The High Stakes of News Corp’s Fight With Perplexity

The owner of The Wall Street Journal and New York Post is suing the AI-powered "answer engine." 5 big questions about the lawsuit.

News Corp, owner of the Wall Street Journal, says that even Perplexity’s “derivative content” — i.e. AI summaries — infringes copyright (Credit: Jennifer Feuchter, Flickr Creative Commons)

Last week, I asked why The New York Times chose to hit Perplexity with a cease-and-desist order regarding the AI-powered search engine's practice of summarizing its news articles in the answers it serves up. Since the Times had previously sued OpenAI for a very similar practice, I wondered why the Gray Lady hadn't gone full lawsuit with the internet's "answer engine."

Perhaps it's because the technology is somewhat different: Perplexity doesn't train foundational models with content — it instead leverages the power of LLMs to summarize web search results. There's also the factor that Perplexity looks relatively small next to OpenAI: reports put the company's valuation at about $9 billion; OpenAI is in the neighborhood of $160 billion, or 20x bigger (they are both private companies). Or maybe it just didn't want to antagonize a tech company whose product is rapidly becoming a go-to research tool for journalists.

Whatever the reason, it was obviously lost on News Corp, who went ahead and slapped Perplexity with a lawsuit on Monday, accusing the company of scraping and summarizing its content without a license. News Corp says Perplexity has been creating vast content indexes by making copies of its publications' content — including journalism from The Wall Street Journal and The Times in the UK — to create a "substitute product" in the form of summarizations and occasional plagiarism (i.e. verbatim copies).

As damages, News Corp is asking for $150,000 for each instance of its content contributing to an answer that's served to a Perplexity user. Given how many stories the company's several publications publish every day, it's highly likely that a favorable decision would bankrupt Perplexity. Destroying its content index, which News Corp also asks for, would be almost moot.

Get the Popcorn

Purely as reading material, News Corp's complaint is much better than The New York Times' lawsuit from December. The document fires rhetorical bullets into Perplexity's business model, describing it as a "brazen scheme," and its product, flipping Perplexity's own marketing slogan ("skip the links") back onto it as a can-you-hear-yourself accusation: theft of traffic that publishers' content should have earned.

As early as page 2, News Corp gives a glorified description of journalism that seems lifted from a Hollywood screen bible: "[Journalists] meticulously investigate and skillfully write news stories, often under tight deadlines and in unpredictable circumstances. At times these journalists risk their lives and liberty to investigate, write, and break news stories that they believe will change the world for the better." Wow! Are tickets available for pre-sale?

The best part, though, is that News Corp puts front and center the central issue of AI summarization and the existential threat it represents to media publishers. Whereas the Times' lawsuit focused primarily on "regurgitation" — that users of ChatGPT could essentially bypass the paper's paywall with the right prompts — News Corp goes straight to the heart of the matter, taking aim at both the foundational act of web scraping as well as the act of summarization, saying they both constitute violations of copyright law:

"The illegality of this massive copyright violation at the input stage does not depend on whether the particular outputs of Perplexity’s so-called “answer engine” are sufficiently similar in each instance to the copyrighted works of Plaintiffs as to constitute identical reproductions of those works. It is sufficient that Perplexity makes copies of Plaintiffs’ works on a grand scale to create reproductions and/or derivative content that is designed as a substitute for Plaintiffs’ works."

Seeing this — explicitly including and highlighting "derivative content" as illegal — so prominent in the suit is refreshingly direct, and it's the fundamental issue before the courts: Can AI-powered search summarize information without licensing the content that it's summarizing?

That's a big question, but there are many other questions this lawsuit brings to the fore, all of which will determine the answer to the ultimate question: Is this the beginning of the end for Perplexity?

Here are the top 5:

1. Why not sue Google, too?

Perplexity is not the only company doing AI-powered search. Another is Open AI, which IS purchasing content licenses from publishers, including News Corp, to fuel SearchGPT, which will soon be part of ChatGPT. Indeed, News Corp's filing heaps praise onto OpenAI for its willingness to do so.

You may have heard of another company doing AI search: Google.