Legal intelligence for telecom, tech and media professionals
Final Issue of Communications Litigation Today

Publisher's note: This is the final issue of Communications Litigation Today. Please note that expanded telecom litigation coverage will now be available in our flagship Communications Daily.

3rd News Organization Complaint vs. OpenAI, Microsoft Reaches Manhattan Court

The Center for Investigative Reporting (CIR), which calls itself “the oldest nonprofit newsroom in the country,” alleges that Microsoft and OpenAI copied CIR’s “valuable content” to train their AI models, and did so “without CIR’s permission or authorization, and without any compensation to CIR,” said its complaint Thursday (docket 1:24-cv-04872) in U.S. District Court for Southern New York.

It’s the third news organization complaint to reach the Manhattan court accusing Microsoft and OpenAI of large-scale copyright infringement to fuel the development of their AI models. The New York Times filed suit against Microsoft and OpenAI on Dec. 27 (see 2312270044), and eight local newspapers, including the New York Daily News and the Chicago Tribune, collectively filed a similar complaint April 30 (see 2404300034). All three complaints allege violations of the Copyright Act, the Digital Millennium Copyright Act and other statutes.

The OpenAI and Microsoft AI products “undermine and damage CIR’s relationship” with potential readers, consumers and partners, and “deprive CIR of subscription, licensing, advertising, and affiliate revenue, as well as donations from readers,” said the complaint. Microsoft and OpenAI “greatly benefit from CIR’s distinct voice in the marketplace, as CIR provides a unique perspective, especially regarding investigative topics impacting diverse communities,” it said.

If limited to a “homogenous dataset,” the defendants’ large language models (LLMs) “would be stunted in growth and power,” said the complaint. Their success depends on content creators like CIR and other members of the news media “that are unique in their style and voice,” it said. Protecting those unique voices “is one of the fundamental purposes of copyright law,” it said.

When they populated their training sets with works of journalism, OpenAI and Microsoft had a choice to respect works of journalism, or not, but they “chose the latter,” said the complaint. They copied copyrighted works of journalism when assembling their training sets, it said. Their LLMs memorized and at times “regurgitated those works,” it said.

OpenAI and Microsoft distributed those works and abridgments of them “to each other and the public,” said the complaint. They also contributed to their users’ “own unlawful copying,” it said. They removed the works’ copyright management information, and trained ChatGPT “not to acknowledge or respect copyright,” it said: “And they did this all without permission.”

OpenAI has acknowledged that use of copyright-protected works to train ChatGPT “requires a license to that content,” said the complaint. Recognizing that obligation, OpenAI has entered into agreements with large copyright owners such as the Associated Press, The Atlantic and the Financial Times to obtain licenses to include those entities’ copyright-protected works in OpenAI’s LLM training data, it said. OpenAI also is in licensing talks with other copyright owners in the news industry but has “offered no compensation” to CIR, it said.

EFF, 6 Other Nonprofits Urge D.C. Circuit to Reject 'Sweeping' Federal TikTok Ban

The statute authorizing the federal TikTok ban -- the Protecting Americans from Foreign Adversary Controlled Applications Act -- is unconstitutional, and should be blocked, said the Electronic Freedom Foundation, TechFreedom and five other nonprofits in an amicus brief Wednesday (docket 24-1113) in the U.S. Appeals Court for the D.C. Circuit.

The act “directly restricts protected speech and association,” and it “deliberately singles out a particular medium of expression for a blanket prohibition,” said the brief. The statute also imposes “a prior restraint that will make it impossible for users to speak, access information, and associate through TikTok,” it said.

The statute triggers an “especially exacting form” of First Amendment scrutiny, and it does so for at least two independent reasons, said the brief. First, the act constitutes a prior restraint on TikTok and its users, “an especially disfavored means of restricting First Amendment rights,” it said. That’s because the statute will shut down the app, blocking millions of users, as well as TikTok itself, from engaging in protected expression in advance of the time that their communications are to occur, it said.

Second, even if the D.C. Circuit doesn’t subject the act to the strict scrutiny that's due in prior restraints, the government would still have to satisfy “a strict narrow-tailoring requirement" because the statute “is a total ban on a unique and important means of communication,” said the brief. In these circumstances, courts “still apply an exacting standard,” it said. A total ban of that type fails unless it curtails no more speech than is necessary to accomplish its purpose, it said.

The government’s burden to justify an infringement on First Amendment rights “is the same in the national security context as in any other,” said the brief: “In fact, the judiciary has an especially critical role to play in ensuring that the government meets its burden when the government invokes national security.”

Amici urge the D.C. Circuit to see the act “for what it is” -- a “sweeping ban on free expression” that triggers the exacting scrutiny under the First Amendment, said the brief. “Applying the proper test,” the D.C. Circuit should grant preliminary injunctive relief under the First Amendment to block Attorney General Merrick Garland from enforcing the ban when it takes effect in mid-January, it said.

SEC Alleges 10 Securities Violations in Suit vs. Internet Mortgage Matchmaker

BorrowMoney.com’s reported revenue for three quarters in FY 2019 was a “figment” of sole officer and majority shareholder Aldo Piscitello’s “imagination and invention,” alleged the SEC's lawsuit Wednesday (docket 0:24-cv-61118) in U.S. District Court for Southern Florida.

The defendant, whose registration of common stock became effective June 11, 2020, purports to provide "an internet-based platform to match mortgage and loan providers with prospective borrowers, earning revenue by supplying leads of prospective customers to those lenders," said the complaint.

