Perplexity AI hit with new lawsuit as it looks to raise more funding

On Monday, News Corp's Dow Jones and The New York Post filed a lawsuit against Perplexity AI, the company developing the AI-powered answer engine known by the same name, for engaging in copyright violations on a "massive scale".

Perplexity AI is not a generative AI model developer. Rather, the company leverages third-party LLMs, providing them with internet access so they access (or better yet, scrape) up-to-date information relevant to users' queries. Once Perplexity is prompted with such queries, it outputs summaries—if they can be called 'summaries', given that other companies have complained that Perplexity merely plagiarized their content—of its findings, including links and citations. As the lawsuit notes, Perplexity markets its answer engine's summaries as relevant and accurate enough that users can skip the links.

As is well known, the company's main targets are traditional search engines—Google's answer to Perplexity is its AI Overviews which, according to the company, summarize and organize search result pages, and can respond to more complex queries than traditional web search queries. Additionally, Perplexity has often publicly stated that it is not looking to compete with media and news outlets. Perhaps to mitigate the piling criticisms, the company developed a revenue-sharing program, recently launched for a small batch of partners.

Regardless, even conceding Perplexity's good intentions, the complaints against the company are not easy to dismiss. Even if it does so 'inadvertently', each time Perplexity users skip the links, the answer engine is unquestionably diverting traffic from the media and news outlets which, as the lawsuit points out, depend on subscriptions and advertisement-related revenue to cover its costs, including paying journalists to research and write stories, sometimes under less-than-ideal conditions.

The merits of Perplexity's revenue-sharing program, if any, are upcoming, as the company has yet to roll out advertisements across its products. Even if the program takes off, the question remains on whether this mitigation strategy sufficiently compensates for the company's questionable data collection practices.

The current lawsuit follows a cease-and-desist that The New York Times recently leveled at Perplexity and news that the AI company is looking to negotiate a further funding round of at least $500 million at an $8 billion valuation.

News Corp emerged as one of the first journalism giants to negotiate a multi-year partnership with OpenAI, which News Corp CEO Robert Thomson praised as "the beginning of a beautiful friendship".