Judge Cuts Lawyers’ Fees in Landmark $1.5 Billion Anthropic Copyright Settlement

A US federal judge overseeing the landmark $1.5 billion copyright settlement between Anthropic and authors has sharply reduced the legal fees requested by plaintiffs’ lawyers, rejecting a percentage-based award that she said would create a “windfall” for attorneys and divert tens of millions of dollars away from class members.

US District Judge Araceli Martínez-Olguín in Oakland approved the nationwide settlement on Monday but awarded class counsel approximately $101.6 million, significantly lower than the $187.5 million requested after lawyers had already reduced an earlier demand for $300 million.

 

The lawsuit alleged that Anthropic trained its artificial intelligence models using hundreds of thousands of pirated books. Anthropic denied any wrongdoing. The settlement represents the largest copyright class action settlement in US history.

The dispute over legal fees reflects a broader debate in major class actions over how lawyers should be compensated. Courts typically determine fees either through a percentage-of-settlement approach, where attorneys receive a share of the recovery, or through the “lodestar” method, which calculates fees based on the hours worked and reasonable hourly rates.

The difference between the two approaches can be substantial, potentially shifting millions of dollars between lawyers and class members.

The class attorneys from law firms Susman Godfrey and Lieff Cabraser Heimann & Bernstein did not immediately comment on the ruling. Anthropic said it looked forward to resolving the litigation but declined to comment on the legal fee dispute.

The lawyers initially sought $300 million in fees but withdrew the request after another judge indicated that such an award was unlikely to be approved. They later requested $187.5 million, arguing that the amount reflected the complexity of the case and the significant recovery secured for authors.

In court filings, the attorneys argued that a percentage-based award would better align their interests with those of class members by rewarding them for achieving a larger settlement.

Anthropic, however, criticised the approach, arguing that courts have raised concerns about applying percentage-based fees in so-called “megafund” settlements involving extremely large recoveries.

The authors’ lawyers responded that Anthropic’s position could discourage leading law firms from pursuing complex class actions against major technology companies.

In her order, Judge Martínez-Olguín concluded that the lodestar method was more appropriate for determining a reasonable fee in the case. She said awarding the requested 12.5% share of the settlement fund would result in excessive compensation for class counsel considering the size of the recovery and the number of hours worked.

The judge increased the lodestar amount with a multiplier, citing the record-setting settlement, the complex and emerging copyright issues involving artificial intelligence, and the risk that lawyers could have recovered nothing if the case failed.

The final fee award represented approximately 6.8% of the settlement fund.

“Class Counsel litigated complex, novel issues in an uncertain area of the law, where they faced a real risk of adverse rulings and zero recovery in this first-of-its-kind litigation,” Martínez-Olguín wrote.

The judge also rejected objections from some authors who are part of the settlement class, finding that their challenges did not fully account for the risks undertaken by the plaintiffs’ lawyers in pursuing the case.

 

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