, Tim Londergan and Chris Buntel unpack one of the biggest developments in intellectual property this year: the $1.5 billion Anthropic copyright settlement. The discussion explores what the case means for creators, AI companies, and the broader balance between innovation and protection in the age of large language models (LLMs).<\/span><\/p>\nTim and Chris walk through the details of the lawsuit brought by author Andrea Bartz and others, who alleged that Anthropic\u2019s AI systems scraped copyrighted books without permission. They discuss how the resulting settlement reframes the boundaries of fair use and how it signals that AI generated progress now comes with a royalty price tag.<\/span><\/p>\nThe conversation expands beyond copyright to consider how AI challenges traditional IP frameworks, especially around authorship, ownership, and creation. Chris and Tim also draw parallels to trade secret law, noting that while AI cannot legally invent or author, it can still create valuable trade secrets, making this form of protection increasingly central to the AI industry\u2019s future.<\/span><\/p>\nTakeaways<\/b><\/h3>\n\n- \n
\n- The Anthropic settlement sets a major precedent for AI and IP, affirming that large language models must pay for the data they use.<\/span><\/span><\/li>\n
- Fair use arguments have limits. When entire works are reproduced or leveraged commercially, creators deserve compensation.<\/span><\/li>\n
- <\/span>The settlement highlights that copyright is only one part of the AI and IP equation. Trade secrets now represent the core value of many AI companies.<\/span><\/li>\n
- <\/span>AI cannot be a legal inventor or author, but it can generate protectable trade secrets, reshaping how innovation is defined and safeguarded.<\/span><\/li>\n
- <\/span>The outcome reflects a cost of doing business for AI developers, establishing a model for how future disputes may be settled.<\/span><\/li>\n
- <\/span>As Tim and Chris note, trade secrets are no longer plan B. They are becoming the default protection strategy for cutting edge technology.<\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n
Transcript:<\/b><\/h3>\n
Tim (00:14)<\/span>
<\/span> Chris, we’re back.<\/span><\/p>\nChris Buntel (00:15)<\/span>
<\/span> Hey Tim, it’s good to be back. Episode 19, we\u2019re almost to 20. Hard to believe.<\/span><\/p>\nTim (00:18)<\/span>
<\/span> Yeah, we\u2019re going to quickly get to 20 this week. We\u2019ll record one more tomorrow so we can hit the 20 milestone. Julianna will be happy with us.<\/span>
<\/span> It\u2019s been a little while since I\u2019ve been on, and we just had some big news today on closing financing at Tangibly. That\u2019s been awesome.<\/span>
<\/span> And I just want to say thanks to you and our guest hosts for the last couple of episodes. That\u2019s been pretty cool.<\/span><\/p>\nChris Buntel (00:55)<\/span>
<\/span> Yeah, we\u2019ve had fun even without you.<\/span>
<\/span> We had some great guest hosts and really good, compelling topics. So we keep moving forward.<\/span><\/p>\nTim (00:58)<\/span>
<\/span> Exactly. It\u2019s a great reminder that you\u2019re completely replaceable.<\/span>
<\/span> It\u2019s like, \u201cTim\u2019s gone? Who cares? Let\u2019s keep going.\u201d I love it.<\/span><\/p>\nAll right. Today we\u2019re going to be talking eventually about trade secrets, but first we\u2019re going to be talking about copyrights.<\/span>
<\/span> We\u2019re covering the biggest news in intellectual property in the past couple of weeks, the Anthropic case.<\/span><\/p>\nAnthropic is the AI company that produces the product Claude, and it\u2019s become a behemoth very quickly. One of the fastest growing startups in history. They\u2019re doing about a five billion dollar run rate as we speak, and they just closed a financing round of thirteen billion at a one hundred eighty three billion dollar valuation.<\/span><\/p>\nChris Buntel (02:02)<\/span>
