Anthropic Settlement Appears to Cruise Through Its Final Fairness Hearing

The landmark $1.5 billion settlement in Bartz v. Anthropic took a big step closer to final approval yesterday with the long awaited fairness hearing held on May 14 before Judge Araceli Martínez-Olguín in the Northern District of California.

While the judge did not rule from the bench, the hearing went fairly smoothly, with Martínez-Olguín barely questioning attorneys about the contours of the deal or the objections, instead focusing most of her questions and concerns on the attorneys' fees and the settlement's cost structure.

In his opening remarks, lead attorney Justin Nelson told the court that the claims rate, which was last reported at 91.3% at the end of April has continued to rise, and now stands at 92.77% as “timely claims” continue to be processed, now reaching a total of 447,576 claimed works.

Nelson noted that the Judge who preliminarily approved the settlement, William Alsup (now retired) had concluded that the major question around the settlement was whether the class would embrace it. The high claims rate suggested the answer to that question is “a resounding yes,” Nelson told the court.

“The participation spans all types of copyright owners, from self-published authors to large publishers,” Nelson said. “This class is highly sophisticated and engaged. Each of them made a considered decision to participate, and for good reason. This is the largest copyright class action settlement in history. It also provides substantial injunctive relief in the form of destruction of the pirated data sets, and a certification that Anthropic did not use the materials from the pirated websites in commercially released models. And the release is a limited one, for past conduct only, not including output claims.”

Nelson also told the court that the settlement opt-out rate was “miniscule” and that that there were only 53 objections, roughly half of which (26) were from people requesting that their works be added to the settlement, which Nelson called another sign of the settlement’s strength.

Calling the deal the “first major AI copyright settlement,” Nelson said the deal was a major win for copyright holders, and should be approved.

“Currently, there's widespread apprehension among all those who rely on copyrights to make a living, not just book authors and publishers,” Nelson told the court. “One of the reasons why a large percentage of the class is participating is because the settlement provides not just substantial monetary relief, but substantial injunctive relief as well, such as the destruction of these pirated databases and a certification that the pirated copies were not used in a commercial model, along with the limited past release. In short, the proposed settlement here is more than the fair, reasonable and adequate standard…and we request that the court grant final approval of this historic settlement.”

The Objectors

Notably, the roughly 75-minute hearing took place in a fairly sparse courtroom, with only a handful of people in the gallery, and the objectors mostly joining via Zoom. Furthermore, none of the objectors raised issues that would appear to threaten the settlement, with judge Martínez-Olguín asking no questions of any of the objectors.

Among the objectors, attorney James Bartolomei, counsel appearing on behalf of some objectors, argued that settlement notice was insufficient for lacking key information. Bartolomei, however, did not suggest that the settlement should be rejected, instead asking the court to delay the process by 35 days to cure what he framed as “a fatal defect” with the notice.

“I'm not here to ask this court to stop this settlement from ever being approved. My clients want what every class member deserves, which is sufficient information to make an informed, knowing, and intelligent choice as to whether $3,000 is worth releasing a claim for books pirated by Anthropic that are worth up to $150,000 per work,” Bartolomei told the court. “The fact of that matter is that the new claims rate of 92%, or whatever it is, probably consists, the lion's share, of large publishing houses. What I'm concerned about for every class member is the independent author who maybe didn't know about this, or maybe didn't have the ability to understand or retain counsel.”

Each of the seven remaining objectors who spoke via Zoom had just two minutes to plead their cases, with several of them offering objections that could be cured (or not) without disrupting the fate of the settlement.

Among them, author and attorney Stacy Werner, who barely got a chance to state her objections before she was timed out, pointed out that a fix was needed for authors whose publishers breached their contractual agreements by failing to register their copyrights, leaving some works ineligible for the settlement.

Two objectors raised the issue of group copyright registrations. Victoria Pinder told the court that she has four works on the class list under four separate copyrights. But she explained that one of her copyright registrations covered “more than 40 individual novels” that were downloaded by Anthropic from pirate sites but were being counted by the settlement administrators as “one claimable work.” Pinder asked the court to modify the plan “so distinct works with group registration count as the separate works which they are.”

Another objector, Matthew Chase, told the court that the settlement did not properly account for authors who publish under pseudonyms.

Two objectors raised broader questions about the settlement’s terms: Robert Jackson argued that approximately $3,000 per work was only about “2% of the $150,000 statutory ceiling available” and asked the court to weigh whether that figure was “fair, reasonable, and adequate,” which is the standard for approval.

Another objector, Randy Hoopman, said a one-time payment was insufficient because Anthropic would continue to profit from the pirated works. “I don't really understand how it can be just if Anthropic is continuing to profit from essentially stealing our work even after the settlement is complete,” Hoopman said. “A one-time payment doesn't really seem like justice.”

Author George Tombs objected to the exclusion of many works, including foreign works, that were denied participation in the settlement because they lacked a U.S. copyright registration.

“I believe that this settlement, as proposed, is sending a cruise missile, or maybe I should say, a fleet of drones, into the very principle of copyright protected by the Berne Convention,” Tombs said. Tombs noted that he and his family have 56 works that he believes Anthropic pirated, but none were accepted into the class. “The idea that people have to register with a U.S. copyright is simply untrue,” he told the court.

Next steps

With the fairness hearing appearing to go smoothly, final approval could come soon, which would pave the way for payouts to begin shortly thereafter.

The closely watched settlement comes after judge William Alsup, in a mixed summary judgment decision last June, found that Anthropic's unauthorized use of copyrighted books to train its Claude AI system was fair use. But the judge also found that the company's decision to keep millions of unauthorized downloads for a permanent "central" research library was not, and ordered the company to stand trial on that claim, prompting the settlement.