How the CNN lawsuit against Perplexity will affect AI industry and you

Prior to the CNN lawsuit, Perplexity had also witnessed a mounting stack of litigation from media titans like The New York Times, Reddit, News Corp, and Dow Jones. The core concern that has gripped the AI world is this – Should AI “answer engines” be allowed to synthesise and serve real-time news articles for free, or should they pay for the journalism that feeds the algorithms?

The outcome of this lawsuit could affect the way the entire generative AI industry trains its models. In the long run, it could affect the way consumers find and consume information online every day.

Wonder how? What happens if the lawsuit rules in favour of the publishers? Let’s find out.

1. What happens to Perplexity 

For Perplexity, the CNN lawsuit could pose a direct threat to its core architecture. Unlike traditional search engines that direct users to external links, Perplexity functions as an “answer engine.” It scrapes the internet for real-time data, processes it through large language models, and comes up with a clean and conversational summary.

If the jury rules in favour of CNN, the financial and operational penalties could be devastating for the AI startup:

Crushing statutory damages: CNN is seeking statutory damages, which under US copyright law can reach up to $150,000 per willful infringement. If you multiply that by 17,000 scraped articles, it potentially leads to an existential threat for the company despite the company being valued in the tens of billions.

The ‘Comet Plus’ trademark problem: CNN’s lawsuit also introduces a damaging trademark violation claim, alleging that Perplexity falsely advertised that its premium tier – the ‘Comet Plus,’ – granted users access to CNN’s premium content. This was despite both of them having no formal relationship or deal in place. If a case of deceptive marketing is proven, it could severely erode corporate trust and investor confidence in Perplexity.

A forced redesign: If courts issue injunctions to block Perplexity from crawling legacy media sites, its real-time “answer engine” is likely to suffer from massive blind spots, rendering its product less useful than traditional search options like Google. It also hands incredible advantage to Google, which already has its own search engine.

2. The effect on the AI industry

While the lawsuit will have severe implications for Perplexity, if the court rules against it, there will likely be ripple effects on the whole AI industry too.

The era of licensed content on the internet: 

If Perplexity loses the case, it will create a legal reality where any commercial AI tool must secure expensive licensing arrangements with publishers before utilising their text, video, or photography. This could lead to the start of a licensed era for the content, and how AI tools are associated. For example, CNN could charge a license fee for Perplexity, Google and other AI providers for scraping their content and training the models, eventually delivering a polished answer experience for customers.

Entry to AI could be expensive: 

High-quality news and data are expensive to produce. This is why traditional media houses have charged a subscription fee from their readers/viewers to deliver exclusive news articles and breakthrough reporting. If an AI startup needs to pay subscription charges to a publisher for training its models, the costs would eventually add up. As a result, the smaller AI companies could end up being priced out of the market. 

A bigger negative aspect of this approach is that it could lead to an AI industry dominated exclusively by tech giants like Microsoft, Google, and Meta, who possess the deep pockets required to fund global media partnerships. Smaller AI companies won’t find space to establish themselves, with content licensing costs playing a major role.

3. What it means for consumers

Most importantly, the lawsuit could have a major impact on how you and we utilise AI content.

Rise of paywalled AI: 

If Perplexity and its peers are forced to pay billions in licensing fees to publishers, those costs will inevitably be passed down to the consumer. The era of robust and free AI search tools may vanish, and could be replaced by steep monthly subscription fees for tools that can access premium and verified news. For example, you might need to pay thousands of Rupees to access genuine and verified content from AI bots like Gemini or Perplexity.

Information fragmentation and hallucination risks: 

If major networks successfully block AI bots from reading their code, AI engines will be forced to rely on lower-quality, unverified, or open-source blogs to answer queries related to current events. For example, ChatGPT may have an advantage with a specific genre of content, while it may struggle with another genre. While OpenAI may try to fill in by relying on open-source content for scraping, it can lead to an unpolished experience for consumers. Hence, this means AI search results could become less accurate, highly fragmented, and more prone to hallucinations.

The return of the link-based search engine economy?

If courts heavily restrict automated summarisation, AI tools may be legally forced to function more like traditional Google search, i.e., giving users snippets and forcing them to click through to the original website. This may save the business model of digital journalism, but it could disrupt the smooth and seamless user experience that we have grown accustomed to from current AI models.

Conclusion

While the courts are yet to make a decision, CNN’s legal team contends that there’s no space for a free option. It remains to be seen how this lawsuit proceeds and whether the jury considers the future of the AI market before making a decision. 

The resolution of this case will decide whether AI continues to freely absorb the world’s knowledge, or pass on the price of accessing verified information to customers and affect the overall AI performance as a result.