Third Circuit Affirms Revised Fair Use Ruling Against ROSS’ AI Legal Research Platform in Sealed Opinion

On Tuesday, news reports indicated that the U.S. Court of Appeals for the Third Circuit issued a ruling under seal affirming the District of Delaware’s grant of partial summary judgment to Canadian technology company Thomson Reuters on its claims that legal artificial intelligence (AI) company ROSS Intelligence infringed upon more than 2,000 copyrighted headnote summaries of U.S. case law from its Westlaw legal research platform. The Third Circuit also affirmed the district court’s denial of summary judgment to ROSS on its fair use defense, marking the first major ruling by a U.S. circuit court on the applicability of such defenses to the training of AI models using copyrighted content.

Intermediate Copying Cases Involving Source Code Are Inapt to Headnote Claims

The appellate ruling follows a revised opinion issued in February 2025 by U.S. Circuit Judge Stephanos Bibas, sitting by designation in Delaware district court. In the revised decision, Judge Bibas, who originally found that the issue of the originality of Thomson Reuters’ headnotes should be submitted to a jury, held that both the compilation of headnotes as well as each individual headnote met the low threshold of originality required to support copyright infringement. Judge Bibas’ revised decision also recognized the originality of the Key Number System numerical taxology used by Westlaw to organize its content, again meeting the minimum threshold of originality required to prevent ROSS from rebutting any presumption of validity stemming from Reuters’ copyright registrations in those works.

Judge Bibas’ revised opinion was also notable for its about-face on ROSS’ fair use defense to Thomson Reuters’ copyright infringement claims. While Judge Bibas had originally ruled in favor of ROSS on fair use, “new information and understanding” led him to find that Reuters prevailed on the two most important factors in the test: the purpose and character of ROSS’ use; and the likely effect on ROSS’ copying on the market for Reuters’ original works.

In his first summary judgment ruling, Judge Bibas had determined that ROSS’ argument that it had made a transformative use of Westlaw’s headnotes and the Key Number System had to be submitted to a jury. That determination was based upon intermediate copying cases issued by the Ninth Circuit where the copying of computer source code for video gaming compatibility was determined to be transformative, including Sega Enterprises v. Accolade (1992) and Sony Computer Entertainment v. Connectix Corp. (2000).

In his revised opinion, Judge Bibas said that those cases were inapt as ROSS hadn’t copied computer code, which serves a functional purpose much different than other copyrightable works and must be copied to reach the underlying ideas for additional innovation. When judged against the newer fair use framework established by the U.S. Supreme Court in 2023’s Andy Warhol Foundation for the Visual Arts v. Goldsmith, the non-generative legal research AI platform developed by ROSS made a product competing with Westlaw and not a transformative use.

First Major Appellate Ruling on Fair Use in AI to be Unsealed After Proposed Redactions

As to factor four, the effect of the use on the market for the original work, Judge Bibas originally left this question for the jury to determine if ROSS’ legal research platform served a different purpose than Westlaw. However, even after taking all facts in favor of ROSS, Judge Bibas’ revised opinion found that its AI-powered legal research platform was a market substitute for Westlaw. Even considering a possible public benefit created by ROSS, “[t]here is nothing that Thomson Reuters created that Ross could not have created for itself or hired LegalEase to create for it without infringing Thomson Reuters’s copyrights,” Judge Bibas ultimately ruled.

While it’s not surprising to see the Third Circuit affirm a district court ruling made by one of its own judges sitting by designation, yesterday’s sealed ruling marks an important step in the ongoing saga of copyright infringement cases against AI developers, which has led to different results at the district court level.

Although many copyright advocates are doubtlessly pleased with the Third Circuit’s affirmance, issues with the appellate court’s approach have been raised by fair use advocacy group Re:Create and its Executive Director Brandon Butler:

“If Judge Bibas had engaged with the full body of intermediate copying cases and laid out a persuasive case for distinguishing AI training, the outlook for AI companies litigating other cases would be darker today. Similarly, if Judge Bibas had connected ROSS’ use to actual market substitution, rather than the broader, more amorphous concept of market competition, the opinion would cast a longer shadow. As it stands, however, this first judicial walk through the AI fair use labyrinth has hit a dead end.”

The Third Circuit’s order directs parties to provide proposed redactions within 10 days. The appellate court indicated that it will unseal its ruling in an appropriate form once it considers the proposed redactions.