As artificial intelligence firms face multibillion-dollar copyright lawsuits over the data used to train their large-scale AI models, AI startups OpenAI and Anthropic are now mulling over whether to deploy investor funds to settle potential claims, according to the Financial Times.
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The move comes as insurance companies appear not ready to properly extend coverage due to the scale of risks such startups’ business activities involve, the outlet said, citing insider sources. This is even as sources note that OpenAI’s arrangement with insurance giant Aon (AON) cannot provide comprehensive protection against sky-high legal claims.
Legal Storms Threaten AI Startups
Since their emergence over the last few years, OpenAI and Anthropic, which respectively count U.S. tech giants Microsoft (MSFT) and Amazon (AMZN) among their chief backers, have been hit with multiple lawsuits alleging unauthorized use of their content.
OpenAI is currently facing a multi-billion lawsuit from The New York Times (NYT), which dragged the artificial intelligence firm to court in 2023, claiming that millions of its articles were used in ChatGPT responses without its permission. Earlier this year, a U.S. district court rejected efforts by OpenAI and Microsoft to dismiss the lawsuit.
Anthropic is also fighting a similar battle, even as it recently reached a settlement in a lawsuit filed by a group of American authors who alleged unauthorized use of their books in feeding the company’s AI models. Another AI developer, Nvidia-backed (NVDA) Perplexity AI is also not left out of the legal mess.
OpenAI Considered Going ‘Captive’?
Meanwhile, OpenAI reportedly deliberated over whether to establish a ‘captive’– a subsidiary insurance company designed to cover a business’ own risks, previously deployed by top firms such as Google (GOOGL) and Meta (META). However, the company told FT it does not currently have one but instead continues to study what insurance architecture will fit the company as it expands.
Despite the challenges, AI developers have continued to expand. OpenAI has ramped up its funding drive and is now estimated to be worth about $500 billion. Similarly, Anthropic recently expanded its valuation three-fold, hitting $183 billion.
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