AI copyright lawsuit prompts fresh options trading in The New York Times

As President Donald Trump’s dispute with major broadcast networks dominates headlines, another legal battle in a Lower Manhattan courthouse is drawing the attention of options traders. The case could reshape the economics of journalism and the compensation news organizations receive for the use of their reporting in generative AI systems.

On Friday, newly unsealed statements from Microsoft and OpenAI executives challenged the “fair use” defense in The New York Times’ lawsuit. That defense generally depends on demonstrating that the accused technology neither substitutes for nor directly competes with the original work.

According to the unsealed material, an OpenAI executive characterized chatbots as an “existential threat” to journalism, saying they provide readers with information directly and reduce the need to visit a news site, according to The Wall Street Journal.

The material also alleged that OpenAI copied millions of copyrighted articles to train its systems, potentially using unauthorized access to retrieve them. Brent Hecht, Microsoft’s director of applied science, described the training as “the largest theft of labor in human history,” according to The Washington Post. The companies’ own data reportedly showed a sharp decline in The New York Times’ click-through rates.

OpenAI co-founder Greg Brockman also reportedly wrote in 2017 that he was “deeply motivated by the gazillions” he hoped to earn from commercializing the technology, according to The Financial Times, and allegedly responded “ah nice” after learning that an employee had found a way around The New York Times’ paywall.

Those developments could increase the likelihood of a substantial settlement and licensing agreement. If negotiations fail, a ruling for The New York Times at trial could carry major consequences for the defendants and significant potential compensation for the newspaper.

One complication for The Times is the Department of Justice’s Sept. 1 statement of interest asking the court to rule that training AI models on copyrighted material qualifies as fair use. The government cited national security concerns, arguing that limiting American systems while foreign adversaries use any accessible material could concede an overwhelming technological advantage.

Despite the stakes, The New York Times shares have been little changed year to date and moved only slightly on Friday.

The New York Times Company, YTD

Options activity, however, has picked up. The largest reported trade involved buying roughly 4,400 October 72.5/77.5 call spreads at a debit of $0.925. The structure risked about 1.3% of Friday’s closing price for a potential gain of at least 4.6% at October expiration, with the possibility of a 10% or greater move if the shares reached the $77.73 average analyst target. Volume in October 62.5 and 65 puts also suggested the trader may have reduced the cost by selling downside puts near the August lows.

The October expiration suggests the trader expected a possible summary judgment or settlement within weeks, a prospect made more plausible by the newly disclosed emails.

If the concern is a negative surprise that pushes the shares to new lows, however, the near-term target already aligns with analyst consensus. A defined-risk call spread may therefore be a more direct way to express the view than trying to determine whether options premiums are too expensive, too cheap, or fairly priced. A 65/77.5 call spread offers more than $7 of potential upside against a downside of just over $5, with minimal extrinsic premium.

In short, the trade combines lower capital use, defined risk, and an asymmetric payout.

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