company.” said attorney Chad Hummel at McKool Smith, who isn’t involved in the litigation. “The settlement might be industry guiding and set corporate precedent on what can and can’t be accessed without consent.”

Tod Cohen, a partner at Manatt, Phelps & Phillips LLP, called it a partial victory for Anthropic, noting that the settlement amount is less than 1% of the company’s valuation.

“Seems like a win for Anthropic that it isn’t required to break the models, just delete the data,” he added.

Read More: Anthropic Settlement Unlikely to Spur Wave of AI Copyright Deals

Other lawyers have expressed doubts that the deal will propel a wave of settlements in the remaining lawsuits, noting the authors cinched several key pre-trial wins against Anthropic that gave them critical leverage.

Anthropic still faces copyright claims in lawsuits brought by music publishers and social media platform Reddit Inc. Music publishers allege the AI company engaged in wholesale copying of protected lyrics to train its signature large language model, Claude, and Reddit’s suit accuses Anthropic of using the social media content without permission for AI training.

Some of Anthropic’s competitors such as OpenAI — which is being sued by The New York Times over copyright claims — have struck multimillion-dollar data licensing deals with major publishers, in part to avoid litigation. Anthropic has not publicly disclosed any such licensing deals to date.

Deven Desai, a professor at Georgia Institute of Technology, offered another view of the settlement.

“Books nowadays average about $20 per work,” he said. “They should’ve just bought them.”

The case is Bartz et al v. Anthropic PBC, 24-cv-05417, US District Court, Northern District of California (San Francisco).

(Updates)

To contact the reporters on this story:
Shirin Ghaffary in San Francisco at sghaffary@bloomberg.net;
Annelise Levy in Arlington at agilbert119@bloomberg.net;
Aruni Soni in Arlington at asoni121@bloomberg.net

To contact the editors responsible for this story:
Seth Fiegerman at sfiegerman@bloomberg.net

Kartikay Mehrotra (Bloomberg Law), Peter Blumberg

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