Court's Preliminary Injunction Rejection in UMG v. Anthropic Is Actually Likely A Victory for UMG on "Fair Use"

It's The Proverbial "Winning The Battle, But Losing The War" Scenario - Here's My Emergency Post That Explains Why

It was reported today that California federal district court judge Eumi K. Lee just rejected Universal Music Group’s preliminary injunction motion against Anthropic in that closely followed AI infringement case. Anthropic has been using UMG song lyrics to train its AI models, and UMG asked the Judge to stop Anthropic’s training dead in its tracks. Most in Tech likely will read Judge Lee’s rejection of UMG’s preliminary injunction motion as a big victory.

But I read Judge Lee’s opinion entirely differently.

To be clear, courts very rarely grant motions for preliminary injunction. So the result here certainly didn't surprise me. Instead, the most critical thing to scrutinize is the Judge's rationale in making her decision. Here, Judge Lee based her ruling on the fact that, in her words, "the market for AI training licenses has grown over the course of this lawsuit rather than diminished." She expressly noted that a vibrant market for AI training licensing now exists, which means that damages for infringement are, in fact, ascertainable if infringement is ultimately found. Preliminary injunctions are only granted when there is "irreparable harm" that cannot be compensated by monetary damages. The Judge here believes that monetary damages can be assessed based on the growing AI training licensing market.

And here's the biggest implication and punchline of Judge Lee's ruling. Tech companies are relying upon "fair use" as a defense to their infringements (by the way, since it is a defense, they bear the burden of proof). BUT perhaps the single most critical factor of the four-part "fair use" defense is factor #4, which analyzes the infringer's (Anthropic in this case) impact on an established market's licensing opportunity for the rights-holder (UMG in this case). Because Judge Lee has now explicitly noted that an established market opportunity exists for content licensing for AI training purposes — and is growing — that doesn't bode well for Anthropic's (and others') "fair use" reliance.

The fact that Anthropic chooses to use UMG's song lyrics for training means that the company must find them to be valuable. And because Anthropic uses them without consent and compensation, it naturally follows that it is robbing UMG of an otherwise valuable commercial licensing opportunity. So, rather than a big victory for Anthropic, the Judge's ruling and rationale here are likely instead significant long-term blows to Anthropic's fair use defense.

It’s the proverbial “winning the battle, but losing the war” scenario, especially in light of the separate federal court’s rejection of "fair use,” as a matter of law, in the Thomson Reuters v. ROSS Intelligence case (which is now precedent that this Judge may choose to follow). I previously wrote about that critical ruling, the first binding ruling of its kind on the fundamental issue of “fair use.”

One more important point. Earlier in this UMG v. Anthropic litigation, UMG had already won a significant victory when Anthropic agreed to implement certain "guardrails." And according to Music Business Worldwide (MBW), that agreement remains intact (and wasn't challenged by Anthropic here). So, there’s that too.

What do you think? Reach out to me at peter@creativemedia.biz.