On Monday, a judge approved a $1.5 billion settlement between Anthropic and authors, ending the largest copyright class-action ever certified and granting the largest copyright settlement ever reached.
Back in May, some authors fought to block the settlement, which was proposed after the court ruled that Anthropic training AI on books was fair use; however, its piracy of works was likely not.
Authors opposing the settlement argued that lawyers’ fees were too high and authors’ payouts were too low. Hoping to avoid accepting the estimated $3,000-per-work payout and file separate lawsuits to seek higher damages, a handful of authors tried to opt out past the deadline.
In her order, US District Judge Araceli Martínez-Olguín overruled objections to the settlement as lacking merit. She emphasized that about 95 percent of the class received notifications and approximately 91 percent of authors and publishers impacted have already filed claims. Only 350 class members opted out, while another 54 sought to object or filed late opt-out requests, Martínez-Olguín said.
The high rate of participation suggested that most authors received timely notice of the distribution plan, agreed it was “fair,” and supported the settlement, Martínez-Olguín wrote. She also noted that the $3,000-per-work payouts were “four times the minimum statutory damages.”
Lawyers fees, plaintiffs awards cut
Although Martínez-Olguín approved the total settlement amount, she reduced both lawyers’ fees and the requested awards for the three authors who represented the class in the litigation.
Lawyers originally asked for 20 percent of the settlement in fees, requesting $300 million. Ahead of Martínez-Olguín’s ruling, that percentage was reduced to 12.5, with the total fees requested amounting to approximately $187 million.
The judge ruled that 12.5 percent was too high, however, cutting fees down to less than 7 percent of the settlement fund, which is about $101 million.
Some of those fees include future work that lawyers will do to distribute funds, and some authors argued that lawyers’ projections for time spent were alarmingly inflated. Acknowledging these concerns, Martínez-Olguín wrote in a footnote that the court decided to take “an additional step to protect the interests of the Class.” Once payouts have been finalized, lawyers will be required to file a post-distribution accounting, and if their fees are less, then the court “may reduce” them, Martínez-Olguín said.
Although the settlement likely relieves the three authors who spent years defending their works and 506,194 works from potential class members, the lead plaintiffs are likely disappointed by a decision to reduce their requested service awards from $50,000 to $15,000.
But Martínez-Olguín said that the higher amount was “unreasonable,” despite authors spending substantial time and resources on both litigation and the settlement negotiation. Without a sign that authors may face retaliation for filing the lawsuit, the judge ruled that lower awards were due.
In a statement to Reuters, lead plaintiffs said that the settlement “brings us one step closer to real accountability for Anthropic and puts all AI companies on notice they can’t shortcut the law or override creators’ rights.”
It’s unlikely, but still possible, that authors may receive more than $3,000 per work.
“If any funds remain in the Settlement Fund after all Valid Claims are paid, the Parties anticipate a redistribution of the remaining funds to Settlement Class Members unless it is economically infeasible to do so,” Martínez-Olguín said.
Authors’ lawyers celebrated the judge’s approval, writing in a press release that “rightsholders came together to call foul” on Anthropic’s piracy and describing support for the settlement among them as “overwhelming.”
Anthropic also seems happy to be done arguing about the settlement. In a statement provided to Ars, Anthropic’s deputy general counsel, Aparna Sridhar, said that Anthropic is glad the case’s landmark ruling established that its AI training was fair use and is happy that most rightsholders have already filed claims.
“We are pleased that more than 91 percent of authors and publishers covered by the settlement have claimed their share of the payment, and we’re looking forward to bringing this matter to a close,” Sridhar said.
Anthropic blocked last-minute opt-outs
For every opt-out granted, Anthropic risks facing separate litigation on what Martínez-Olguín said remains a complex case for courts to assess. It makes sense then that Anthropic was motivated to block delayed requests to opt out.
Some authors who opposed the settlement argued that they did not receive timely notices, the opt-out period was too short, and the settlement awards to authors were unacceptable, because the Copyright Act allowed for potentially higher statutory damages.
Martínez-Olguín confirmed that 350 class members successfully opted out of the settlement, but dozens of objections were denied, as were at least nine authors’ direct requests to opt out after the March 30 deadline.
Ultimately, Martínez-Olguín overruled most of the objections and denied most of the late opt-out requests.
The court only accepted two late opt-out requests from authors who showed “excusable neglect” in failing to meet the deadline, Martínez-Olguín said.
The two were co-authors who did not receive settlement notices. One author filed an opt-out request a few days late, which was granted, while the other request was granted after a much longer delay, due to the author suffering a stroke. That author also garnered the court’s sympathy by noting that she “lives in Mexico, speaks Spanish, was not able to understand the class notice, and asserts no Spanish translation was provided.”
One of the last authors to try to escape the settlement at the last minute was Donald Passman, an entertainment lawyer and author who sent his request at the end of June. That was three months after the deadline, which Martínez-Olguín said was “inexcusably late” since records showed the notices were delivered to his current address, where at least one notice was “received,” albeit more than a month after the opt-out deadline.
In a court filing, Passman argued that evidence showed he received late notice of the settlement. He allegedly couldn’t even rely on his publisher, Simon & Schuster, to forward notices and “had no information about the existence of any opt-out deadline” until he received a letter past the deadline that only invited him to claim his payout and did not mention opt-outs.
Passman did not immediately respond to Ars’ request to comment on the settlement approval. But he’s likely disappointed, since he argued that his book, All You Need to Know About the Music Business, is a key industry text and “the estimated per-work settlement payment of approximately $3,351.39 does not adequately compensate me for the potential value of my individual copyright claims.”
Anthropic fought Passman’s attempt to opt out, arguing that he took months to file his opt-out request after learning about the settlement. According to Anthropic, it allegedly strained credulity that Passman “somehow did not hear about the largest copyright settlement ever in a case that generated mountains of headlines.”
“Allowing Mr. Passman to opt out after such a long and unjustified delay would invite others to try the same, undermining finality and risking undue delay in the distribution of Settlement funds,” Anthropic argued. “In a Class of hundreds of thousands, only a tiny fraction—approximately 400—have sought to opt out.”
Martínez-Olguín agreed with Anthropic and said that granting Passman’s request risked opening the floodgates for other authors to back out of the settlement.
In her order, Martínez-Olguín reminded authors that the settlement provided non-monetary benefits they seemed to be ignoring. For one, authors can avoid costly, lengthy, complex litigation that could result in a loss with “zero recovery,” she said, citing precedent showing that “prompt closure” provides value to class members. For another, the settlement requires Anthropic to destroy all their works and allows for future litigation, should Anthropic misuse their works after the dust settles.
