In-depth reporting and analytical commentary on artificial intelligence regulation. No legal advice.

Biggest non-U.S. AI copyright lawsuit filed in IP litigation hotspot Munich by German collecting society GEMA against OpenAI

Context: There are approximately three dozen U.S. copyright lawsuits pending against AI providers (for just one example, see this November 8, 2024 ai fray article), some of them involving multi-billion-dollar claims at least in theory. Many right holders have, however, preferred to enter into license agreements with AI providers. So far, there has not been much litigation outside the U.S., though a first decision of rather narrow scape came down in Hamburg, Germany, this fall (September 30, 2024 ai fray article).

What’s new: Yesterday, German music rights collecting society GEMA announced a lawsuit concerning the use of song lyrics in the training of, and their output by, OpenAI (November 13, 2024 GEMA press release). The complaint was filed that same day with the Landgericht München I (Munich I Regional Court), arguably Europe’s strictest intellectual property court. The lawsuit is categorized as a “model action” (i.e., like a class action it is designed to bring about clarification beyond the claims of a small set of plaintiffs) and clearly has the potential to go up all the way to the European Court of Justice, be it as the result of a preliminary reference straight from the first-instance court or at a later stage of proceeding.

Direct impact: Unlike certain U.S. lawsuits, this one is not about a multi-billion-dollar damages claim. The objective is to clarify the legal situation, and on that basis GEMA would then try to negotiate deals with OpenAI and other AI providers. For OpenAI, the German lawsuit poses a particular challenge because of a different legal framework that favors opt-outs and does not come with a fair use exception, though there is scope even in European copyright law for derivative works to be allowed if they are highly transformative.

Wider ramifications: GEMA represents German song lyricists (and composers, but this case is apparently just about text). Germany is the largest EU market, and copyright law is part of the Union acquis, meaning that it falls under EU law. The outcome of this litigation will have EU-wide effects, and GEMA is known to collaborate particularly close with its French counterpart, SACEM. GEMA states on its website that “the lawsuit’s filing and the resulting media attention are [also] intended to initiate a public discussion on copyright and AI.” In 2019, GEMA and its allies achieved various changes to the EU Copyright Directive favoring their interests, and the next legislative process of that kind will be AI-focused. Now that European copyright enforcement against AI providers has begun in earnest, those companies may have to think about how to deal with divergent legal frameworks on both sides of the Atlantic.

Copyright collecting societies like GEMA have had disputes with the technology industry for decades, particularly in Europe. Fees were imposed on photocopiers and later on multimedia devices. These days, the hot topic is about whether AI systems may be trained on copyrighted material.

The purpose of this article is to explain, at a high level, the ways in which the jurisdictional framework governing this AI copyright action differs from the U.S. situation:

  • Damages verdicts in Europe tend to be small. German courts are rather conservative, and there are no willfulness enhancements. One can sometimes see punitive lines of thought in European IP rulings, but those are minority opinions and don’t result in damages awards comparable to U.S. jury verdicts.
  • But European courts are far more likely to order injunctions. In Germany, an injunction is the primary remedy against any kind of IP infringement, and while EU law theoretically involves proportionality considerations, injunctions against the infringement of intellectual property rights are near-automatic.
  • Decisions are made by professional judges, not juries.
  • U.S. federal judges are generalists, and it is intended that way. By contrast, German judges specialize in particular fields of law. In the lower court, this case will be put before a three-judge panel specializing in intellectual property law. It would be heard by another specialized three-judge panel on appeal to the Munich Higher Regional Court, and by a specialized five-judge panel if it reaches the Federal Court of Justice. Only the European Court of Justice does not have specialized panels. Any of those German courts has the right to refer legal questions (concerning the interpretation of EU law) to the ECJ, and only the Federal Court of Justice (as a court of last instance) has the obligation to do so unless there is no serious question to be raised.
  • The Munich I Regional Court is famous in IP (particularly patent law, which is one field of IP) circles for its sharp rulings. Approximately six years ago, patent injunctions came down in relatively short succession against Apple (over certain iPhone models) and Meta’s WhatsApp service. In 2022, that court entered a patent injunction against Ford Motor Company, prohibiting all German sales and manufacturing activity and ordering (which is a standard remedy in Germany, and in practice cases settle before it get so that) the recall and destruction of thousands of cars over a single wireless patent (out of tens of thousands out there).
  • German lawsuits are nowhere near as transparent as U.S. cases. Pleadings are not published. In cases like this, redacted judgments will be published, though often with considerable delay.
  • Trials are short: typically just a couple of hours. In this case, the court may reserve a half-day or full day, but it is not going to be a multi-day, let alone multi-week, trial.
  • There is a good chance of the trial taking place in 2025.
  • German Urheberrecht (literally “creator’s right” and typically translated as “author’s right”) differs from U.S. copyright in various ways. For example, it particularly emphasizes authors’ control over their works.
  • There is no fair use doctrine in the EU, and particularly not in Germany, but transformative works may have the effect of making the original work “pale out” (“verblassen”).
  • GEMA believes that opt-out rights are much stronger in Europe, and that collecting societies are authorized to exercise those rights on behalf of their members (the actual right holders).

And just in case anyone wonders what the “I” in the name “Munich I Regional Court” means: there are two regional courts (comparable to U.S. district courts) in Munich. The Munich I Regional Court’s district is Munich proper (the city itself), while the Munich II Regional Court’s district includes the surroundings of Munich. On average, commercial cases that are heard by the Munich I Regional Court are more important, and the Munich II Regional Court is not even allowed to hear cases in certain specialized fields of law such as patents and copyrights.

ai fray‘s founder attended hundreds of (patent) court hearings and trials in Munich while living in that area and knows the legal philosophy of some of the Munich I Regional Court’s most influential judges. It took surprisingly long for a copyright plaintiff to file a case in that venue, which became the world’s number one patent injunction hotspot. Now there are two parallel patent court systems in Munich: the national court system with the Munich I Regional Court and Munich Higher Regional Court, and the Unified Patent Court, where Munich is also the number one venue (November 5, 2024 ip fray article).

ai fray has reached out to the Munich I Regional Court, but they will not be able to confirm the pendency of the case until all defendants (including OpenAI LLC, where it will take longer because it is based outside the EU) have been served.