New York Times Sues OpenAI In What Could Be A Landmark Lawsuit

0:01Today on the AI Breakdown, we're looking at a new lawsuit from the New York Times against OpenAI and Apple's simultaneous courting of publishers to pay them for data to train their AI models. Before that on the brief, OpenAI is raising at a$100 billion valuation. The AI Breakdown is a daily podcast and video about the most important news and discussions in AI. Go to breakdown.network for more information about our YouTube, our newsletter, and our Discord. Welcome back to the AI Breakdown Brief, all the AI headline news you need in around five minutes. Given that this is the week between Christmas and New Year's, it's about the lowest information density that we've had in AI since, I don't know, before ChatGPT first launched.

0:45Still, there are some interesting nuggets for those of you who are still paying attention this week. And we kick off with reports that OpenAI is in talks to raise another round of funding at a valuation of more than$100 billion, which would make it the second most valuable U.S. startup behind only SpaceX. According to Bloomberg, OpenAI is in early discussions to raise a fresh round of funding at a valuation at or above$100 billion. Investors potentially involved in the fundraising round have been included in preliminary discussions, but details like the terms, valuation, and timing haven't yet been finalized and could still change.

1:19Now, this is apparently separate from the tender offer being led by Thrive Capital that we've been talking about for over a month now. That tender offer is happening at an$86 billion valuation, or at least was before the whole Sam Maltman fired from the board thing, and seemed like a way specifically to give early employees access to liquidity. According to Bloomberg reporting, that tender offer saw more demand than they could accommodate, which has led to this new discussion at an even increased valuation. I think right now that realistically speaking, the way that investors are looking at the frontier model companies is that the companies that have a plausible chance to actually be one of the leaders in this space are basically worth infinity dollars.

2:00The allocation seems to be considering that if you can get into these companies at basically any price, you should do so. Now, on top of this, there is also reporting that OpenAI has been holding discussions to raise between$8 and$10 billion from Abu Dhabi-based G42. If you've been listening closely to the AI breakdown, you'll know that G42 has been somewhat controversial this year. More than just about any other company, they've been trying to have their cake and eat it too when it comes to their relationships with US-based companies and China-based companies, but recently had to make the decision to focus entirely on the US and cut ties with their Chinese partners based on pressure from the US government.

2:39Now, it's unclear apparently to Bloomberg sources whether this $8-10 billion fundraise from G42 is related to that$100 billion valuation round or is something entirely separate. What is known is that the G42 partnership has been exploring a dedicated AI chip project, although it's not clear how much of that is within OpenAI versus outside of it. One of the speculations around why Sam Altman was fired is the idea that he was trading on his brand associated with OpenAI in order to raise money for a completely separate venture that OpenAI didn't really have a stake in. The codename for that project related to OpenAI or not, has been reported to be Tigris.

3:16Speaking of frontier model companies, the information is reporting that Anthropic's revenue projections have gone up significantly. As recently I feel like as a week or two ago, Anthropic had been suggesting to investors that they expected to make somewhere on the order of$500 million next year, or at least to achieve a$500 million annualized run rate by the end of the year. Now it appears that projection is up to$850 million. Writes the information, It isn't clear why the latest projections are materially higher. The projection underscores the three-year-old startup's remarkable growth expectations and may offer more evidence that generative artificial intelligence is gaining steam among enterprises.

3:53Now you'll remember that it was also recently reported that Anthropic is raising a fresh$750 million led by Menlo Ventures at at least a$15 billion pre-investment valuation. Not at that heady$100 billion level yet like OpenAI, but certainly nothing to chuff at either. Moving over into product releases for a moment, one of the most hyped platforms of the last couple months has been Pika Labs. They've been slowly letting people onto their 1.0 video generation platform, many of the outputs of which have been making their way to Twitter slash X, and as a special Christmas gift, they've now opened up their platform generally.

4:27Now one 2024 speculation among many is that in the same way that 2023 was the year that AI image generation came to the mainstream, perhaps the same will be true for video generation when it comes to 2024. Certainly, Runway has been moving extremely quickly in this space. Stability AI and Google also released new models recently. But Pika is definitely a contender here. Writes VentureBeat, Pika says that the model can produce a wide range of content, including 3D animations, live action clips, and cinematic videos, as well as modify moving objects like a horse or an outfit with simple text prompts.

