Microsoft and OpenAI Face NYT Copyright Fight Over Copilot Training and Fair Use

While Gralla frames the dispute in uncompromising terms—arguing that Big AI firms knowingly "robbed" publishers to build their models—the underlying legal battle is a high-stakes clash between two competing visions of copyright law. On one side sit major news organizations pointing to internal Microsoft and OpenAI memos as evidence that tech insiders foresaw severe economic harm to publishers. On the other side stand Microsoft and OpenAI, arguing that training large language models on publicly available web data is a transformative "fair use" protected by United States copyright law, and that isolated employee emails do not equal legal liability.

For Windows users, enterprise IT administrators, and software developers who rely on Microsoft 365 Copilot, Azure OpenAI Service, and GitHub Copilot every day, this is far more than a media-industry spat. The outcome of these summary judgment battles could dictate how AI models are trained, what data they are allowed to retain, and how enterprise AI tools ground their answers in the future.

Inside the Unsealed Memos: What Employees Actually Wrote​

The focal point of Computerworld's commentary—and earlier reporting by TechCrunch and Yahoo News on the unredacted court records unsealed in September 2026—is a collection of internal communications surfaced by the news plaintiffs during discovery. In litigation, plaintiffs frequently comb through years of corporate emails and Slack messages looking for candid statements that undercut a defendant's public posture. Here, the publishers highlighted several striking internal warnings from inside both Microsoft and OpenAI.

Brent Hecht's Warnings at Microsoft​

According to Computerworld's review of the unsealed filings, the most prominent internal critic cited by the plaintiffs is Brent Hecht, Microsoft's director of applied science. In a January 2023 internal memo—written nearly a year before The New York Times filed its lawsuit in December 2023—Hecht warned that millions of people around the world would soon view large AI models "'hoovering up' all their work to be an astonishing theft of unprecedented proportions," adding a characterization of the practice as "the largest theft of labor in human history".

In a subsequent memo written after the lawsuit was underway, Hecht addressed the downstream market effect of AI chatbots. Because OpenAI's tools and Microsoft Copilot use information drawn from newspapers to answer user queries directly, Hecht wrote that users might no longer need to visit publishers' websites or subscribe to print editions—a shift he warned "necessarily threatens the economic stability of those who create the content".

Candid Exchanges Inside OpenAI​

The unsealed filings cited by Computerworld and TechCrunch also point to internal anxieties at OpenAI going back years before ChatGPT launched to the public in November 2022:

• 2020 Policy Warning: Jack Clark, then OpenAI's policy director, sent a 2020 memo to OpenAI President Greg Brockman and CEO Sam Altman warning that the company's trajectory would increasingly lead to systems that "substitute for the labor of the people that define the 'culture' of society". Clark added a colorful caution that OpenAI risked becoming a symbol of how Silicon Valley steps into other parts of life "and leaving a mess on the carpet".
• The "Existential Threat" Remark: In June 2023, six months prior to the Times lawsuit, Nick Turley, the OpenAI executive leading the ChatGPT team, internally characterized AI as representing an "existential threat" to publishers.
• The Paywall Exchange: Computerworld also highlights a message cited in the filing in which an OpenAI engineer told Greg Brockman he was working on "a hack to get around nytimes paywall" to obtain faster access to paid copyrighted material, to which Brockman replied, "ah, nice". (While striking in a legal brief, the cited exchange alone does not establish whether such a bypass was adopted as company policy or what specific data made it into production training runs.)

Satya Nadella's Deposition Testimony​

The filings also include sworn deposition testimony from Microsoft CEO Satya Nadella. According to TechCrunch and Yahoo News, Nadella testified that "anything that is paywalled should be licensed by anyone who wants to use it…for grounding or training," and agreed that chatbot conversations can substitute for visiting original publisher websites. As reported by Computerworld, Nadella stated conditionally in his deposition that if he "had been made aware that OpenAI had scraped and trained on information that was behind a paywall," he would have required OpenAI to retrain its models—an authority he testified Microsoft holds.

Gralla's column argues that Nadella's conditional statement rings hollow given years of public allegations and litigation without a demand for model retraining. From a strictly legal perspective, however, Nadella's testimony draws a sharp distinction between scraping publicly accessible web pages—which Microsoft and OpenAI defend as lawful—and bypassing a paywall to ingest restricted content.

