After Udio-Universal Settlement, AI Music Lawsuits Aren’t Over: What Happens Now?

Universal Music Group and Udio have settled their legal battle by striking a deal for a fully-licensed artificial intelligence music platform. But the broader litigation involving rival AI firm Suno and both Sony Music and Warner Music is still very much pending.

The deal, announced Wednesday, will end UMG’s allegations that Udio broke the law by training its AI models on vast troves of copyrighted songs. Under the agreement, Udio will pay a “compensatory” settlement and the two will partner on a new subscription AI service that pays fees to UMG and its artists, and allows artists to opt in to different aspects of the new service.

But that agreement will not resolve the entire legal battle, in which all three majors teamed up last year to sue both Udio and Suno — the other leading AI music firm — for allegedly “trampling the rights of copyright owners” by infringing music on an “unimaginable scale.”

For now, Sony and Warner will continue to litigate their case against Udio, but a settlement like the one struck by UMG obviously creates a framework for them to reach a similar deal. The revamped Udio 2.0 will not be an exclusive UMG partner, according to sources close to the situation — meaning it’s able to strike similar catalog licensing deals with Sony and Warner, as well as any other parties.

Udio has ample incentive to do so. Past experience has shown that music licensing for tech platforms is something of a zero-sum proposition; it often doesn’t work for users if you have glaring gaps in your catalog of songs. Spotify wouldn’t be nearly as ubiquitous if it were missing catalogs by Taylor Swift, Drake or The Beatles, while TikTok’s standoff with UMG last year ended up impacting non-UMG recording artists like Beyoncé and Adele due to rights being owned by different companies.

In striking the deal, Udio has also effectively put its cards on the table: it wants to be the music industry’s AI good guy. Though not legally impossible, it’s hard to argue in court that you don’t need training licenses and artist consent while touting the benefits of both in press releases. Udio has also already made concrete changes to its platform, including controversially disabling downloads for its existing subscribers — a further sign that it’s no longer looking to fight it out.

It’s worth noting that the settlement makes for odd bedfellows in any ongoing litigation. The same team of lawyers that repped UMG in its claims against Udio — now settled with a first-of-its-kind partnership — is also representing competitors Sony and Warner as they continue to sue that company. Ditto for Suno, which is defended by the same team of attorneys as Udio, which just agreed to sign a licensing deal that’s antithetical to Suno’s core argument that no such deals are needed.

But such situations are par for the course for cases like these, where industry rivals team up for a legal case, and each company on both sides almost certainly signed agreements waiving any legal right to argue that their lawyers have a conflict of interest.

The case against Suno, on the other hand, looks more likely to keep going. All three majors are still suing that company, and Suno has long been seen in industry circles as more the more combative of the two. One can’t imagine that Suno’s will to fight will be reduced by the Udio deal; if anything, it has a clearer runway to AI music dominance now that its largest text-to-audio rival has effectively left the space to cultivate its own walled-off garden.

The Suno lawsuit remains at the earliest stage, where a defendant will file a motion to dismiss a case, which is typically the first big ruling in a civil litigation. If both sides decide to fight it out, the case and resulting appeals could go on for years into the future. But the key battle lines of the litigation are already clear.

The multi-million-dollar question is whether training AI platforms like Suno on millions of unlicensed copyrighted songs counts as “fair use,” a legal doctrine that allows for the reuse of protected works in certain circumstances. That issue is also at the heart of dozens of other lawsuits filed against booming AI firms by book authors, news outlets, movie studios, comedians and visual artists — meaning it might really be more of a trillion-dollar question.

Can Suno prevail on that point, making Udio look silly for settling so early? The proverbial jury is very much still out.

One federal judge, ruling on a major case against Anthropic, sided resoundingly with AI firms, saying that unlicensed training was clearly a fair use because it was no different than a human writer taking inspiration from copyrighted books they had read. But another judge ruled that such training would be illegal “in many circumstances” and that AI firms expected to generate “trillions” in profits “will figure out a way to compensate copyright holders.”

A separate, emerging flashpoint in the case is whether Suno broke the law by “stream-ripping” its training songs from YouTube. That’s a key issue in the wake of a court ruling this summer that said AI training on copyrighted works itself is fair use, but that using illegally-obtained works to do so could lead to billions in damages for AI firms.

In the wake of this week’s Udio settlement, the record labels likely see that deal as setting a helpful precedent: “See, AI companies do need licenses to train their models — Udio just took one.” And in that same vein, when it comes to that all-important courtroom battle over fair use, those same music companies likely view this week’s Udio deal as potential legal ammo.

A key factor in the fair-use analysis is whether exploiting a copyrighted work for free caused market harm — whether it hurt the ability of the original author to monetize their own creative output. A major licensing deal with a direct competitor would seem to be a very obvious market that would be harmed by the conduct of Suno, which says it can build its AI models without such deals.

But that argument has already been rejected in both of those earlier fair-use rulings. Even for the judge who said AI training would be illegal in most circumstances, that kind of argument would be “circular” — since essentially any copyright owner could argue that the specific thing they’re suing over is a lost market opportunity. That means the Udio deal might help the labels in the business world and the court of public opinion, but likely not in actual court. For now, time will tell.

For deeper reading, go check out the full lawsuits against Suno and Udio, and go read the responses from Suno and Udio. And stick with Billboard for updates as the cases move ahead.