The US State Department issued a cable on April 24 to diplomatic and consular posts worldwide warning foreign governments about Chinese efforts to copy American AI systems through distillation, according to Reuters. The cable specifically named DeepSeek, a Chinese AI startup, alongside Chinese AI firms Moonshot AI and MiniMax as part of an outreach effort to highlight risks tied to models derived from proprietary US systems.
State Department Warning on Distillation
According to the cable, unauthorized distillation can enable foreign companies to build lower-cost models that match some performance benchmarks while stripping out security controls. The outreach was intended to prepare for possible follow-up action by the US government.
The Chinese Embassy in Washington responded to the allegations by calling them baseless and stating that Beijing protects intellectual property rights.
Terms of Use vs. Copyright Framework
The dispute centers on contract terms rather than copyright law. OpenAI’s terms of use specify that users own the output generated, which creates a stronger legal claim against unauthorized extraction based on terms-of-use violations than on copyright grounds. Anthropic, the US AI company behind the Claude chatbot, accused DeepSeek, Moonshot AI, and MiniMax of extracting millions of Claude responses through approximately 24,000 fraudulent accounts as part of a distillation effort.
National Security Concerns
A US House Select Committee on the Chinese Communist Party report characterized DeepSeek as a Chinese espionage tool and raised concerns about censorship risks tied to compliance with Chinese law. The same report noted that DeepSeek uses Nvidia H100 chips, advanced AI processors that US export controls prohibit from sale to Chinese buyers. The Select Committee indicated that the US AI lead may be approximately three months and urged wider export controls, incentives, and whistleblower protections, suggesting the dispute could prompt broader government action.
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