The New York Times has filed a copyright infringement lawsuit against Microsoft and OpenAI. The lawsuit relates to content that Microsoft and OpenAI use to train their Large Language Models, LLM, which are central to Artificial Intelligence.

The purpose of copyright protection is to "promote the progress of science and useful arts." The fathers of the Constitution wanted to encourage authors to create new works and to make available those works for the public to enjoy. They also wanted to further the advancement of scientific knowledge.

This matters in relation to this particular case because copyright law aims to further the pursuit of knowledge, not to stop it dead through demands for unreasonable compensation. Under United States law, there is no copyright violation for " fair use " of the material at issue. The fair use doctrine promotes freedom of expression by permitting the unlicensed use of copyright-protected works. Under the doctrine, teaching, scholarship, and research are highlighted as examples of activities that may qualify as fair use.

Training LLMs would be considered scholarship and research. A major purpose of LLMs is to disseminate knowledge. Other factors in determining fair use include the nature of the copyrighted work — a technical article is more likely to support a claim of fair use than a creative or imaginative work. By their very nature, LLMs are technical.

But courts also look at the quantity of the copyrighted material that is used. If the use includes a large portion of the copyrighted material, fair use is less likely to be found. Here, the New York Times is at an advantage.

The fourth factor to consider under the fair use doctrine is how the unlicensed use harms the existing or future market for the copyright owners’ original work. In this matter against Microsoft and OpenAI, how is the New York Times damaged by LLMs?

Arguably no damage is done to the New York Times. We are in the first inning of the artificial intelligence revolution. The newspaper continues to report strong earnings, and the share price reflects those results. On balance, the court in the current case will weigh the interest of the New York Times against the interest of Microsoft and OpenAI and the general public in advancing artificial intelligence as rapidly as possible throughout the economy. The court will recognize that nations all over the world are rushing to deploy artificial intelligence, including LLMs. AI will be a critical strength of the U.S. A court will be loath to allow the New York Times to hold the nation hostage to its narrow self-interest.

The court will compel the two parties to negotiate in good faith. In the end, Microsoft and Open AI will have to pay some sort of compensation to the New York Times media organization, but the claim of billions of dollars in damages is risible.

The market capitalization of Microsoft is $2.8 trillion. The market capitalization of the New York Times is $8 billion. Microsoft has deep pockets. It can afford to litigate this case for a decade or longer. Because the case balances novel intellectual property against basic copyright law, it is probable that the Supreme Court will issue the final ruling if the two parties cannot agree on compensation. The legal road to the Supreme Court is long and expensive. For Microsoft, the case is a nuisance, nothing more.

James Rogan is a former U.S. foreign service officer who later worked in finance and law for 30 years. He writes  a daily note  on finance and the economy, politics, sociology, and criminal justice.