In some cases if the model regurgitates the original material then that is clearly copyright violation, but if the model "learns" from the source material just like a human brain would then that's not a copyright violation.
I think we're going to see cases that find distillation is also fair use. You're using the competing model like a book. You pay for it, you use it (read it), it informs your model, but you aren't repeating/reselling what the model told you verbatim. Foreign labs may still run afoul of competing labs' Terms of Service, and they may also pay a settlement (or not, it's a different jurisdiction after all), but the damage is already done. Distillation will become uncontroversial when done legally.
God I'm so tired of this.
The billion dollar companies have the ability to hire an army of lawyers to DDOS the legal system. They at most pay a slap-on-the-wrist fine as the cost of doing business.
I'm extremely pro free markets etc, but the uncomfortable truth is anthropic stole the work of thousands of authors for profit. I think it will end one my favourite things in life: programming books.
If an LLM generalizes from thousands of authors then it is no different from what your brain does.