Though the company reported revenue in FY 2019, quarterly reports, signed by Piscitello, for the periods ended Nov. 30, 2018, Feb. 28, 2019, and May 31, 2019, were mostly “fictitious,” alleged the complaint. For the remainder, BorrowMoney didn’t have contracts or events that met the criteria for revenue recognition required by generally accepted U.S. accepted accounting principles, it said.

BorrowMoney further misled the investing public when it “purportedly 'came clean’ that its revenue was entirely overstated” in a Nov. 15, 2019, Form 8-K filing with the SEC, the complaint said. That report announced the resignation of BorrowMoney’s auditor and indicated that the auditors believed the company’s quarterly reports “were materially misstated by revenue being overstated and loans from related parties being understated,” it said.

In disclosing the auditor’s resignation, BorrowMoney, “acknowledging that it was Piscitello himself who contributed to BorrowMoney’s purported revenue, failed to disclose its improper revenue recognition was not due to misclassifications” as it stated in the November 2019 8-K, “but rather that it should not have disclosed revenue at all” for any FY 2019 quarterly reports, the complaint alleged. The company hasn’t made any “corrective disclosures” to clarify that revenue figures in those three quarters weren’t “simply misclassified” but “instead, were fictitious or did not meet the criteria for revenue recognition.”

Piscitello's other failings included not filing a required Form 3 with the SEC indicating his beneficial ownership of 20 million shares of BorrowMoney common stock when the registration of common stock became effective in June 2020 and not making required disclosures related to changes in his beneficial ownership of stock as a result of 99 transactions made in brokerage accounts he owned solely or jointly between August 2020 and February 2023, said the complaint. Piscitello netted about $37,900 from sales of BorrowMoney’s common stock August 2020-June 2022, alleged the complaint. He also failed to disclose he bought 3.3 million shares in March 2023, it said.

Over five years, BorrowMoney “had four independent audit firms resign, and though a publicly traded company, it does not currently have an independent audit firm in its employ,” alleged the complaint.

The SEC claims 10 violations of the Securities Exchange Act. It seeks a permanent injunction against BorrowMoney barring it from violating the act and orders directing BorrowMoney and Piscitello to disgorge all “ill-gotten gains”; pay penalties; bar Piscitello from serving as an officer or director of any company with securities registered with the SEC; and permanently restrain Piscitello from participating in the offering of any penny stock.

Meet Kevin Sues CNN Parent for Refusing Him a License to Cover Debate

Digital media company Meet Kevin sued CNN parent Warner Bros. Discovery for refusing to offer social media companies broadcast licenses for the CNN presidential debate that was set for Thursday between President Joe Biden and former President Donald Trump, said an antitrust complaint Thursday (docket 2:24-cv-05441) in U.S. District Court for Central California.

CNN refused to grant Kevin Paffrath, an online political analyst and commentator who uses the moniker Meet Kevin, streaming and commentary rights to the debate, said the complaint. Paffrath, who is licensed as a real estate broker and financial adviser, promoted his “commitment to thorough public discourse by providing live coverage and commentary for over 10 hours during the January 6, 2021 event,” which he said “highlights the value and necessity of making his insights accessible to the public for major political events.”

Paffrath reached out to CNN Wednesday by phone and email, requesting a streaming and commentary license to provide “critical commentary and analysis to its substantial audience” of over 2 million subscribers on YouTube and X.com, said the complaint. Despite “multiple attempts,” CNN didn’t respond or engage in “meaningful discussions” about the request, it said.

The plaintiff asserts that CNN’s refusal to grant him a license for the Thursday debate is “monopolistic behavior” that “restricts public discourse, and violates principles of fair competition and public interest.” By denying Meet Kevin a license to broadcast the debate, CNN impedes his “ability to engage in transformative use of the debate content for public commentary and educational purposes, which is protected under the fair use doctrine,” the complaint alleged.

On information and belief, CNN “refuses to grant any social media content creator a broadcast/streaming license, even if the creator agreed to follow the rules" it set for other networks that did receive licenses, alleged the complaint. CNN also denied YouTube content creators “Breaking Points” and Tim Pool under the threat it would file a Digital Millennium Copyright Act takedown request on social media platforms if they attempted to stream and cover the broadcast, the complaint said.

Paffrath asserts CNN’s control over the presidential debate broadcast rights “restricts freedom of the press to a select few major corporations of its choosing, undermining the democratic principle of a free and diverse press.” The complaint said it isn’t the first time CNN has restricted Paffrath’s freedom of speech, citing the California gubernatorial recall election campaign, in which the plaintiff “was a leading candidate.” CNN "falsely" said no Democrats were competing against Gov. Gavin Newsom (D); Paffrath maintained he garnered “27% of the replacement vote.” CNN updated its report after Fox News published that the recall race made no mention of Paffrath, said the complaint.

CNN’s control over the presidential debate and its refusal to grant streaming rights to independent media “constitute monopolistic behavior, which harms public discourse and restricts the free flow of diverse and antagonistic sources of information, which are essential for a democratic society," the complaint said. If CNN is allowed to proceed, Paffrath and other online political commentators will suffer “irreparable harm and damage,” it said.

Paffrath claims unfair competition under the FTC Act, plus violations of the Communications Act and the Sherman acts, and violations of the public forum doctrine and public policy. He seeks damages and future damages, pre-judgment interest, attorneys’ fees and costs, and orders permanently enjoining CNN from engaging in the alleged misconduct. It also requested that CNN be required to submit a report within 30 days detailing how it complied with the judgment, it said.