“Given the potential coverage gap for copyright infringement in connection with AI output in CGL policies, AI developers should consider procuring specific intellectual property or media liability coverage.”
The first major decision in a U.S. copyright case involving content created using artificial intelligence (AI) was delivered on February 11, 2025. In Thomson Reuters v. ROSS, the U.S. Court of Appeals for the Third Circuit held that an AI legal research platform infringed the copyrights of a competing, non-AI platform owned by Thomson Reuters, by using content from Thomson Reuters’ legal research platform to train its AI platform. This is likely just the beginning of intellectual property (IP) infringement litigation arising out of the use of AI, and the importance to businesses of understanding the scope of insurance coverage potentially available for those claims cannot be overstated. Without sufficient protections afforded by an appropriate insurance portfolio, businesses pioneering the use of AI-generated content bear substantial out-of-pocket exposure.
Thomson Reuters v. ROSS
On February 11, 2025, the Third Circuit ruled in Thomson Reuters v. ROSS, 1:20-cv-00613-SB that ROSS Intelligence, Inc., an AI-powered legal research platform, infringed on Thomson Reuters’ copyrights by using Westlaw’s headnotes and key numbering system to train its AI system for legal research inquiries. The court found that ROSS’s use of these copyrighted materials was not protected under the fair use doctrine. The decision emphasized that ROSS’s actions were commercial and directly competed with Westlaw, undermining the market for Westlaw’s products. The court rejected ROSS’s “intermediate copying” defense, noting that the copied material was editorial rather than functional, and thus not necessary for achieving ROSS’s new purpose.
This ruling has significant implications for AI developers, particularly those using existing content to train their models, as it underscores the importance of obtaining proper licenses and respecting intellectual property rights.
All businesses that generate content using artificial intelligence, which inherently pulls from existing sources and data, should carefully understand the risks of doing so and protect against possible intellectual property infringement in connection with their AI output.
Businesses should also be sure to protect against the financial risks associated with alleged AI-related infringement, and the significant legal expenses that will accompany such claims regardless of their merit. Various forms of liability insurance, including Commercial General Liability (CGL), Errors & Omissions (E&O), specific IP Infringement and/or Media Liability policies and endorsements may afford such protection for IP infringement and other AI-related risks.
Does Commercial General Liability (CGL) Insurance Protect Against Copyright Infringement in Connection with AI Output?
The most common form of insurance applicable to at least some forms of intellectual property infringement is commercial general liability (CGL) insurance. A careful review of the standard ISO CGL form, however, suggests that there may be a coverage gap for copyright infringement in connection with AI output.
Overview of ‘Coverage B’ Standard Insurance Services Offices (ISO) CGL Form
“Coverage B” of the standard ISO CGL form provides protection against “personal and advertising injury.” Such protection typically includes legal defense costs and any settlements or judgments up to the policy limits, providing a safety net for businesses facing claims of advertising-related intellectual property infringement. Note, however, that the infringement must be in its “advertisement” of another’s copyright, trade dress, or slogan.
The standard ISO CGL form defines “advertising injury” in the context of two offenses: (1) injury arising out of “the use of another’s advertising idea in your ‘advertisement,’” and (2) injury arising out of “infringing upon another’s copyright, trade dress or slogan in your ‘advertisement.’” “Advertisement” is defined as “a notice that is broadcast or published to the general public or specific market segments about your goods, products or services for the purpose of attracting customers or supporters.”
Thus, “Coverage B” protection against copyright infringement applies only to “injur[ies] arising out of . . . notice[s] that [are] broadcast or published to the general public or specific market segments about your goods, products or services for the purpose of attracting customers or supporters.”
Whether something is alleged to be an infringement of one’s copyright is relatively straightforward, but whether allegations of IP infringement may qualify as allegations of “trade dress” or even slogan infringement are less so, and are often guided by the parameters of the Lanham Act (15 U.S.C. §§ 1051 et seq.) and other IP-specific statutes, regulations, or common law doctrines.
