Third Circuit rules AI training on copyrighted works not fair use

The U.S. Court of Appeals for the Third Circuit ruled that training artificial intelligence models on copyrighted material does not constitute fair use under federal law. The panel determined that utilizing an author's creative spark to develop a competing commercial product violates copyright protections. This decision marks the first federal appellate ruling to explicitly reject the fair use defense for AI training datasets. Legal experts suggest the ruling establishes significant precedent within the Third Circuit's jurisdiction, potentially influencing ongoing litigation in other circuits. Major AI developers have previously argued that ingesting copyrighted works for model training represents transformative use. The court disagreed, emphasizing the commercial nature of the resulting AI systems and their potential market substitution. Industry stakeholders now face renewed pressure to secure licensing agreements with rights holders. The ruling remands the case to lower courts for further proceedings consistent with this interpretation of copyright law.