NYT vs. OpenAI/Microsoft legal battle: Who wins? Analysts weigh in

It was reported yesterday that the New York Times (NYT) filed a lawsuit against ChatGPT developer OpenAI and Microsoft (NASDAQ:), alleging copyright infringement.

The lawsuit claims that OpenAI’s ChatGPT large language models (LLMs) are benefiting from copyrighted material. The New York Times is pursuing compensation, the elimination of all LLMs containing the Times’s data, a permanent injunction preventing Microsoft and OpenAI from engaging in alleged copyright-infringing activities, and additional remedies.

Similar legal actions have been taken in other sectors, such as artists suing generative image LLMs. GitHub, owned by Microsoft, and OpenAI are facing a class-action suit over the use of source code in OpenAI’s Codex LLM, supporting Microsoft’s GitHub Copilot.

AI providers argue that LLMs are protected from copyright infringement under the ‘fair use’ standard, asserting that these tools generate new content rather than replicate copyrighted material.

Analysts at Bank of America see “little impact to pace of copilot development”, as well as “little/no impact to Azure’s AI revenue in the near-term.”

“Microsoft has established a responsible AI Council that meets regularly to establish standards for data privacy and to prevent LLM hallucinations and bias,” analysts noted in a report.

“For example, Security Copilot is trained on Microsoft’s own data such as threats to its own datacenter (the second largest globally). Similarly, GitHub Copilot is based on the OpenAI Codex LLM, though the data feeding Codex for GitHub Copilot is likely restricted to Microsoft’s own code used for developing the broad library of Azure services and other Microsoft offerings.”

In the meantime, other content producers are likely to follow suit and file lawsuits against LLM developers.

“We expect more copyright suits to be brought against OpenAI, Microsoft, and other GenAI builders while courts work through cases brought by data owners. We continue to believe Microsoft is positioned favorably to navigate this and other potential cases,” analysts at Macquarie wrote in a note.

As far as NYT is concerned, analysts at Evercore ISI highlighted that AI has shifted from being a threat to now being seen as a potential growth opportunity.

“We believe the most likely outcome is that NYT signs several AI licensing deals over the next few years that are each worth low tens of millions of dollars of revenue per year that largely flows through to AOP,” analysts wrote.

NYT shares closed 2.8% higher yesterday.