OpenAI Harms the NYT Because of ChatGPT's Response to User Queries About Wirecutter Recommendations

D. The “Misappropriation” Claim Is Preempted by the Copyright Act

Count VI, for “misappropriation” under New York law, appears to raise two distinct theories. The first suggests that OpenAI engages in “unfair competition” by using “Times content to train models that produce informative text of the same general type and kind that [t]he Times produces.” Compl. ¶ 195 (the “Text Claim”). The second suggests that OpenAI harms the Times because ChatGPT can respond to user queries about Wirecutter recommendations. Id. ¶ 194 (the “Recommendations Claim”). Both are preempted by the Copyright Act. 17 U.S.C. § 301(a).

1. The Text Claim Fails

The Text Claim is preempted by Section 301 of the Copyright Act, which “oust[s] the states from imposing any control of the area” governed by federal copyright law. In re Jackson, 972 F.3d 25, 42 (2d Cir. 2020). Preemption applies if two conditions are met: (1) the claim relates to “works of authorship . . . within [copyright’s] subject matter” (“subject matter” condition); and (2) the rights asserted are “equivalent to any of the exclusive rights within [copyright’s] general scope” (“general scope” condition). 17 U.S.C. § 301(a). Here, the subject matter condition is satisfied because the claim is based on OpenAI’s use of (1) Times articles, which are “literary works,” 17 U.S.C. § 102(a), and (2) facts from those articles which, while unprotectable, fall “within the subject matter of copyright for the purposes of [] preemption,” Barclays Capital Inc. v. Theflyonthewall.com, Inc., 650 F.3d 876, 893 (2d Cir. 2011). And the general scope condition is satisfied because the rights asserted are not “qualitatively different from a copyright [] claim.” In re Jackson, 972 F.3d at 43–44. One aspect of the Text Claim is based on the use of content to “train models,” Compl. ¶ 195, which is one of the stated bases of the copyright claim, id. ¶¶ 64, 161–62. The other is based on outputs that are “the same or similar to content published by [t]he Times,” id. ¶ 194–95, which is the other stated basis of the copyright claim, see id. ¶ 163. Because the Text Claim is based on the same allegations as the copyright claims, the claim is preempted.[47]

2. The Recommendations Claim Fails

The Recommendations Claim focuses on Wirecutter, a Times-owned website that publishes articles to guide readers through difficult purchase decisions. See, e.g., Compl. ¶¶ 130, 134. Wirecutter makes “the vast majority of its revenue” through “commission[s],” which it earns when users click “affiliate links” in its articles and purchase a product. Id. ¶¶ 128–29. According to the Times, by complying with requests to identify Wirecutter-recommended products, ChatGPT reduces the need for users to “visit the [] Wirecutter article and click on [these] links,” id., thus “depriving [t]he Times of the opportunity to receive referral revenue,” id. ¶ 194.

This claim is almost identical to the “misappropriation” claim the Second Circuit rejected in Barclays. 650 F.3d 876 (2d Cir. 2011). That case concerned stock recommendations which banks provided to paying clients as a mechanism for generating commissions. Id. at 880–82. The defendant “compile[d]” those recommendations and provided them “to their own subscribers for a fee.” Id. at 882. The banks brought a “misappropriation” claim, stressing that they “spend hundreds of millions of dollars annually” generating the recommendations, and that the defendant “seriously threatens their ability to justify [that] expense.” Id. at 881, 885–86.

The Second Circuit first held that the claim satisfied the conditions for Copyright Act preemption: (1) the “facts of the Recommendations,” while unprotectable, fell within the subject matter of copyright; and (2) the banks claimed the right to control the reproduction of those recommendations, which falls within the “general scope” of copyright. Id. at 902. The Court, however, explained that its precedents recognized a “narrow” preemption exception for “hot news” claims endorsed by the Supreme Court in the Int’l News Serv. v. Associated Press (INS), 248 U.S. 215 (1918) case. Barclays, 650 F.3d at 896–98.[48] Accordingly, the merits of the claim depended on whether it fell into the “narrow” category of “INS-type non-preempted claims.” Id. at 902–03.

The Circuit held it did not. First, while “INS-type” claims involve defendants who “sell [purloined] news as though the defendant itself had gathered it,” the Barclays defendant was “selling the information with specific attribution to the issuing [bank].” Id. (emphasis added). For that reason, there was no “meaningful difference” between the defendant’s republication of the recommendations and a “member[] of the traditional news media” reporting on information “with proper attribution.” Id. at 903–04. Second, INS-type claims concern defendants who appropriate material (e.g., news) that the defendants “acquire through efforts akin to reporting.” Id. at 903. But the banks’ claim sought “only to protect their Recommendations, something they create using their expertise and experience”—which brought the claim closer to copyright’s exclusive domain. Id. For those reasons, the defendant’s “service—which collects, summarizes, and disseminates the news of the [banks’] Recommendations—[was] not the kind of ‘INS-like’ product that could support a non-preempted cause of action for misappropriation.” Id. at 905.

The Recommendations Claim fails for the same reasons. First, it satisfies the preemption conditions: it (1) relates to facts within copyright’s “subject matter;” and (2) asserts the right to control reproduction of those facts, which falls within copyright’s “general scope.” Id. at 902.

Second, to the extent the Times has attempted to plead an “INS-type non-preempted claim[]” for misappropriation, id. at 902, it has failed to do so for the reasons discussed in Barclays. OpenAI is not “selling the Recommendation[s] ‘as its own.’” Id. at 903. It provides “specific attribution to” Wirecutter, which means this is not an INS claim. Id. Moreover, Wirecutter recommendations are not facts that the Times “acquire[s] through efforts akin to reporting;” rather, the Times “seek[s] only to protect [its] Recommendations, [which it] create[s] using [its] expertise and experience.” Id. The claim is therefore governed exclusively by copyright law, under which the quantum of the Times’s “investment” is irrelevant to its right to monopolize the results. Compl. ¶ 196; Moody’s, 808 F.2d at 207 (“[T]o grant copyright protection based merely on the ‘sweat of the author’s brow’ would risk putting large areas of factual research material off limits and threaten the public’s unrestrained access to information.”); Barclays, 650 F.3d at 886 (rejecting claim despite allegation that defendant “seriously threatens [banks’] ability to justify the expense of maintaining [] extensive research operations”).

[47] Financial Information, Inc. v. Moody’s Investors Serv., Inc., 808 F.2d 204, 206, 208–09 (2d Cir. 1986) (misappropriation claim based on allegation that defendant “copied 40–50% of [plaintiff’s] information” preempted).

[48] INS concerned a news service that “lift[ed] factual stories from AP bulletins and sen[t] them by wire to INS papers” for republication without attribution to the AP. Barclays, 650 F.3d at 894, 896–98 (quoting INS).