The new theory of “copyright shareholder derivative” lawsuit is spreading. I’ve coined this term to describe shareholder derivative lawsuits under securities law that are based on the allegation that the directors and officers (D&O) approved copyright infringement, exposed the company to substantial risk of copyright liability, or made material misrepresentations about such conduct to conceal or minimize that risk.
Adobe already faces 2 such lawsuits (see below). Now Microsoft was hit with another such lawsuit.
The Complaint alleges that Microsoft directors and officers breached their fiduciary duties by investing in OpenAI and providing Microsoft’s Azure infrastructure to enable OpenAI to train its models using unlicensed, allegedly infringing copyrighted works, including copies of books from the Books3 dataset.
The Complaint also alleges that these defendants approved 2024 and 2025 proxy statements to defeat shareholder proposals that raised concerns about the possible copyright infringement and lawsuit(s) filed against Microsoft. For example, the 2024 proxy statement by Microsoft, partly quoted in the Complaint, stated this about the datasets Microsoft used:
The statement “Microsoft uses a variety of data sources, including publicly available information, in a manner consistent with global copyright laws” is one that the Complaint uses as an example. The Complaint also emphasizes the statement: “We do not train on data from domains listed in the Office of the United States Trade Representative Notorious Markets for Counterfeiting and Piracy list.”
The 2025 proxy statement included similar language.
Anderson, the plaintiff, alleges that Microsoft made various misrepresentations. Anderson alleges “(a) that Microsoft had violated federal copyright laws in the formulation of its AI strategy and its partnership with AI companies like OpenAI.” Paragraph 94. Other allegations include:
The Complaint cites Judge Alsup’s decision in Bartz v. Anthropic as a red flag that the directors ignored:
The complaint includes other alleged missteps and misstatements related to Microsoft’s AI products, including CoPilot, not summarized here.
This AI-related copyright lawsuit is the 12th lawsuit against Microsoft in the United States, by my unofficial count. It is the 123rd against AI companies in the United States.
Excerpt from Anderson Complaint:
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DOWNLOAD THE COMPLAINT IN ANDERSON V. NADELLA
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