Raw Deal: The OpenAI Court Got It Wrong
Raw Story Media's Lawsuit Was Wrongly Dismissed on "Standing" Grounds
Good morning! It’s your first post-election brAIn dump — featuring the “mAIn event” — my analysis of Friday’s court decision in the Raw Story Media v. OpenAI case that rocked the generative AI/media landscape (mistakenly, as I explain below). Then, it’s the “AI Litigation Tracker” — updates on key generative AI infringement cases by leading IP law firm McKool Smith.
First, a comment about the election. I certainly expect AI “Trump Change” — policy shifts that slow the pace of AI-related legislation and regulation, which shouldn’t be surprising given Elon Musk’s general guardrail-less, no holds barred approach to AI (not to mention his personal financial stake in xAI, his OpenAI competitor). Silicon Valley’s AI “Acceleration-ists” could be heard cheering in the streets of Menlo Park. But none of this should slow the pace of generative AI-focused content licensing deals — not to mention litigation — amongst the major generative AI developers and media rights-holders. I touch upon all of this below — and refer you to my proposed AI licensing solution from last week (here’s the link in case you missed it).
I. The mAIn event - Raw Deal for Raw Story Media: Court Got It Wrong When It Dismissed Its Case
This past Friday, everyone in media/generative AI circles could be found debating U.S. District Court Colleen McMahon's dismissal of Raw Story Media's lawsuit against OpenAI on "standing" grounds. Raw Story had alleged that OpenAI included Raw Story's content in its LLM training data set without consent — and stripped out its copyright management information (CMI) in violation of the DMCA (specific copyright provisions related to the digital era). Judge McMahon dismissed the case, because she concluded that Raw Story Media failed to allege any actionable “harm” or “injury.” Most Friday headlines shouted something like this from VentureBeat: “OpenAI’s data scraping wins big as Raw Story’s copyright lawsuit dismissed by NY court.”
But here’s the thing. OpenAI’s “big win” is a fleeting one that will be reversed if it gets to that point, because Judge McMahon simply got it wrong as a matter of law. I've read the opinion, served as a U.S. Federal District Court clerk right out of law school (so I know how district courts frequently make mistakes), am an IP/copyright lawyer by trade, follow the issues very closely (as you long-time readers know), and also have the good fortune of speaking with a lot of very smart people.
So here's why I’m so confident.
(1) Judge McMahon ruled that Raw Story Media had no standing because it failed to allege sufficient "concrete,” "not abstract" harm (her words) — and she pointed to both Section 1202(b)(i) of the DMCA and the TransUnion v. Ramirez case to justify her conclusion. BUT TransUnion involved the Fair Credit Reporting Act — NOT the U.S. Copyright Act. And this entirely different context matters. Here's why.
(2) Under the U.S. Copyright Act — but not under the Fair Credit Reporting Act -- unlicensed copying alone (i.e., infringement) is enough to sufficiently allege an actionable"injury" or "harm” that survives a motion to dismiss (i.e., properly pleading what it is called a “prima facie” case). There is no need to allege more.
The kind of “distribution” that was necessary for standing in TransUnion doesn’t apply in this copyright context. Here, in Raw Story Media’s case against OpenAI, a DMCA Section 1202(b)(i) violation occurs simply by the removal or alteration of copyright management information itself — and Raw Story Media properly alleged that violation. And Judge McMahon’s (more likely her law clerk’s) mis-application of TransUnion caused her to wrongly conflate Section 1202(b)(i) with 1202(b)(iii) — a completely different DMCA provision that does include a "distribution" element. But Section 1202(b)(iii) was not relevant here.
OpenAI, of course, can argue "fair use" to defend itself — and can try to raise an alleged lack of injury to support its argument. But that’s not what happened here. On Friday, Judge McMahon simply dismissed Raw Story Media’s claims as a matter of law. Wrongly.
(3) The DMCA’s Section 1202(b)(i) — the relevant provision in this Raw Story Media case — was created specifically to protect a work's "integrity" and creator "attribution." It codifies the concept of "moral rights" that is part of the World Intellectual Property Organization (WIPO) Treaty, to which the U.S. is a signatory. Again, an alleged violation of 1202(b)(i) itself is enough to survive dismissal on the basis of the pleadings. The TransUnion case’s Fair Credit Reporting Act context has no analog to WIPO.
(4) Finally, the "harm"/"injury" here is patently obvious. OpenAI's unlicensed use of Raw Story Media’s content for LLM training purposes directly harms the potentially lucrative "market" for Raw Story to license its content to other generative AI developers. Right now, virtually all major GenAI developers (including OpenAI) have signed commercial content licensing deals for LLM training purposes. OpenAI’s $250 million deal with News Corp is one such example.
So if OpenAI and other GenAI developers no longer need to enter into licensing deals for LLM training purposes, no market is left for Raw Story. The company has been essentially "substituted" out. And, as I recently wrote, market "substitution" is at the heart of the U.S. Supreme Court's recent ground-breaking Andy Warhol decision that rejected "fair use.” Adverse impact on a copyright owner’s licensing opportunities is a major deciding factor in the Copyright Act’s relevant 4-part "fair use" test.
For all these reasons, the Court here simply got it wrong. The Court of Appeals will reverse if it gets to that point. As we used to say in law school (yes, sadly, we did say this), Res Ipsa Loquitur! (which means Q.E.D. for you more technical types).
[One additional note worth mentioning: the bar to clear the “standing” requirement is extremely low. But that is just an observation worth making. It has nothing to do with my analysis above which is purely on the legal merits of the matter.]
II. AI Litigation Tracker - Updates on Key AI Infringement Cases (by McKool Smith)
Partner Avery Williams and the team at McKool Smith (named “Plaintiff IP Firm of the Year” by The National Law Journal) lay out the facts of — and latest critical developments in — the key generative AI/media infringement cases listed below via this link to the “AI Litigation Tracker”.
(1) Raw Story Media v. OpenAI
(2) Dow Jones, et al. v. Perplexity AI
(3) The New York Times v. Microsoft & OpenAI
(4) Sarah Silverman v. OpenAI (class action)
(5) Sarah Silverman, et al. v. Meta (class action)
(6) UMG Recordings v. Suno
(7) UMG Recordings v. Uncharted Labs (d/b/a Udio)
(8) Getty Images v. Stability AI and Midjourney
(9) Universal Music Group, et al. v. Anthropic
(10) Sarah Anderson v. Stability AI
(11) Authors Guild et al. v. OpenAI
(12) The Center for Investigative Reporting v. OpenAI
NOTE: Go to the “AI Litigation Tracker” tab at the top of “the brAIn” website for the full discussions and analyses of these and other key generative AI/media litigations. And reach out to me, Peter Csathy (peter@creativemedia.biz), if you would like to be connected to McKool Smith) to discuss these and other legal and litigation issues. I’ll make the introduction.
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