U.S. District Judge William Alsup of San Francisco said in a ruling filed late Monday that the AI system’s distilling from thousands of written works to be able to produce its own passages of text qualified as “fair use” under U.S. copyright law because it was “quintessentially transformative.”

While the startup has won its "fair use" argument, it potentially faces billions of dollars in damages for allegedly pirating over 7 million books to build a digital library.