AI training of copyrighted material not fair use: Third Circuit

Using someone else's "creative spark" to start a competing business runs afoul of copyright law, the panel found.PHILADELPHIA (CN) — The Third Circuit rejected an artificial intelligence company’s fair use defense after it trained its AI on a competitor’s product, finding the training constituted copyright infringement — and potentially setting a landmark precedent for artificial intelligence.Thomson Reuters sued now-defunct AI startup ROSS Intelligence in 2020, claiming ROSS took headnotes — short descriptions of important legal issues that appear before judicial opinions — from its Westlaw database, using a third party called LegalEase Solutions to gain access after Westlaw refused ROSS access.ROSS then used that data “not for the purposes of legal research, but to rush out a competing product” by training its artificial intelligence on Westlaw’s headnotes, Reuters said in its complaint.In 2025, a federal judge in Philadelphia granted Reuters partial summary judgment and denied the same to ROSS, finding Westlaw’s headnotes were copyrighted and that ROSS’ use of them without permission violated copyright law.While ROSS argued the headnotes were too similar to their respective uncopyrightable judicial opinions to qualify for copyright protections, the lower court found Westlaw’s selection and arrangement of the notes constituted a “creative spark” akin to a sculptor chiseling a raw block of marble.That spark made Westlaw’s non-verbatim headnotes original works, and thus copyright-protected, the lower court ruled. Furthermore, because ROSS’ use of the headnotes was insufficiently transformative and aided in the startup’s market competition with Westlaw, fair use did not apply.ROSS appealed, sending the case before a Third Circuit panel in June 2026.Following months of deliberation, U.S. Circuit Judge Tamika Montgomery-Reeves — a Joe Biden appointee — affirmed the federal court’s ruling on behalf of the panel, breaking the issue down into its simplest legal concepts.“Under ROSS’ framing, this case appears to concern the future of AI legal technology,” Reeves wrote for the panel Wednesday. “But appearances can be deceiving. In truth, this is no more than an ordinary copyright case.”Taking a look at the Westlaw headnotes’ originality, Montgomery-Reeves agreed the Reuters editors showed sufficient creative spark for legal protections.“Each headnote had to convey enough factual background and reasoning to stand on its own without reference to the opinion or any other headnote, while accurately reflecting the corresponding opinion passage,” Montgomery-Reeves wrote. “Because these decisions show the requisite minimal ‘creative spark,’ the headnotes are original.”Similarly, the panel looked again at ROSS’ fair use defense, finding similar conclusions as the lower court.Describing ROSS’ use of the headnotes as “minimally transformative at best,” Montgomery-Reeves noted the startup’s use of the notes for AI training only served as differing means to the same end as Reuters.“ROSS took an intermediate step of using the headnotes to train an AI program, which arguably presents a slight degree of difference in use,” Montgomery-Reeves wrote. “But the undisputed evidence demonstrates that ROSS used the headnotes to train an AI program for the benefit of its legal-research platform.”Additionally, the panel found that ROSS’ use of the headnotes would negatively impact Westlaw’s value in the legal-research platform market, as well as its value in the potential derivative market of licensing headnotes to train AI — further refuting ROSS’ fair use argument.“The undisputed evidence reflects that Thomson Reuters’ materials possess a creative spark, and ROSS aspired to be a direct competitor by using them for a highly similar purpose,” Montgomery-Reeves wrote. “We therefore hold that Thomson Reuters’ materials are copyrightable and that ROSS’ use was not fair.”U.S. Circuit Judge L. Felipe Restrepo, a Barack Obama appointee, and U.S. Circuit Judge Emil J. Bove III, a Donald Trump appointee, concurred with Montgomery-Reeves.Representatives for Thomson Reuters and ROSS Intelligence could not be reached for comment.Subscribe to our free newslettersOur weekly newsletter Closing Arguments offers the latest about ongoing trials, major litigation and rulings in courthouses around the U.S. and the world, while the monthly Under the Lights dishes the legal dirt from Hollywood, sports, Big Tech and the arts.Additional Reads