As the titans of artificial intelligence move closer to launching on the public markets, a formidable obstacle is emerging that could define their timelines and valuations: a thicket of copyright lawsuits. According to a new analysis, this legal uncertainty is not evenly distributed, potentially giving one major player, Anthropic, a significant advantage over its larger rival, OpenAI.
The Copyright Quagmire: A Core Risk for Investors
For investors eyeing a potential Initial Public Offering (IPO) in the AI sector, the primary concern is whether the vast potential liability from copyright claims can be quantified and contained. Tamlin Bason, an industry analyst at Bloomberg Intelligence, highlighted the central dilemma, stating that unresolved litigation poses a fundamental risk. "Not because the claims are guaranteed to succeed," he told City AM, "but because the potential litigation is so hard to quantify."
The scale of the risk is staggering. Under US copyright law, statutory damages can reach up to $150,000 (approximately £111,384) for each individual work found to be infringed. Given that the large language models (LLMs) powering these AI systems are trained on millions of text, image, and audio sources, the total financial exposure is colossal.
While companies often rely on "fair use" as a legal defence, its success is far from guaranteed. "Fair use is a plausible defence," Bason cautioned, "but it is by no means certain to work in every instance. And even where it does, it is slow to develop." This mismatch between the slow pace of legal proceedings and the tight schedule of an IPO calendar is a major headache for financial underwriters.
Anthropic's Narrower Path to Resolution
Analysts suggest Anthropic, the creator of the Claude AI, is currently in a less precarious legal position. Its outstanding disputes are relatively contained, focusing mainly on negotiations with music publishers and the social media platform Reddit. If Anthropic can settle these remaining disputes, it would effectively clear its active docket of litigation that carries an existential financial risk.
"That would effectively clear its docket," Bason explained, "leaving it with a defined cost structure, rather than existential risk." Converting an unknown liability into a known, settled cost is a crucial step for any company preparing for the scrutiny of public markets.
Anthropic has already taken visible steps to signal its IPO readiness. It has hired the law firm Wilson Sonsini, which advised on the public listings of Google and LinkedIn. Furthermore, the company appointed a chief financial officer who previously guided Airbnb through its own IPO in 2020.
OpenAI Confronts a Broader Legal Battlefield
In contrast, OpenAI is grappling with a wide array of legal challenges from authors, publishers, and major news corporations. Crucially, no court has yet issued a definitive ruling affirming its right to use copyrighted material for AI training without permission. This lack of legal precedent leaves a cloud of uncertainty hanging over the company.
While OpenAI has proactively struck licensing deals with content owners like Disney, this strategy may carry its own legal implications. Bason noted that "its licensing activity may suggest an implicit recognition that rights holders deserve compensation," potentially undermining its fair use arguments in court.
The most significant legal threat is a multi-district litigation case overseen by Judge Sidney Stein in New York. The briefing process for summary judgment in this case is not expected to conclude until October 2026, with trials potentially stretching into 2027. "Given the complexities of the litigation," Bason said, "we would expect the legal timeline to lengthen rather than shorten." This protracted timeline could complicate any IPO process that demands clarity and certainty.
Precedent and Uncharted Territory
Public markets have previously absorbed companies with unresolved legal issues—Uber and Lyft both listed while questions over driver classification remained. However, copyright law presents a different dynamic, where potential damages can scale almost infinitely with the volume of data used.
The worst-case scenario for the entire industry, Bason warned, would be courts ruling that using copyrighted content to train LLMs does not constitute fair use. While judges have accepted fair use in some narrow cases involving Anthropic and Meta, the US Supreme Court has emphasised that such defences are highly fact-sensitive, leaving the door open for conflicting rulings.
None of this guarantees Anthropic a smooth listing or rules out OpenAI going public first. Both companies continue to burn capital at a dizzying rate to fund computing costs, and both face challenges in forecasting long-term profitability. However, as the race to the public markets heats up, with listings widely anticipated by 2026, the winner may be the firm that can first convert its vast legal uncertainty into a manageable, quantifiable cost.
