- Anthropic appears to be in a real pickle.
- Not only is it trying to avert a class action trial and potential “doomsday” statutory damages, but now it is also trying avoid waiver of its attorney-client privilege on the most sensitive and controversial topic in the entire case: you guessed it, use of pirated books.
Things appear to going from bad to worse for Anthropic in the lawsuit filed by book authors Bartz.
Judge Alsup just allowed Bartz to file more evidence to support its contention that Anthropic has impliedly waived its attorney-client privilege regarding legal advice given related to Anthropic’s use of pirated books from shadow libraries.
Ominously, Judge Alsup said that this issue of loss of attorney-client privilege will “take most of the morning” on August 28 at the hearing. But argument on Anthropic’s Motion for Leave to Appeal Pursuant to 28 USC 1292(b), or in the Alternative, For Leave to Move for Reconsideration filed by Anthropic PBC will comparatively “take less time.”
Judge Alsup himself had sua sponte raised the issue of whether Anthropic was relying on the advice of counsel in its defense. Anthropic said no. But Bartz said Anthropic had impliedly waived the privilege by asserting an innocent infringer defense and a defense based on volition. Now, it looks like Judge Alsup is going to devote most of the time a the August 28th hearing to this issue of waiver. That suggests that the potential waiver of Anthropic’s attorney-client privilege is a serious issue–and one that Anthropic may lose.
So Why Is Anthropic Even Considering an Innocent Infringer Defense?
It’s unclear why Anthropic is even considering raising an innocent infringer defense at trial. Although it would allow, if proven, a possible reduction of the lowest statutory damages award from $750 to $250 per infringing work, that decision is ultimately at the discretion of the Judge. And, as readers have pointed out to me, Section 402(d) precludes an innocent infringer defense if the copyrighted works had copyright notice to which the defendant had access. That surely must the be case for most, if not all, books published by a publisher (especially those who obtained an ISBN and copyright registration).
The $500 difference at the low end of statutory damages per work pales in comparison the gravity of losing attorney-client privilege especially on the hugely controversial issue of pirated books.
If Anthropic loses its attorney-client privilege, it would be a major loss for the company. And it could be a colossal loss depending on what the legal advice actually was. If there was legal advice against the use of pirated books from shadow libraries or taking the view in 2021 that it (or some aspect of it such as the torrenting) was very likely illegal, then doing it anyway can constitute willful infringement. Indeed, it might be willful infringement as a matter of law. And, if that’s a fair possibility of happening at trial, the pressure for Anthropic to settle will be enormous.
On the other hand, it’s fair to surmise that when Meta considered this precise issue before it torrented from shadow libraries, its legal advice suggested the law either was unclear or supported such activity if the copies were used for a lawful fair use. That appears to be why Judge Chhabria in that case held there was no crime or fraud to justify the loss of attorney-client privilege by Meta.
What Damaging Testimony Did Anthropic’s Benjamin Mann Provide?
To support its motion, Bartz said that Anthropic co-founder Benjamin Mann gave some damaging testimony that further supports the waiver of privilege:
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