September 8, 2026, (Inside AI) — A federal judge in Manhattan must now decide whether training large language models on copyrighted news articles and books qualifies as fair use, a ruling that could reshape the economics of generative AI.
OpenAI, Microsoft, The New York Times, and a group of authors including John Grisham and George R.R. Martin filed dueling briefs on Friday. Each side asked U.S. District Judge Sidney Stein to rule in their favor without a trial.
The core dispute: does AI training on protected expression create new, transformative work, or does it unfairly compete with the original creators?
The Times sued in 2023, accusing OpenAI and Microsoft of using millions of articles without permission to train ChatGPT. The authors filed a separate suit the same year over their books. These cases were consolidated in New York last year, and dozens of similar complaints now target tech companies.
Fair use is the pivotal defense. Two judges in San Francisco split on the issue last year. Judge William Alsup called Anthropic’s use of books “quintessentially transformative.” Two days later, Judge Vince Chhabria ruled for Meta but warned that AI training would not be fair use “in many circumstances.”
Chhabria raised a concern that generative AI could “flood the market” with content that competes with human creators. The authors echoed that warning in their filing, arguing that AI is “diluting the market for books across the board.”
“Fair use does not countenance such catastrophic threats to the incentive to create,” the authors wrote.
News outlets made a similar argument, saying ChatGPT diverts users from their websites. “Defendants’ competitive exploitation of Plaintiffs’ expressive works cannot be excused” under court precedent, they said.
OpenAI countered by citing Alsup’s ruling. It said using copyrighted work for AI training is “among the most transformative many of us will see in our lifetimes.”
The company argued its pretraining process extracts “broad, unprotectable statistical patterns related to language,” not protected expression. Microsoft also pushed back, saying fears that LLMs would displace authors and journalists were unfounded.
“Plaintiffs began this case speculating that LLMs would destroy their very livelihoods,” Microsoft said. “Years of discovery later, the record is clear: Neither LLM training nor the use of LLMs in products substitutes for copyrighted books.”
Why Fair Use Hinges on Market Harm
Fair use analysis weighs four factors, but courts often emphasize the effect on the market for the original work. The authors and publishers argue that AI outputs directly compete with books and articles, reducing demand for human-created content.
OpenAI and Microsoft counter that language models do not reproduce protected expression. They claim the technology creates new text based on statistical patterns, not copies of specific works.
The evidence gathered during discovery could prove decisive. Microsoft said the record shows no substitution for copyrighted books. But the authors point to broader market effects, including lower royalties and fewer publishing opportunities.
Judge Stein’s decision will likely be appealed, but it will set an early benchmark for dozens of pending cases. The outcome could force AI developers to license training data or redesign their models.
Legal Precedent Remains Unsettled
The divergent rulings from San Francisco highlight the uncertainty. Alsup focused on the transformative nature of AI training, while Chhabria worried about market flooding. Stein must now choose between these approaches or chart a new path.
Industry observers note that the U.S. Supreme Court has not ruled on AI training and fair use. A clear appellate decision may be years away. In the meantime, companies face regulatory and litigation risk on multiple fronts.
The case is In re OpenAI Inc Copyright Infringement Litigation, U.S. District Court for the Southern District of New York, No. 1:25-md-03143.
