The lawsuit, filed by two News Corp subsidiaries, claims that Perplexity AI illegally used copyrighted materials from some of its most renowned publications. The suit alleges that Perplexity’s AI models, designed to respond to user queries, copied and reproduced human-created content from The Wall Street Journal and The New York Post without proper licensing. The complaint goes on to highlight how Perplexity’s use of third-party AI models, including those developed by OpenAI and Anthropic, may have exacerbated the situation.
The Legal Implications
News Corp’s lawsuit stands out in an era where publishers are increasingly clashing with AI companies over intellectual property rights. At the heart of the dispute is Perplexity’s “retrieval-augmented generation” (RAG) database, which the lawsuit claims pulls from a vast digital repository of copyrighted media. According to the plaintiffs, Perplexity’s AI outputs machine-generate reproductions of original human content, often repackaging or paraphrasing news articles in responses to user queries.
This case could have broad implications, especially considering News Corp is seeking damages and an injunction to stop Perplexity from using its content. As AI companies continue to disrupt the media landscape, this lawsuit mirrors other high-profile legal battles in the AI sector. News Corp is not the first to challenge AI companies—The New York Times, for example, sent a cease-and-desist letter to Perplexity earlier this year, but News Corp’s approach goes deeper, addressing both copyright and trademark violations.
A Critical Time for Perplexity AI
The lawsuit comes at a precarious moment for Perplexity, as it is in the process of raising $500 million in fresh funding at a potential valuation of $8 billion. Perplexity has been on a meteoric rise since its founding in 2022, having already secured investments from tech giants like Nvidia and Bezos Expeditions. In fact, the company’s valuation jumped from $500 million in early 2023 to $3 billion after a Series B round just months later. Now, with an eye on disrupting Google’s search dominance, Perplexity aims to capture a slice of the lucrative online search market.
Potential Investor Concerns
Perplexity’s fundraising efforts, however, may now face increased scrutiny due to the ongoing legal battle. The outcome of this lawsuit could shape investor sentiment, especially if Perplexity is forced to halt or limit the use of certain content in its AI models. Investors are keen on AI technologies that can potentially challenge industry leaders like Google, but the risk of legal liabilities could dampen enthusiasm.
The AI search market is heating up, with companies like OpenAI and Perplexity vying to shake Google’s long-standing dominance. In 2023, Google generated a staggering $175 billion from search-related advertising, and any disruption in this market presents a tantalizing opportunity for AI startups. However, the path to dethroning Google is fraught with challenges, including legal hurdles. While Google has managed to avoid these issues by striking deals with publishers, Perplexity is now caught in a legal storm that could affect its long-term ambitions.
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As News Corp and Perplexity face off in court, the case highlights the growing tension between AI developers and traditional media. With billions of dollars at stake, how Perplexity navigates these legal waters will be critical in determining its future as a potential leader in AI-driven search technologies. The lawsuit not only threatens Perplexity’s immediate fundraising efforts but also serves as a cautionary tale for other AI companies in the rapidly evolving tech landscape.