<\/span> Yeah, one hundred eighty three billion valuation, which is amazing.<\/span><\/p>\nTim (02:06)<\/span>
<\/span> A lot of happy investors. So let\u2019s talk about Andrea Bartz and the other plaintiffs in this case. Who is she? And then let\u2019s get into the guts of the case.<\/span><\/p>\nChris Buntel (02:30)<\/span>
<\/span> Andrea is a book author, apparently a quite successful one. She\u2019s written five books, which is five more than I\u2019ve written.<\/span>
<\/span> She and her class said that the scraping that was done by the AI system of all their book contents was copyright infringement.<\/span><\/p>\nTim (02:35)<\/span>
<\/span> Five books? Five more than I\u2019ve written. Yep. Me too.<\/span><\/p>\nChris Buntel (03:00)<\/span>
<\/span> It led to a compelling case balancing the needs of two groups.<\/span>
<\/span> On one hand, you have authors who spend time and effort to produce books. On the other, you have the large language model industry that needs massive amounts of data to function.<\/span><\/p>\nThey argue they need to do this to have a viable industry. But copyright holders say, \u201cYou can use my content, but you have to pay me for it,\u201d just like if someone made a physical copy of a book.<\/span><\/p>\nIt led to a lot of back and forth and ultimately a massive one point five billion dollar settlement, the high watermark for copyright infringement, which was approved by the judge just days ago.<\/span><\/p>\nTim (04:05)<\/span>
<\/span> Yeah. Anthropic, as well as OpenAI, is in a lawsuit right now with the New York Times and probably others.<\/span><\/p>\nThe LLM folks argue this is fair use, that this information is out there, and they can read it, learn from it, and build products from that learning.<\/span>
<\/span> But the Anthropic settlement basically says fair use is not enough, you have to pay for it.<\/span><\/p>\nChris Buntel (04:46)<\/span>
<\/span> Well, it\u2019s not like they were copying one sentence or summarizing a story. They were copying entire books, and certainly for commercial purposes.<\/span><\/p>\nIt wasn\u2019t parody or commentary, it was commercial use. The authors said, \u201cThis is blatant copying for commercial gain, and you\u2019re copying my entire catalog.\u201d<\/span><\/p>\nOpenAI\u2019s case with the New York Times is the same story, just with news content instead of books.<\/span><\/p>\nTim (05:40)<\/span>
<\/span> So if I want to learn something from a book, I buy the book, I read it, and I pay for it.<\/span>
<\/span> If I want to use the learnings from that book, I can, but I can\u2019t plagiarize it.<\/span><\/p>\nSo is that the right analogy here? If I want to go learn from the book, I have to pay for the book. Is that effectively what this means?<\/span><\/p>\nChris Buntel (06:34)<\/span>
<\/span> That\u2019s effectively it. You\u2019re getting a license to consume the book for your own purpose as a normal consumer.<\/span>
<\/span> And it\u2019s meant to reward creative people.<\/span><\/p>\nIf anyone could copy books for free, why would people write new books? That\u2019s the whole premise of IP law, to reward creation.<\/span>
<\/span> When someone copies without permission, the creator deserves compensation.<\/span><\/p>\nThat principle applies here just as well.<\/span><\/p>\nTim (07:32)<\/span>
<\/span> Right. So did OpenAI\u2019s lawyers just have a couple of all-nighters figuring out a new strategy in that New York Times litigation or what?<\/span><\/p>\nChris Buntel (07:53)<\/span>
<\/span> Yeah, I think so. This is a unique situation.<\/span>
<\/span> Before large language models, no one would physically photocopy millions of books. It just wasn\u2019t possible.<\/span><\/p>\nNow, technology allows it. So all these models are doing the high tech version of photocopying entire libraries.<\/span><\/p>\nTechnology forces IP law to evolve. We\u2019re facing situations that would\u2019ve never happened otherwise.<\/span><\/p>\nTim (08:48)<\/span>