5:00Now, this is still much less precise than image generation, but the technology is advancing fast. Speaking of new releases, some eagle-eyed commentators have noticed that Microsoft has launched Copilot for Android devices. This is a free way to use GPT-4 and DALI-3 on your phone. And one interesting thing that I've been noticing more broadly is that Microsoft is really liking these ways of experimenting with integrating its products, and by its products I also mean OpenAI's products, into mobile experiences in ways that don't necessarily require subscriptions. I'm not sure exactly what the goal is or the business strategy.

5:35Perhaps the logic is that if people start using these things on their phones, they'll port them over to the main business use case, which is where Microsoft makes its money. But ultimately, I don't know. Lastly, today's some interesting new data on the most visited AI tools between September 2022 and August 2023. Now, right at the top, as you might imagine, is ChatGPT with over 14.6 billion visits, but not as far behind it as you'd think is Character AI with 3.8 billion visits. BARD lags behind that at 241.6 million visits. Still, the survey does note that BARD users spend an average of 10 minutes per session and that 67 % of them are on mobile.

6:13But I think the one that's surprising most people is Character.ai. Certainly, it surprised me when I started to see statistics like this. But when you dig in, the numbers are even more shocking. Many of Character AI's users are spending two hours a day on their site, bringing up serious questions for some around the implications for the future of social interactions. What does it mean when people are interacting with AIs for such a big portion of their day? Will it make their interactions with regular humans better? Or will it simply be a substitute? Whatever the case, it is worth keeping an eye on, because like I said, I think a lot of you are going to be surprised by these numbers.

6:47However, that will do it for today's AI Breakdown Brief. Next up, the main AI breakdown. Quickly, a brief word from today's sponsor. As a listener of this show, I suspect you like to stay up to date on all things AI and tech, which is why you have to check out the chart-topping podcast Web3 with A16Z Crypto. Produced by venture firm Andreessen Horowitz, Web3 with A16Z is the perfect companion podcast to the AI breakdown. Web3 with A16Z Crypto is your definitive resource for the future of the internet. Whether you're interested in the convergence of AI and crypto or simply curious about what's next.

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9:42And the first of them has to do with yet another lawsuit against OpenAI around copyright and AI training. Now, there have been many of this category of lawsuit flying around throughout 2023, but this one is a little bit bigger because of who's involved. The New York Times is suing OpenAI and Microsoft, claiming that millions of articles from the Times were used to train their AI models in violation of copyright protections. Now, from the Times itself, quote, The Times is the first major American media organization to sue the companies, the creators of ChatGPT, and other popular AI platforms over copyright issues associated with its written works.

10:22The suit does not include an exact monetary demand, but it says the defendants should be held responsible for billions of dollars in statutory and actual damages related to the unlawful copying and use of the Times' uniquely valuable works. It also calls for the companies to destroy any chatbot models and training data that use copyrighted material from The Times. Says the complaint, Defendants seek to free ride on The Times' massive investment in its journalism by using The Times' content without payment to create products that substitute for The Times and steal audiences away from it. Now, obviously, this is going to be a protracted legal battle.

10:55I fail to see how it could be resolved without going all the way to the Supreme Court. I don't think, however, it's a slam dunk. You heard in the quote that I just shared, the crux of the Times argument. It's not just that OpenAI has used the Times corpus of work to train its models, but that the product that it creates with them is a substitute for the Times and steals audiences away from it. That feels like it's going to be a very hard thing to prove. The main use case of something like ChatGPT is not to get access to news information, at least not in a way that substitutes from a daily publication like the Times.

11:29Or at least I assume that that's part of what OpenAI's argument is going to be. It just seems to me like an incredibly tricky thing to prove. But in some ways, it feels like the battle and gumming up the works is part of the strategy. Now, what I mean by that is that in some ways, it feels like a negotiation tactic. And giving more credence to that, we go again to the New York Times' own reporting of its own lawsuit. Quote, The lawsuit filed on Wednesday apparently follows an impasse in negotiations involving the Times, Microsoft, and OpenAI. In its complaint, the Times said it approached Microsoft and OpenAI in April to raise concerns about the use of its intellectual property and explore, quote, an amicable resolution, possibly involving a commercial agreement and technological guardrails around generative AI products, but that the talks reached no resolution.

