Artificial intelligence startup Anthropic PBC said in a court filing on Tuesday that it reached a resolution in a class action lawsuit with a group of prominent United States authors, marking a turning point in one of the most significant AI copyright lawsuits in history.

The move will allow the company to avoid being potentially crushed by a poor outcome in the case where the authors alleged the company infringed on their copyrights by downloading as many as 7 million books from pirate websites.

According to Bloomberg Law, the settlement comes after Anthropic informed both the district court and the appeals court that the pursuit of billions of dollars in damages in the class action lawsuit posed a “death knell” for the company, compelling it to agree to a potentially unfair settlement. Santa Clara Law Professor Edward Lee estimated the potential damages Anthropic would have faced could reach upwards of $900 billion if a jury found the company’s infringement willful.

Compared with the company’s own estimated $5 billion in revenue this year, while operating at a loss of billions of dollars, such a judgment would be devastating. Anthropic was last reported seeking $10 billion in a new funding round at a $170 billion valuation earlier this month.

The settlement follows a win scored for Anthropic in June when U.S. District Judge William Alsup of the District Court for the Northern District of California ruled in favor of the company that it had not broken the law by using legally purchased books that were later digitized without the authors’ permission.

However, in the same ruling, Alsup noted: “Anthropic had no entitlement to use pirated copies for its central library.”

The terms of the settlement were not described in the court filing.

“This historic settlement will benefit all class members,” the authors’ attorney Justin Nelson said in a statement. “We look forward to announcing details of the settlement in the coming weeks.”

Alsup ordered the parties to file for preliminary approval of the settlement by Sept. 5.

Although the settlement resolves this class-action, it does not clear the company of other pending copyright suits it’s embroiled in. Reddit recently brought suit against Anthropic, accusing it of unauthorized scraping to train its AI model, and Universal Music Group, among other music labels, also filed suit over song lyric infringement.

“Recent revelations about the massive and deliberate exploitation of pirated content for LLM training by largest AI vendors — are just the tip of the iceberg of the unexpectedly nasty and painful surprises, more are looming on the horizon,” Dr. Ilia Kolochenko, chief executive of ImmuniWeb SA and a practicing lawyer specializing in AI, data privacy and protection, told SiliconANGLE.

Anthropic is not the only AI company in legal crosshairs. Dozens of similar lawsuits have peppered the AI copyright infringement landscape with filings against the company’s competitors, including OpenAI, as well as Meta Platforms Inc. and the AI search engine Perplexity Inc. Infringement claims continue to roll in against AI developers from publishers, authors, media companies and music labels.

“The current business model of many AI companies (i.e., grab everyone’s intellectual property without paying, claim that you do this for the sustainable innovation and everyone’s well-being, and then make billions for founders and shareholders) may pretty soon become economically unviable,” added Kolochenko.

The response to widespread scraping by AI companies from rights-holders has been lawsuits, while platforms have opted to protect their content with technical barriers. For instance, Reddit blocked its content from the Internet Archive, companies use CloudFlare to stop AI bots and some artists use image poisoning techniques such as Nightshade.

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