Exclusions in CGL Policies
Assuming the alleged infringement satisfies the standard CGL Coverage B requirements of copyright, trade dress, or slogan in the insured’s advertisement, certain exclusions must also be considered when evaluating coverage for a given loss. For example, CGL policies often exclude coverage for intentional acts, meaning that if the insured knowingly infringes on another’s intellectual property, the policy may not provide coverage. In the same vein, “knowledge of falsity” exclusions, which preclude coverage for claims arising from statements that the insured knew were false at the time they were made, are standard fare. This exclusion underscores the importance of ensuring that all advertising and promotional materials are accurate and truthful. Finally, the “breach of contract” exclusion precludes coverage for claims arising from the insured’s breach of a contractual obligation. This exclusion can be significant for businesses that have entered into licensing agreements or other contracts related to the use of intellectual property.
Specific Intellectual Property Liability Coverage
Given the potential coverage gap for copyright infringement in connection with AI output in CGL policies, AI developers should consider procuring specific intellectual property or media liability coverage. Typically, this coverage is added as an endorsement to an errors and omissions (E&O) insurance policy (also known as professional liability insurance), as part of a company’s risk management strategy.
This coverage is designed to cover the legal expenses and potential damages for the enforcement or defense of patents, trademarks or copyrights, and it can help protect policyholders from patent infringement claims brought against them. Importantly, an insured’s defense of claims and lawsuits alleging covered infringement is covered regardless of the truth or falsity of the allegations against the insured. The costs of defending against intellectual property claims can be substantial, even if the allegations are ultimately found to be baseless. By covering these defense costs, these policies help ensure that businesses can afford to mount a robust defense and protect their interests in court.
Similarly, D&O policies should be procured and, as necessary, endorsed to protect board members and senior executives from liability arising out of their AI-related business decisions.
Key Takeaways
- Legal Precedent for AI-related Intellectual Property Presents Potential for Wave of Copyright Infringement and other IP-related Litigation: Understanding the extent of insurance coverage for AI-related risks is now more critical than ever. Thomson Reuters v. ROSS, is doubtless just the beginning of a trend of IP-related infringement decisions informing how courts may handle copyright infringement claims involving AI training data and other AI-generated content. The court’s decision highlights the limitations of the fair use doctrine, particularly in cases where the use is commercial and directly competes with the original work. AI developers must be cautious and ensure they have the necessary licenses for the content they use to train their models. This decision is expected to trigger a surge in copyright infringement lawsuits and signals to AI developers the critical need to ensure they have adequate insurance coverage through a well-structured liability policy(ies). Otherwise, businesses that create content using AI risk facing significant financial liabilities and substantial judgments and attorneys’ fees that they may have to pay out of pocket.
- CGL Policies Provide Limited Protection Against Copyright Infringement That Potentially Does Not Extend to Non-“Advertisement” Infringement in Connection with AI Output: CGL policies, particularly “Coverage B,” provide limited protection against copyright infringement for “advertising injur[ies].” CGL policies also typically include exclusions for intentional acts, prior publications, knowledge of falsity, and breach of contract. Given this narrow scope, businesses should consider procuring additional professional liability policies for broader intellectual property coverage.
- AI Companies Should Procure Broad Intellectual Property Liability Coverage: Intellectual property insurance offers crucial protection against IP infringement claims. If a company faces a lawsuit for alleged copyright infringement for AI output, this coverage helps by covering legal expenses, court fees, settlements, and potential judgments arising from the litigation. Even if the claim is ultimately dismissed, the costs of legal defense can be substantial and may strain business operations without adequate coverage. Critically, these policies also cover the insured’s defense of claims and lawsuits alleging covered infringement regardless of the truth or falsity of the allegations against the insured. D&O insurance designed to cover AI-related liabilities is also a prudent way to protect the company’s board members and senior executives from liability arising out of business decisions relating to the use of AI.
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Author: gustavofrazao
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