Dow Jones Copyright Dispute Puts Perplexity AI’s $500M Funding at Risk

Key Takeaways

• News Corp subsidiaries Dow Jones & Company and NYP Holdings have filed a lawsuit against Perplexity AI.
• The complaint alleges Perplexity illegally copied copyrighted material from publications, including The Wall Street Journal and the New York Post.
• Perplexity seeks to raise $500 million in fresh funding.

Two subsidiaries of News Corp have filed a lawsuit against Perplexity AI, alleging that it illegally copied copyrighted news content from the plaintiffs’ publications, which include The Wall Street Journal and the New York Post.

The suit comes at a bad time for Perplexity, which is trying to raise $500 million from investors to fund its continued growth.

News Corp vs. Perplexity AI 

Echoing other legal battles that have pitted publishers against AI companies, News Corp’s complaint centers on Perplexity’s use of AI models trained on its intellectual property. 

Alongside its own custom models, Perplexity uses models developed by third parties, including OpenAI and Anthropic.

The plaintiffs assert that the lack of proper licensing from Perplexity infringes on their intellectual property rights under the U.S. Copyright Act and dilutes their trademarks under the Lanham Act.

They seek damages, an injunction to halt Perplexity’s use of their content, and other legal remedies.

While the lawsuit has similarities with cases like The New York Times vs. OpenAI (the Times has also sent Perplexity a cease and desist letter), it differs in an important way.

Different From Other Cases

Unlike suits that claim AI model training amounts to copyright infringement, News Corp targets a vast database of digital media to which Perplexity’s AI models have access. 

Using this “retrieval-augmented generation” (RAG) database, Perplexity’s models “[repackage] the original, indexed content in written responses (“outputs”) to users,” the complaint observes.

These outputs “are machine-generated reproductions of human-created content arranged by LLMs and other tools that summarize and paraphrase original, human-generated content, even at times reproducing that content verbatim.”

How Perplexity navigates its latest legal challenge could impact investors’ view of the company as it is trying to raise additional capital

From Zero to Eight Billion in Two Years

Four months after raising $250 million from investors including Nvidia and Jeff Bezos, Perplexity AI reportedly seeks an additional $500 million at a valuation of between $8 billion and $9 billion.

Perplexity AI’s journey to its current valuation has been meteoric. 

Founded in 2022, the company raised $11.5 million in seed funding that same year, establishing the precedent for its explosive growth. 

By the time it closed a $25.6 million Series A round in April 2023, Perplexity’s valuation had swollen to an estimated $500 million.

That figure jumped again in January this year when a  $73.6 million Series B boosted the startup’s valuation to $3 billion.

The most recent round, which included participation from Nvidia and Bezos Expeditions, landed Perplexity on the tech sector’s radar and cemented its position among the world’s most valuable AI developers. 

The current talks to raise additional capital at an $8 billion valuation reflect the significant investor appetite for AI technologies that promise to revolutionize how information is searched and processed. 

Behind the lofty valuation target lies an appeal that would get any investor’s heart racing: the prospect of usurping Google as the world’s dominant search engine

AI Firms Target Lucrative Search Market

Google’s dominance of the market for online search services has stood at around 90% since the mid-2000s.

In 2023, Google generated $175 billion  in advertising revenue from online searches, accounting for nearly 60% of its total earnings that year.

But if there was ever a technology that could disrupt the status quo, it’s generative AI. And for a company like Perplexity AI, stealing even a small slice of Google’s market share would justify a multi-billion dollar valuation.

Competition in AI Search

After OpenAI released ChatGPT in 2022, Google’s management reportedly declared  a “code red,” anticipating that unless they acted quickly, the new chatbot could threaten its primary source of revenue. 

Today, the competition is even more intense. With OpenAI’s SearchGPT taking direct aim at Google’s dominance, the Big Tech giant has pushed out features like AI Overviews to protect its home turf. 

When it comes to copyright challenges, Google has avoided the legal battles OpenAI and Perplexity have been dragged into by striking deals with major publishers.

Although AI Overviews poses some of the same revenue challenges to news outlets as Perplexity’s answer engine, the prospect of not showing up on the world’s most popular search engine is enough to convince major publishers to participate.

About the Author

James Morales

Although his background is in crypto and FinTech news, these days, James likes to roam across CCN’s editorial breadth, focusing mostly on digital technology. Having always been fascinated by the latest innovations, he uses his platform as a journalist to explore how new technologies work, why they matter and how they might shape our future.

See more

[email protected] LinkedIn Twitter