‍👉 Background: Anthropic is a San Francisco-based AI company founded in 2021 by ex-OpenAI staff. Its crown jewel is a chatbot called Claude, who’s basically boxing-on against ChatGPT and Perplexity for the AI heavyweight title. Anthropic has already raised billions in funding, and is now valued at more than $60 billion USD.

‍👉 What happened: While Claude’s been getting smarter, authors are getting angrier. A group of authors claim that Anthropic downloaded seven million pirated books to train its AI… which violates copyright laws. And now, a US federal judge has ruled that the group of authors can sue Anthropic as a class action.

‍👉 What else: This would let the authors in the case represent all US writers whose books were allegedly pirated. And if it’s ruled that Anthropic did actually pirate these books, this class action could be extreeeeemely costly for Anthropic and its AI-ambition.

What's the key learning?

‍💡A class action lawsuit is when a group of people with similar complaints sue as one. For businesses, these suits can be financially risky not just because of potential payouts, but also because of the reputational damage.

💡In Anthropic’s case, the class action lawsuit includes potentially every US author whose work was scraped without permission. Anthropic isn’t just facing lawsuits from authors but also from others like Universal Music and Reddit. Anthropic’s whole business could turn on its head if the courts rule it was built on pirated content.

💡These lawsuits can directly impact company valuations, partnerships, commmunity trust as well as the ability to raise further capital. Remember when Meta (formerly Facebook) was hit with the Cambridge Analytica class action? It’s market value dropped $134 billion USD in just a few days and it ended up settling the case for $725 million USD.