Section Summary: Unsealed court filings from the publishers' lawsuit reveal internal memos from Microsoft applied science director Brent Hecht and OpenAI executives expressing deep concern over the ethics of AI data ingestion and its economic impact on news publishers, alongside deposition testimony from Microsoft CEO Satya Nadella drawing a line at unlicensed paywalled data.

The Legal Reality: Why "Theft" in a Memo Isn't a Court Verdict​

It is easy to see why a columnist—or a plaintiff's attorney—would treat an executive memo using the word "theft" as a smoking gun. If a Microsoft director called AI training "the largest theft of labor in human history," doesn't that settle the case?

In a federal courtroom, the answer is no. Based on general legal and industry standards in copyright litigation, there is a vast gulf between how scientists or executives debate the moral and economic disruption of a new technology in internal memos and what actually constitutes copyright infringement under Title 17 of the United States Code.

The Four Factors of Fair Use​

The core legal battle in The New York Times v. Microsoft Corp. and OpenAI—which began in December 2023 and has since been joined by the New York Daily News, the Center for Investigative Reporting, and seven other newspapers—revolves around the doctrine of fair use. When courts evaluate whether using copyrighted material without a license is lawful fair use, they weigh four statutory factors, as outlined in OpenAI's public legal documentation:

1. The purpose and character of the use (including whether the use is commercial and, crucially, whether it is "transformative"—meaning it adds something new with a further purpose or different character rather than merely superseding the original work).
2. The nature of the copyrighted work.
3. The amount and substantiality of the portion used in relation to the copyrighted work as a whole.
4. The effect of the use upon the potential market for, or value of, the copyrighted work.

Why did the newspaper plaintiffs fight so hard to unseal Hecht's memos, Turley's comments, and Nadella's deposition? Because of Factor Four. To defeat a fair-use defense, publishers want to prove that ChatGPT and Microsoft Copilot act as direct market substitutes that siphon away web traffic, subscriptions, and advertising revenue. Internal documents showing that Microsoft and OpenAI personnel themselves worried chatbots would replace trips to newspaper websites give the plaintiffs ammunition to argue that market harm isn't just hypothetical—it was foreseeable to the builders of the technology.

Additionally, the Times has alleged in its complaint that ChatGPT and Copilot can regurgitate verbatim excerpts of Times articles and occasionally generate false "hallucinations" wrongly attributed to the newspaper, damaging its brand. The plaintiffs are asking the court not only for monetary damages (evaluating their intellectual property in the billions of dollars) but also for the destruction of AI datasets and models containing their copyrighted work.

Section Summary: While internal memos use colloquial words like "theft," the courtroom battle hinges on the four-factor test for copyright fair use—specifically whether AI models are transformative tools or unlawful market substitutes that usurp publisher revenue.

Microsoft and OpenAI Push Back: The Transformative Use Defense​

Neither Microsoft nor OpenAI is taking these allegations lying down. Both companies have filed their own motions for summary judgment and forcefully rejected the notion that internal debates represent corporate guilt or legal conclusions.

Microsoft's Response​

Addressing Brent Hecht's memos, Microsoft spokesperson Alex Haurek stated that Hecht's comments reflected a single employee's personal perspective, were not a legal analysis, and did not represent Microsoft's corporate position. As reported by Computerworld, Haurek noted that Hecht was not a decision-maker on these matters and had been hired specifically "to present divergent and asymmetric perspectives" inside the company. Microsoft maintains in its legal filings that its practices comply with copyright law and that Copilot is designed to assist users and synthesize information, not serve as a substitute for reading original journalism.

OpenAI's Counteroffensive and Precedent​

On its official New York Times litigation portal, OpenAI mounts a sweeping defense of generative AI training and accuses the Times of trying to secure "an undeserved payday at the expense of progress that benefits everyone." OpenAI highlights several pillars of its legal and industry strategy:

OpenAI's reference to the June 2025 federal court orders in Bartz v. Anthropic and Kadrey v. Meta Platforms is a critical piece of context missing from many opinion pieces. In those separate copyright cases, two federal judges concluded that using copyrighted books to train large language models was highly transformative—a major victory for AI developers on the training question. OpenAI also notes on its case page that the court narrowed the Times' lawsuit and related publisher cases in rulings during 2025 and August 2026, dismissing certain ancillary claims so the litigation focuses primarily on the core fair-use dispute.

Furthermore, OpenAI points out the irony that The New York Times itself has used OpenAI technology internally—including in support of Pulitzer-winning reporting—and argues that the paper's business remains healthy rather than decimated by chatbots.

