By Arpan Chaturvedi, Aditya Kalra and Munsif Vengattil
NEW DELHI (Reuters) -OpenAI faces an uphill climb as it argues that Indian courts cannot hear lawsuits about its U.S.-based business in the country, where Telegram has failed with similar defences and U.S. technology firms have faced government heat on compliance.
OpenAI, which counts India as its second biggest market with millions of users, is locked in an intense court battle triggered by domestic news agency ANI for alleged use of copyright content.
The case gained prominence in recent weeks as book publishers and media groups, including those of billionaires Gautam Adani and Mukesh Ambani, banded together to oppose OpenAI in the case.
OpenAI, which is facing new challenges from Chinese startup DeepSeek's breakthrough cheap AI computing, has maintained it builds its AI models using public information in line with fair use principles. The company faces similar copyright infringement lawsuits in U.S., Germany and Canada.
Details of legal rebuttals by OpenAI in other markets are not known, but in New Delhi it is opposing ANI by saying in court filings its usage terms call for dispute resolution only in San Francisco, it is beyond the jurisdiction of Indian courts and it "does not maintain any servers or data centres" in the country.
"It's a pre-Internet era argument which will not fly in Indian courts today," said Dharmendra Chatur, a partner at Poovayya & Co., which advises foreign tech companies.
"Google (NASDAQ:GOOGL), X, Facebook (NASDAQ:META) all perform services through their foreign companies and are party to litigation across India," Chatur added, explaining courts typically assess if a website is accessible and offers services to customers in India in deciding the point.
OpenAI did not respond to Reuters queries for this article. Its lawyer in India, Amit Sibal, declined to comment, citing ongoing proceedings.
Six other lawyers, and submissions of two court-appointed experts in the OpenAI lawsuit, Arul George Scaria and Adarsh Ramanujan, said Indian judges can hear the matter.
"It is evident that OpenAI is making their interactive services available to the users in India," Scaria wrote in his Jan. 25 court submission, which has not been made public but was seen by Reuters.
OpenAI's website shows it charges an 18% Indian tax on paid offerings and it said recently there was a "massive uptake of ChatGPT" in the critical market.
In the OpenAI-ANI case, an outright win on the jurisdiction argument will mean OpenAI will not need to face the copyright lawsuit in India. If it loses that argument, it will have to contest ANI's demand for deletion of training data and pay $230,000 in damages.
The Delhi court is set to hear the case next in February on the jurisdiction and other arguments.
Asked about the lawsuit, Reuters, which holds a 26% interest in ANI, has said it is not involved in its business practices or operations.
"FOREIGN DEFENDANT"
Batting for the power of Indian courts, lawyers and the court-appointed expert Scaria cited a 2022 decision involving Telegram as a legal precedent.
An Indian author had sued Telegram for her leaked copyright works appearing on Telegram groups, but the company declined to share details saying it was governed by laws in Dubai, where it is based, and had servers outside India.
Telegram disclosed the details after a Delhi judge ruled: "the conventional concepts of territoriality no longer exist ... (Telegram choosing) not to locate its servers in India cannot divest the Indian courts from dealing with copyright disputes."
The court did not impose a penalty.
OpenAI, however, argues there is 2009 court precedent in India that says merely because an app or webpage is accessible there does not mean judges can get jurisdiction "over a foreign defendant."
Even if OpenAI’s argument on jurisdiction fails to stop the lawsuit initially, an Indian intellectual property lawyer said it could later help the company make the point that a court order would need enforcement abroad. The lawyer declined to be named because of the matter's sensitivity.
Though Prime Minister Narendra Modi's government is not party to the OpenAI lawsuit, it has had a love-hate relationship with Big Tech.
India's IT minister in 2021 referred to U.S. tech firms and said their "position that 'I will only be governed by laws of America' ... is plainly not acceptable."
In the most bitter public faceoff that same year, Twitter, now X, declined to comply with orders to remove certain content and the government issued a press release, titled "Twitter needs to comply with the laws of the land".
The company complied later but sued New Delhi. The case is ongoing.
Even before Indian legal challenges mounted, OpenAI chief Sam Altman planned an India visit for Feb. 5. An email shows two other senior executives, James Hairston and Srinivas Narayanan, also plan to be in India.
"India is really important ... we've seen massive uptake of ChatGPT," OpenAI India executive, Pragya Misra, said last year.