Report from Reuters
In Brief – The US 9th Circuit Court of Appeals has upheld a 2024 ruling favoring AI developers in a lawsuit brought by computer coders alleging that OpenAI’s Codex and Microsoft’s Copilot violate the Digital Millennium Copyright Act (DMCA) by reproducing copyrighted code without the original copyright management information crediting its authors. District Judge Jon Tigar dismissed the coders’ DMCA claims in 2024 but allowed their claims concerning open-source licensing violations to proceed. The opinion of the appeals court panel upheld Tigar’s DMCA dismissal, finding that Codex and Copilot generate new works of code rather than remove copyright information from existing works. The appeals court rejected applying the “substantially similar” test from traditional copyright infringement claims to DMCA claims because it would expand the DMCA beyond its intent and expose defendants to potentially ruinous damages.
Context – The proper treatment of AI training under copyright law is being debated globally, but major copyright lawsuits in US courts will be most impactful. The DMCA is part of some peripheral AI cases like this one, but the headline issue is still likely the application of the “fair use” doctrine to AI model training. Two conflicting district court opinions released in 2025 highlight the complexities. Judge William Alsup’s opinion vigorously defended generative AI training as “fair use” because AI models were highly transformative was countered the following week by Judge Vincent Chhabria’s opinion that introduced the novel concept of “indirect substitution” through which AI systems nullify the fair use defense by creating massive volumes of cheap content that are not copies of originals but are “similar enough to compete with the originals and thereby indirectly substitute for them”. The determination in this case that AI models don’t store and later produce copies, but learn from training and generate new outputs, reinforces the transformative use argument. If basic model training is judged to be fair use in the US, expect other major markets to follow suit in order not to have their local AI development efforts fall drastically behind.