<\/span> That\u2019s super interesting. You and I have talked about AI\u2019s impact on trade secrets and patents.<\/span><\/p>\nThe standard is that AI can\u2019t be an author on a patent.<\/span><\/p>\nChris Buntel (09:09)<\/span>
<\/span> And can\u2019t be a creator of a copyright either. AI isn\u2019t an inventor or artist.<\/span><\/p>\nTim (09:16)<\/span>
<\/span> But it could be the inventor of a trade secret, right?<\/span><\/p>\nChris Buntel (09:24)<\/span>
<\/span> Yes. Trade secrets are different. They don\u2019t require a human creator. There\u2019s no such thing as an inventor of a trade secret.<\/span><\/p>\nThe idea of an AI creating a trade secret is perfectly fine because there\u2019s no human requirement like there is for patents or copyrights.<\/span><\/p>\nTim (09:30)<\/span>
<\/span> Right. Exactly. Fine. Okay, yes, you\u2019re being a lawyer.<\/span>
<\/span> We\u2019ll just call it the trade secret creator. There you go.<\/span><\/p>\nAnyway, my point was this settlement feels like the first big step in bringing some clarity around what the future looks like with AI and copyright.<\/span><\/p>\nChris Buntel (10:33)<\/span>
<\/span> That\u2019s right. And these litigations are just the start.<\/span><\/p>\nUltimately, this becomes a cost of doing business for large language models.<\/span>
<\/span> At first, I reacted like most people, wow, one point five billion is a lot of money.<\/span>
<\/span> But if you look at it as a tax or royalty to get access to all this content, it\u2019s actually not that bad.<\/span><\/p>\nTim (11:12)<\/span>
<\/span> Yeah. Let\u2019s get into that.<\/span>
<\/span> A billion and a half, and their valuation is one hundred eighty three billion. This isn\u2019t going to kill them.<\/span><\/p>\nThis was a one-time cost, not an ongoing royalty. But it\u2019s not the end either because they scraped everything, not just books.<\/span><\/p>\nChris Buntel (11:52)<\/span>
<\/span> That\u2019s right.<\/span><\/p>\nTim (12:18)<\/span>
<\/span> Music, lyrics, anything creative.<\/span><\/p>\nChris Buntel (12:23)<\/span>
<\/span> Exactly. Music is a whole other category that was likely scraped too.<\/span><\/p>\nTim (12:35)<\/span>
<\/span> Right, we\u2019ll save that for another podcast.<\/span>
<\/span> So, when this one point five billion dollar check clears, who\u2019s getting it?<\/span><\/p>\nChris Buntel (12:39)<\/span>
<\/span> It gets distributed to the authors. Each author gets a fixed amount, around three thousand dollars.<\/span><\/p>\nTim (13:05)<\/span>
<\/span> Don\u2019t worry, we have a lot of dog lovers in our audience, Chris. Someone\u2019s at your door.<\/span><\/p>\nChris Buntel (13:09)<\/span>
<\/span> We do. But yes, the authors each get paid.<\/span>
<\/span> For some, three thousand is small, like for bestsellers.<\/span>
<\/span> But for someone who sold two copies to family, that\u2019s a windfall.<\/span><\/p>\nTim (13:39)<\/span>
<\/span> Right.<\/span><\/p>\nChris Buntel (14:10)<\/span>
<\/span> It\u2019s a huge group, about half a million authors.<\/span><\/p>\nTim (14:19)<\/span>
<\/span> Even if they owe ten times that, that\u2019s still maybe ten billion total, half a percent of their value. Manageable.<\/span><\/p>\nChris Buntel (15:05)<\/span>
<\/span> Exactly. It\u2019s an amount they can handle. You don\u2019t want royalties so high they kill your business model, and that\u2019s not the case here.<\/span><\/p>\nTim (15:10)<\/span>
<\/span> Yeah. I think this settlement is good news for both sides.<\/span>
<\/span> The authors get something, the company moves on, and it sets a precedent.<\/span><\/p>\nOther AI companies will likely owe similar payouts now.<\/span><\/p>\nChris Buntel (16:01)<\/span>
<\/span> Yes, and most authors will be happy with that. It\u2019s fair and it provides certainty.<\/span><\/p>\n