Anthropic reaches settlement in landmark copyright class action

Anthropic PBC, the company behind the AI assistant Claude, and a group of authors suing it for allegedly pirating 7 million books to train its large language model, agreed Tuesday to settle what plaintiffs called "possibly the largest copyright class action ever."

The lawsuit raised novel questions about whether AI companies can invoke fair use defenses when accused of mass copyright infringement. It was one of several class actions challenging the wholesale copying of material to build large language models powering popular AI products.

The settlement notice came as Anthropic was seeking to appeal a July 17 class certification order from U.S. District Judge William Alsup that had set the case for a Dec. 1 trial. In appellate filings, Anthropic warned the order "sounds the death knell of the litigation." The company also had a motion pending before the 9th U.S. Circuit Court of Appeals to stay proceedings and push back the trial date.

Anthropic had accused Alsup of "rushing" the case to trial before his retirement, claiming it faced "hundreds of billions of dollars" in statutory damages because of the certification ruling and a June 23 order partially denying the company's motion for summary judgment on its fair use defense.

Settlement terms were not disclosed as of Tuesday. Anthropic's media relations office and legal team could not be reached for comment.

"This historic settlement will benefit all class members. We look forward to announcing details of the settlement in the coming weeks," Justin A. Nelson of Susman Godfrey LLP in Houston, co-lead counsel for the plaintiffs, said in an email. Bartz v. Anthropic PBC, 3:24-cv-05417 (N.D. Cal., filed Aug. 19, 2024).

Alsup's summary judgment ruling marked a turning point. He held the company could not claim fair use for downloading and storing more than 7 million books from pirate sites, though he granted summary judgment on its broader defense that using copies of books to train AI models could constitute fair use.

Dale Nelson, an intellectual property partner at Donaldson Callif Perez LLP in Los Angeles, said in a phone interview Tuesday that the settlement could signal a warning to other AI firms.

"Anthrophic was arguing that, you know, they could potentially be exposed to billions of dollars in damages if this trial were move forward," Nelson said. "Any of these companies that are going to roll the dice and say, 'we're just going to rely on fair use,' had to have recognized that they were taking a chance and that it might be ruled not a fair use. That's the risk you take in making that kind of a momentous decision."

Nelson, who represents independent filmmakers, documentarians, podcasters and other artists, previously spent more than 25 years in-house at Warner Bros., where she most recently served as vice president and senior intellectual property counsel.

In Anthropic's July 31 appeal of Alsup's certification order, Kathleen R. Hartnett of Cooley LLP argued the case could not proceed to trial because of the sheer number of potential plaintiffs.

"This petition seeks review of the unprecedented and erroneous certification of possibly the largest copyright class action ever involving up to seven million potential claimants, whose works span a century of publishing history ... the district court manifestly erred regarding a fundamental issue of class-action law by certifying a copyright class of massive size and complexity, despite the need for individualized inquiries into issues such as ownership, registration, validity, copying, and damages," the petition stated.

Nelson added that the burden of notifying millions of rights holders may have influenced the plaintiffs to settle despite the prospect of massive damages.

"I think the plaintiffs also felt pressure to settle because the work that they would have to do to put the lists together seemed burdensome even though they stood to potentially recover damages during trial. ... Sometimes, even a bad settlement is better than a good lawsuit financially speaking," she said.

In an order Thursday, Alsup vacated an upcoming hearing date and directed the parties to file a motion for preliminary approval of the settlement by Sept. 5. He left the trial schedule intact, writing: "Nothing in this order affects the trial date or the final pretrial conference date or any other trial-related date in the event that the settlement craters."

Anthropic is represented by Joseph Farris, Douglas Winthrop, Jessica Lim Gillotte, Angel T. Nakamura, Estayvaine Bragg of Arnold & Porter Kaye Scholer LLP; Daralyn J. Durie, Whitney R. O'Byrne, Ramsey W. Fisher, Jackson Lane, Fitz B. Collings, Mary Prendergast and Aditya V. Kamdar of Morrison & Foerster LLP; Ephraim McDowell and Alexander A. Kasner of Cooley LLP; and Mark Lemley of Lex Lumina LLP.

Co-lead counsel for the plaintiffs include Rohit D. Nath, Justin A. Nelson, Alejandra C. Salinas, Jordan W. Connors, J. Craig Smyser and Samir H. Doshi of Susman Godfrey LLP; Rachel Geman, Jacob S. Miller, Danna Z. Elmasry, Daniel M. Hutchinson, Reilly T. Stoler, Jallé H. Dafa and Betsy A. Sugar of Lieff Cabraser Heimann & Bernstein LLP. Scott J. Sholder and CeCe M. Cole of Cowan, DeBaets, Abrahams & Sheppard LLP also serve as counsel for the class.