12:12Now, keeping on this theme of negotiation, another story that is popping up right now is that Apple is exploring AI deals with these big news publishers. From the Times again, Apple explores AI deals with news publishers. The company has discussed multi-year deals worth at least$50 million to train its generative AI systems. Now, it doesn't appear that the New York Times was one of these publications, but the news organizations that Apple has approached include Conde Nast, NBC News, and IAC, which owns publications like People, The Daily Beast, and Better Homes and Gardens. Now, of course, Apple is not the only company that's gone out and tried to do deals with publishers in advance of this copyright issue.

12:49Earlier this month, OpenAI struck a similar deal with European publishing giant Axel Springer to be able to explicitly use that company's news content in ChatGPT in a way that would actually reference where that information was coming from. From CNN, As part of the deal, ChatGPT users will receive summaries of news stories from Axel Springer brands, including Politico, Business Insider, Build & Welt, with attribution and links to the original sources of reporting. No financial terms were disclosed when that deal was announced. Now, what I think many are recognizing is that this may be a vector for Apple to compete with AI and make up and take back some of the lead that others like OpenAI have gotten on it.

13:28Kyle Russell writes, Maybe the thing people are underestimating about Tim Cook-era Apple's ability to compete in AI is how much cash they can drop on buying training data with quote-unquote clean rights. Chamath Palahapitiya said something very similar. The interesting thing about this NYT OpenAI lawsuit is the counterfactual. If Apple is indeed writing substantial checks to media companies to license their content for training models, the impact of this and other lawsuits against AI companies training on non-public data will be swift and meaningful. A very clever move by Apple if this lawsuit goes the way of the New York Times.

14:01When Luke 16 asked, wouldn't this move give a huge edge to Google Bard and XAI, given all the proprietary data they can train on without licensing? In part, I would think so. YouTube plus Gmail plus App Store, etc., etc., etc., only way to compete would be buying access to data. So the implications here are one, in the context of Apple itself, using its huge war chest of cash to be able to outcompete someone like OpenAI for access to data that is not going to get them into trouble legally speaking. But two, if these copyright lawsuits go the way of the publishers, one of the second order effects is probably that it's only big tech companies who already own significant sources of data who will be able to compete in the LLM space.

14:42This is why these lawsuits are so significant and have the potential to have such a big impact on how the space plays out. Now, meanwhile, a couple more little interesting nuggets surrounding Apple and AI. People started noticing over the last week that back in October, Apple quietly released an open-source multimodal LLM called Ferret. Writes VentureBeat, with little fanfare, researchers from Apple and Columbia University released an open-source multimodal LLM called Ferret in October 2023. At the time, the release, which included the code and weights, but for research use only, not a commercial license, did not receive much attention.

15:16But now that may be changing. With open-source models from Mistral making recent headlines, and Google's Gemini model coming to Pixel Pro and eventually to Android, there has been increased chatter about the potential for local LLMs to power small devices. So that's the context in which people are situating this Apple news. Because in addition to this model, they also recently released two new research papers whose net impact would be to enable more advanced experiences to run directly on devices like the iPhone and the iPad without having to go to the cloud. Many people have speculated that part of why Apple hasn't jumped into the generative AI race with two feet is because they're waiting for things to get to the point where hardware advances plus model size reductions have gotten to the point where they can do things in the on-device privacy-preserving way that has become such a hallmark of all of their products.

16:01At the same time, though, Apple is losing some amount of talent in this AI race. According to Bloomberg, the head of iPhone design is leaving Apple to go work at that new AI device startup led by former Apple designer Johnny Ive and Sam Altman. Writes Bloomberg, as part of the effort, outgoing Apple executive Tang Tan will join Ive's design firm Love From, which will shape the look and capabilities of the new products, according to people familiar with the matter. So I think that to the extent that you're keeping track of those 2024 predictions, for anyone who had Apple getting more involved in the AI space on their list, you're off to a good start.

16:36That's going to do it for today's AI Breakdown. Until next time, peace.