3rd Circuit rules AI training on Westlaw headnotes not fair use

The U.S. Court of Appeals for the Third Circuit ruled that a startup’s unauthorized copying of Westlaw headnotes to train an AI research product does not constitute fair use. The court emphasized that the defendant’s use was commercial and directly competed with Thomson Reuters’ existing market, distinguishing this case from broader generative AI disputes because no generative model was involved. The decision affirms that repurposing proprietary legal annotations for a competing subscription service exceeds copyright protections, even when used for machine learning. Legal experts note the ruling hinges on market substitution rather than transformative use, potentially limiting fair use defenses for specialized AI training datasets. Thomson Reuters praised the verdict as a validation of intellectual property rights in legal tech. The startup has not announced whether it will appeal to the Supreme Court. This precedent may influence ongoing litigation involving news publishers and code repositories.