OpenAI Faces Legal Hurdles in India

By Arpan Chaturvedi, Aditya Kalra, and Munsif Vengattil
NEW DELHI (Reuters)

OpenAI faces significant challenges as it contends that Indian courts lack jurisdiction over lawsuits regarding its U.S.-based operations, a stance that previously failed for Telegram and has put other U.S. tech firms under scrutiny for compliance issues.

As OpenAI considers India its second-largest market, featuring millions of users, it is embroiled in a legal dispute initiated by the domestic news agency ANI for alleged copyright infringement related to content usage.

The case’s visibility has surged recently as major book publishers and media organizations—including those linked to billionaires Gautam Adani and Mukesh Ambani—united against OpenAI’s practices.

Despite emerging competition from China’s DeepSeek, which offers affordable AI computing solutions, OpenAI maintains that its model development relies on publicly available information and adheres to fair use standards. Similar copyright infringement lawsuits loom in the U.S., Germany, and Canada.

OpenAI’s legal strategy in New Delhi asserts that its terms mandate dispute resolution solely in San Francisco, positing that it is outside Indian courts’ jurisdiction and pointing out that it does not operate servers or data centers in India.

Legal experts, including Dharmendra Chatur from Poovayya & Co., have challenged OpenAI’s claims, stating, “It’s a pre-Internet era argument which will not fly in Indian courts today,” noting that companies like Google, Facebook (NASDAQ:META), and others face litigation in India regardless of their foreign base.

OpenAI refrained from commenting for this article, while its Indian lawyer, Amit Sibal, also remained silent due to active proceedings. Notably, legal opinions from six other lawyers and two court-appointed experts argue that Indian courts can address the case, with Scaria acknowledging that OpenAI’s services are accessible to Indian users.

OpenAI’s website indicates that it charges an 18% tax on its paid offerings in India, indicating a significant user base for ChatGPT. Winning the jurisdiction argument could exempt OpenAI from the copyright lawsuit, but losing it would compel the company to comply with ANI’s demands, including potentially deleting training data and facing a $230,000 damages claim.

The Delhi court is scheduled to address the case again in February, focusing on jurisdiction-related arguments.

To support the ability of Indian courts to adjudicate the matter, legal professionals are referencing a 2022 ruling involving Telegram. In that case, Telegram resisted Indian jurisdiction by citing its operations in Dubai and servers located outside India, claiming that this absolves them of Indian legal responsibilities. However, the court dismissed this argument, asserting that conventional ideas of territoriality are outdated.

Although OpenAI contends that a 2009 Indian court ruling envisions that access alone does not grant jurisdiction, experts suggest that an unfavorable ruling could help OpenAI argue for the necessity of enforcement abroad for any subsequent court orders.

Prime Minister Narendra Modi’s administration is not involved in this lawsuit but maintains a complicated relationship with Big Tech. In a notable statement from 2021, India’s IT minister critiqued U.S. tech firms’ insistence on exclusive governance by American law.

OpenAI’s CEO, Sam Altman, is scheduled to visit India on February 5, accompanied by senior executives James Hairston and Srinivas Narayanan, emphasizing the importance of the market. OpenAI India executive Pragya Misra commented last year, “India is really important … we’ve seen massive uptake of ChatGPT.”