By Mike Scarcella

WASHINGTON, July 21 (Reuters) - A federal judge overseeing the $1.5 billion copyright settlement between Anthropic and authors sharply reduced the plaintiffs' legal fee request, rejecting a percentage-based award that she said would produce a "windfall" for the lawyers and divert tens of millions of dollars from class members.

U.S. District Judge Araceli Martínez-Olguín in Oakland approved the nationwide settlement on Monday but awarded class counsel about $101.6 million, below the $187.5 million they sought after cutting back an earlier request for $300 million.

The lawsuit alleged Anthropic trained its artificial intelligence models on hundreds of thousands of pirated books. Anthropic denied any wrongdoing.

The dispute over fees highlighted a recurring dispute in major class actions over how lawyers should be compensated. Courts can award fees based on a percentage of the settlement fund or use the "lodestar" method, which calculates fees based on hours worked and reasonable billing rates.

The difference between the approaches can be substantial, with millions more dollars potentially flowing to class members or to the lawyers who represent them.

The attorneys for the class at law firms Susman Godfrey and Lieff Cabraser had no immediate comment on the fee award, including whether they would appeal. In a statement, Anthropic said it was looking forward to bringing the litigation to a close but declined to comment on legal fees.

The class lawyers initially sought $300 million in fees but withdrew that request after another judge indicated that he would not approve it. They later sought $187.5 million, arguing that the amount reflected the complexity of the litigation and the result achieved.

In court filings, the attorneys said a percentage-based award better aligned the interests of counsel and class members by rewarding lawyers for obtaining a larger recovery.

Anthropic in a court filing in December criticized the plaintiffs’ fee approach, saying judges have questioned using the benchmark percentage model in the context of a so-called megafund settlement.

The authors’ lawyers countered that Anthropic wanted to lower the fees to “discourage quality firms from bringing similar class actions against it in the future.”

Martínez-Olguín, in her order, concluded the lodestar method was better suited to determining a reasonable fee in the case than a percentage-based award. She said granting the requested 12.5% share of the settlement fund would generate outsized profits for class counsel given the size of the recovery and the hours worked.

The judge increased the lawyers' lodestar award with a multiplier, citing the record-setting settlement, the novel copyright and AI issues involved, and the risk that counsel might recover nothing. The final fee award amounted to about 6.8% of the settlement fund.

Martínez-Olguín rejected a series of objections to the fee request by authors who are members of the class, finding that they did not account for the risks the plaintiffs’ lawyers took.

Read more:

US judge approves Anthropic's $1.5 billion settlement of copyright lawsuit

Lawyers behind $1.5 billion Anthropic settlement slash fee bid after pushback from judge