The community of copyright AI watchers has been eagerly awaiting the first case to evaluate the legality of using copyright-protected works as training data. We finally have it, and it has a lot of copyright law experts scratching their heads and wondering what it means for the AI industry.
On February 11, 2025, Third Circuit federal appeals court Judge Stephanos Bibas—sitting by designation in the U.S. District Court for the District of Delaware—issued a decision that is likely to shape the future of AI copyright litigation. By granting partial summary judgment to Thomson Reuters Enterprise Centre GmbH (“Thomson Reuters”) against Ross Intelligence Inc. (“Ross”), the court revisited and reversed its earlier 2023 opinion and rejected Ross’s fair use defense. Although this case involves a non-generative AI application, the reasoning has implications for the more than 30 ongoing AI copyright cases currently being litigated.
Case Overview
The Ross litigation centers on allegations that Ross used copyrighted material from Thomson Reuters’ Westlaw—a leading legal research platform—to train its AI-driven legal research tool. Ross wanted to use the Westlaw headnotes to train its AI model, but Thomson Reuters would not grant Ross a license. Instead, Ross commissioned “Bulk Memos” from a third-party provider. These memos, designed to simulate legal questions and answers, closely mirrored Westlaw headnotes—concise summaries that encapsulate judicial opinions. After determining that 2,243 headnotes were substantially similar to the Westlaw headnotes the court held that this was direct copyright infringement and rejected Ross’s fair use defense.
Breaking Down the Fair Use Analysis
The court evaluated the four statutory fair use factors, with two—“purpose and character” and “market effect”—proving decisive:
1 – Purpose and Character of the Use: The court found that Ross’s use was commercial and aimed at developing a product that directly competes with Westlaw. Despite Ross’s argument that its copying was merely an “intermediate step” in a broader process, the judge rejected the intermediate copying cases (discussed below), emphasizing that “Ross was using Thomson Reuters’s headnotes as AI data to create a legal research tool to compete with Westlaw.” Importantly, the court’s analysis was informed by the framework established in the recent Supreme Court decision in Warhol v. Goldsmith, which stressed that reproduction fails to constitute a transformative use if the copying serves a similar market function as the original. The Warhol precedent underlines that transformation requires a “further purpose or different character” from the original work, a requirement Ross did not meet.
2 – Market Effect: The market effect factor proved even more influential. By positioning itself as a direct substitute for Westlaw, Ross both disrupted the existing market and undercut potential licensing markets for Thomson Reuters’s content (notwithstanding that Thomson refused to license to Ross). The court noted that any harm to this market—“undoubtedly the single most important element of fair use”—weighed decisively against Ross.
While the factors addressing the nature of the copyrighted work and the amount used modestly favored Ross, they were insufficient to overcome the adverse findings regarding the purpose of the use and market harm.
The Court’s 2023 Ruling vs. The Current Ruling
It’s worth noting the struggle the judge went through in deciding the fair use issue in this case. Judges rarely reverse themselves on major rulings, but that’s what happened here.
As I noted, the judge in this case had issued a 2023 decision on the fair use issue. There, he held that the question of whether Ross’s use of the West headnotes was fair use to be a jury issue.
In the current decision he reversed himself.
Here’s what the judge said in 2023:
If Ross’s characterization of its activities is accurate, it translated human language into something understandable by a computer as a step in the process of trying to develop a “wholly new,” albeit competing, product—a search tool that would produce highly relevant quotations from judicial opinions in response to natural language questions. This also means that Ross’s final product would not contain or output infringing material. Under Sega [v. Accolade] and Sony [v. Connectix], this is transformative intermediate copying.
And here is what he said in his 2025 decision:
My prior opinion wrongly concluded that I had to send this factor to a jury. I based that conclusion on Sony and Sega. Since then, I have realized that the intermediate-copying cases [Sony, Sega] (1) are computer-programming copying cases; and (2) depend in part on the need to copy to reach the underlying ideas. Neither is true here. Because of that, this case fits more neatly into the newer framework advanced by Warhol. I thus look to the broad purpose and character of Ross’s use. Ross took the headnotes to make it easier to develop a competing legal research tool. So Ross’s use is not transformative. Because the AI landscape is changing rapidly, I note for readers that only non-generative AI is before me today.
This was a major change in direction, and it reflects the challenge the judge perceived in applying copyright fair use to artificial intelligence under the facts in this case.
Implications for Generative AI Litigation
The question on the minds of most copyright AI observers is, “what does this mean for the more than 30 copyright cases against frontier AI model developers—OpenAI, Google, Anthropic, Facebook, X/Twitter, and many others”?
My answer? In most cases, likely not much.
The 2025 Ross decision underscores that even intermediate copying can fall outside fair use when it ultimately facilitates the creation of a product that directly competes with the copyrighted work. For example, unlike Authors Guild v. Google Books, where the transformation involved enabled a unique search function without substituting for the original works, Ross’s use of headnotes was aimed squarely at developing an AI legal research tool that encroaches on Westlaw’s market. This market harm—central to fair use analysis—undermines the fair use defense by establishing that the copying, even if temporary or intermediate, has a direct commercial impact. The ruling aligns with recent precedents like Warhol, which require a truly transformative purpose rather than mere replication, thereby narrowing the scope of permissible intermediate copying in AI training contexts.
However, the case may not have much significance for most of the pending AI copyright cases. While the Ross decision tightens the fair use framework in situations where the end product directly competes with the original work, most current generative AI cases do not involve direct competition. Most generative AI systems produce entirely new content rather than serving as a substitute for the copyrighted materials used during training. As a result, the market harm and competitive concerns central to the Ross ruling may not be as relevant in these cases, and its impact on the broader generative AI landscape may be limited.
Conclusion
The ruling in Thomson Reuters v. Ross Intelligence sets an important precedent for how courts may evaluate the use of copyrighted works in AI training. Although fact-specific and limited to a non-generative AI context, the decision’s reliance on principles from the Warhol case—particularly the need for a transformative purpose and the critical weight of market impact—will likely influence future disputes, including those involving frontier generative AI models, particularly where the AI model competes with the owner of the training data.
Developers and content owners alike should take note: as the legal landscape adapts to the realities of AI, robust data sourcing strategies and a clear understanding of copyright limitations will be crucial. For companies working on generative AI, the challenge will be to innovate without replicating the competitive functions of existing copyrighted works—a balancing act that this decision has now brought into focus.
It’s also important to note that this ruling doesn’t end the case. There are remaining issues of fact that the judge reserved for trial. However, it appears that Ross Intelligence is bankrupt, and therefore may not have the financial resources to continue to trial. And, of course, Ross could appeal the trial judge’s rulings at the conclusion of the case, although it is questionable whether it will be able to do so for the same reason. It seems likely that this case will end here.
Thomson Reuters Enterprise Centre GmbH v. Ross Intelligence Inc. (D. Del. Feb. 11, 2025)