Section Summary: Microsoft dismisses the unsealed memos as the non-legal opinions of an employee hired to offer contrarian views, while OpenAI points to June 2025 federal court rulings in the Anthropic and Meta cases that affirmed AI training as transformative fair use, alongside licensing deals with over 20 major news publishers.

What This Means for Windows Users, IT Pros, and the Open Web​

Why should a Windows 11 power user, a systems administrator deploying Microsoft 365 Copilot, or an enterprise architect building on Azure care about a copyright fight between media giants and AI labs? Because the technical and economic fallout will reshape the software ecosystem we use every day.

1. The "Doom Loop" and the Future of Grounding (RAG)​

Several commentary pieces analyzing the unsealed filings—including coverage highlighted in MeetCyber and Planet Earth and Beyond—have zeroed in on what critics call the web's potential "doom loop". Modern AI assistants like Microsoft Copilot rely on two distinct mechanisms:

• Pre-training: Teaching the base model language patterns, reasoning, and world knowledge from massive static datasets.
• Grounding / Retrieval-Augmented Generation (RAG): Using Bing search indexes in real time to fetch up-to-date facts from websites and synthesize an answer for the user.

If AI summaries satisfy user queries so completely that human click-through rates to independent websites collapse, publishers lose the ad and subscription revenue required to pay human reporters and technical writers. And if publishers go out of business—or lock every piece of quality journalism and technical documentation behind strict paywalls and anti-crawler firewalls—what happens to the AI? Without fresh, human-verified reporting to ground its answers, Copilot's real-time web retrieval becomes dramatically less useful.

2. Licensing vs. Scraping: A Bifurcated Information Economy​

Nadella's deposition statement—that paywalled content should be licensed whether used for training or grounding —hints at where the enterprise AI market is inevitably heading. We are already watching the internet split into two tiers:

• The Licensed Tier: Major conglomerates (like News Corp, Axel Springer, the Associated Press, and Condé Nast) strike multimillion-dollar licensing and product partnerships with OpenAI and Microsoft, feeding clean, authorized data into Copilot and ChatGPT.
• The Blocked Tier: Publishers that decline licensing deals increasingly deploy robots.txt blocks and edge-level web application firewalls to block AI crawlers, or pursue litigation to force licensing terms.

For Windows users and researchers, this means AI assistants may eventually have blind spots corresponding to which publishers have signed deals with which AI vendors.

3. Enterprise Risk and Microsoft's Copilot Copyright Commitment​

For enterprise IT leaders, the lawsuit underscores why contractual indemnification matters. When organizations deploy Microsoft 365 Copilot or Azure OpenAI Service, they naturally worry about whether an AI-generated output could expose their business to copyright claims. Microsoft has long addressed this customer anxiety through its Customer Copyright Commitment (CCC), which generally promises to defend commercial customers against third-party intellectual property lawsuits arising from the outputs of Microsoft's Copilots, provided customers use the built-in content filters and safety guardrails.

However, if a court were ever to grant the extreme remedy sought by the Times—the forced destruction or mandatory retraining of foundational datasets and models —it could cause significant version churn, model deprecations, and API migrations for enterprise developers building on those specific model checkpoints. While most legal observers view forced model destruction as a long shot given recent transformative-use rulings in the Meta and Anthropic cases, the summary judgment filings filed in September 2026 ensure the legal suspense will continue.

Section Summary: Beyond the courtroom drama, the clash between publishers and Microsoft/OpenAI highlights a critical sustainability challenge for the open web: if AI grounding starves publishers of traffic, the quality of real-time information available to tools like Microsoft Copilot could ultimately degrade.

The Bottom Line​

Preston Gralla's Computerworld column captures the raw moral outrage many writers, journalists, and publishers feel watching trillion-dollar tech titans ingest decades of human labor without asking permission. And the newly unsealed memos prove that this outrage wasn't confined to newsrooms—scientists and executives inside Microsoft and OpenAI wrestled with the exact same ethical and economic alarms before the lawsuits were ever filed.

Yet in a courtroom, candid internal angst does not automatically override the fair use doctrine. With OpenAI and Microsoft pointing to federal rulings that backed transformative AI training in 2025, and The New York Times armed with internal memos warning of publisher market substitution, the federal judiciary now faces one of the defining copyright questions of the century. Until the gavel falls, Windows users can expect Copilot to keep summarizing the web—even as the people who wrote that web fight for their share of the AI revolution.