AI Litigation Insights

Our Observations

Plaintiffs Dow Jones and Company, Inc. and NYP Holdings, Inc., publishers of The Wall Street Journal and New York Post, (collectively, Plaintiffs), have filed a lawsuit in the Southern District of New York against defendant Perplexity AI, Inc. (Perplexity AI), a San Francisco-based artificial intelligence company. Plaintiffs are large news media corporations that allege that Perplexity AI illegally copied their content, “diverting customers and critical revenues away” from Plaintiffs. Plaintiffs allege that Perplexity AI infringed on their copyrights when registered copyrighted articles from their sites were inputted into the Perplexity AI large language model and reproduced for users. As a result, Plaintiffs claim that Perplexity AI’s outputs functioned as substitutes for viewing Plaintiffs’ content. Finally, Plaintiffs argue that the use and reproduction of their content in this way dilutes their trademarks.

This Case Involves:

• Generative AI
• Trademark/Copyright
• Faulty AI Tools

Plaintiffs distinguish Perplexity AI, which provides citations to source content, from traditional search engines, by arguing that while traditional search engines necessarily copy some content, the search results rarely function as substitutes for the Plaintiffs’ content. Instead, search engines provide pathways for users of the engines to discover the content by clicking the provided links. In contrast, the nature of the summaries and articles produced by Perplexity AI are such that they render users of Perplexity AI unlikely to access Plaintiffs’ source content. Finally, Plaintiffs argue that Perplexity AI has no fair use defense, because Perplexity AI uses Plaintiffs’ content for a commercial purpose.

Plaintiffs also argue that the use of their content by Perplexity AI dilutes their trademarks, in violation of the Lanham Act. This is because content presented to users of Perplexity AI is paired with citations or attributions to the apparent source of the information. These citations use Plaintiffs’ trademarks. Plaintiffs argue that this harms their reputations for high-quality journalism because while their content is presented to users of Perplexity AI, that content may also be paired with inaccurate information generated by the machine, or “hallucinations.” These hallucinations may be false or misleading, and Perplexity AI wrongly attributes these hallucinations to the plaintiffs. This, in turn, causes users to believe the incorrect content originated from Plaintiffs’ publications, harming Plaintiffs’ reputations for accurate journalism. Plaintiffs here have taken an additional step by including specific examples, which show the AI engine outputting hallucinations attributed to Plaintiffs. Plaintiffs are represented by a new entrant on the plaintiff’s side, with high-profile counsel of record Former Attorney General William Barr.

Why We’re Watching
The lawsuit is the most recent in the fight between tech companies and publishers over how tech companies may use publishers’ copyrighted content in their AI programs without authorization.

Causes of Action:

1. Copyright Infringement (17 U.S.C. § 106) 
2. False Designation of Origin and Dilution of Plaintiffs’ Trademarks (15 U.S.C. § 1125)

Relief Requested:

• Injunctive Relief:
  • To prevent Perplexity AI from copying Plaintiffs’ content.
  • To prevent Perplexity AI from using Plaintiffs’ content.
  • To destroy Perplexity AI’s database containing Plaintiffs’ copyrighted works.
  • To destroy any derivative content Perplexity AI has made based on Plaintiffs’ copyrighted works.
  • To prevent Perplexity AI from using Plaintiffs’ trademarks.
• Damages:
  • Statutory damages of $150,000 for each instance of copyright infringement, including copies made in Perplexity AI’s index, as well as any outputs generated for users. 
  • Statutory damages, actual damages, treble damages, and disgorged profits for each instance of trademark infringement.
  • Attorneys’ fees.

Judge Insights
Judge Katherine Polk Failla was nominated by Barack Obama and confirmed by the Senate in 2013. Prior to her time on the bench, she was Assistant United States Attorney with the Southern District of New York.

Statistics:
Judge Failla grants motions to dismiss in 49% of cases where they are contested, on par with the national average of 48%.
She grants motions for summary judgment in 36% of cases, compared to a national average of 41%.
Judge Failla has an 18% reversal rate, compared to the median of 24% in the Southern District of New York. 

Copyright cases:

• Judge Failla has heard 247 copyright cases. 
• Claimants prevailed in 13% of cases.
• Defendants prevailed in 3% of cases.
• Settlements likely occurred in 74% of cases.

Plaintiff’s Counsel
Lead Counsel: Paul T. Cappuccio
Co-Counsel: William P. Barr
Firm: Torridon Law PLLC

About the attorneys:
Paul T. Cappuccio
Prior to joining Torridon Law PLLC as a partner in 2024, Paul T. Cappuccio was general counsel for Time Warner, Inc., as well as Vice Chairman of the dtx company. He has experience with corporate transactions and antitrust issues, as well as extensive experience as a senior business executive and board member for public companies. Prior to working in-house, Cappuccio was a litigation partner at Kirkland & Ellis, as well as Associate Deputy Attorney General at the US Department of Justice under William P. Barr, who is co-counsel on this case.

William P. Barr
William P. Barr has served twice as the US Attorney General of the United States, from 1991-1993 under George H. W. Bush, and from 2019-2020 under Donald Trump. After his first tenure as US Attorney General, he worked as an Executive and General Counsel for GTE Corporation and Verizon. In addition to working for the CIA and serving on the CIA’s External Advisory Board, he has served on the National Security Counsel as well as the Committee on Foreign Investment in the United States. Along with Ted Ullyot, former General Counsel of Facebook, he founded Torridon Law, PLLC in 2023.

__________

If you have any questions about this Legal Briefing, please feel free to contact any of the attorneys listed or the Eversheds Sutherland attorney with whom you regularly work.