Anthropic and OpenAI Raise Alarms: Are Chinese Firms Secretly Using 'Distillation' to Clone US AI Models?

Photo Credit: The New York Times / Chloe Ellingson

 Leading American artificial intelligence developers, including Anthropic and OpenAI, are increasingly vocal about the use of "distillation" by some Chinese tech companies to replicate proprietary AI capabilities. The companies argue these practices violate their terms of service, although the legal status of AI distillation remains unsettled and the allegations have not been independently verified.

According to a June 10 letter to Senators Tim Scott and Elizabeth Warren, Anthropic alleged that some Chinese tech entities have systematically copied its AI technologies through what it described as "distillation attacks". Anthropic, along with other frontier labs, has urged U.S. lawmakers to explore legislative pathways to curb this practice, arguing that it accelerates China's AI development and impacts vital areas such as cybersecurity, business planning, and military applications. OpenAI’s terms of use similarly prohibit using outputs from its proprietary models to develop competing AI models, reflecting concerns similar to those raised by Anthropic.

Key Takeaways

• Distillation Defined: Originally developed by Google researchers in the early 2010s for efficiency, "distillation" involves using a highly capable "teacher" model to train a more efficient "student" model.

• The Controversy: While distillation of open-source models is common, Anthropic and OpenAI prohibit the distillation of their proprietary, frontier-level systems under their terms of service.

• Industry Prevalence: U.S.-based AI companies, including Elon Musk's xAI, have acknowledged utilizing distillation as a common industry practice, illustrating the ubiquity of the technique within the AI sector.

• Alleged Large-Scale Harvesting: Anthropic alleged that some Chinese AI companies, including DeepSeek, created large numbers of accounts to generate conversations for AI model training.

Understanding AI Distillation

Distillation has been a staple of the tech industry for over a decade, serving as a method for researchers to build smaller, more efficient models that perform effectively on less expensive hardware.

• The Teacher-Student Dynamic: Pioneer Geoffrey Hinton, who co-developed the technique at Google, explains the process as a "teacher" model guiding a "student" model on how to behave.

• The Proprietary Conflict: Friction arises when companies use this technique to mimic the behavior of non-open-source, proprietary systems—the most powerful models owned by labs like Anthropic and OpenAI.

Legal and Practical Hurdles

The legal status of distilling proprietary AI models remains ambiguous. Legal scholars note that whether AI distillation violates copyright, trade-secret, or contract law depends on how the training data was obtained, the applicable jurisdiction, and how closely the resulting model reproduces protected behavior. Furthermore, even if U.S. laws were adjusted, much of this activity occurs outside U.S. jurisdiction, making enforcement through domestic courts extremely challenging.

US Response and Potential Impact

American AI labs are advocating for multiple strategies to combat the perceived threat from Chinese competitors:

1. Increased Collaboration: Anthropic has called for Congress to pass legislation facilitating deeper collaboration between the U.S. government and leading frontier labs to counter distillation attacks.

2. Export Controls: Companies are encouraging the U.S. government to continue restricting China's access to specialized, high-performance computer chips, which are essential for training frontier-level models.

3. Technological Evolution: Some experts, such as Adaption CEO Sara Hooker, argue that distillation will become less significant as models transition toward "AI agents"—digital assistants that perform complex tasks across multiple software platforms—which are much harder to duplicate via distillation.

EEAT Reference: Operational Variables & Tri-Tier Review

1. Reported Claims and Public Statements

• Anthropic has provided information to U.S. Senators detailing how it monitors and identifies patterns associated with accounts harvesting data from its proprietary Claude chatbot.

• Elon Musk has publicly acknowledged that xAI has used model distillation techniques during development, illustrating that distillation itself is widely used within the AI industry.

• Separately, Chinese AI developer Z.ai recently released GLM-5.2, highlighting the rapid pace of AI model development in China.

2. What Analysts Say (Industry Context)

• Analysts say distillation has become a common optimization technique across the AI industry.

• Experts note that while distillation can efficiently transfer capabilities from one model to another, building frontier AI systems still requires significant compute, engineering expertise, and proprietary datasets.

• Legal experts say whether distillation violates trade-secret law depends on how the information was obtained and how closely the resulting model reproduces protected behavior.

3. What Remains Unconfirmed (Variables)

• Precise Methods: The precise methods used by individual companies remain unverified.

• Legislative Outcome: It is currently unknown if or how Congress will respond to the requests from frontier labs regarding new legislation or enhanced enforcement.

Why It Matters

The debate over AI distillation reflects the growing technological competition between the United States and China. As AI becomes increasingly important for national security, scientific research, and commercial innovation, governments and technology companies are paying closer attention to how advanced AI models are trained, protected, and regulated. The discussion also raises broader questions about how intellectual property laws should apply to AI systems that learn from the behavior of other models rather than directly copying their source code.

Source Transparency: This report is based primarily on reporting by The New York Times, including Anthropic's June 10 letter to U.S. Senators Tim Scott and Elizabeth Warren, public statements from AI industry leaders, and legal analysis regarding AI distillation, trade secrets, and intellectual property. The allegations discussed have not been independently verified, and the companies named have not necessarily responded publicly to every claim referenced. Where allegations are discussed, they are attributed to the organizations making those claims and should not be interpreted as established facts unless independently confirmed.

Editorial Note

This report is based on reporting by The New York Times regarding claims made by U.S.-based AI companies regarding the alleged distillation of proprietary AI models by some Chinese AI companies. The legal status of AI distillation remains a subject of debate, and the allegations made by these American companies are part of an ongoing geopolitical and industry-wide discussion regarding AI development and intellectual property.

• Primary Source: Reporting by The New York Times, referencing Anthropic's June 10 correspondence with U.S. Senators and industry legal analysis.

• Ecosystem Context: Intellectual property law developments, trade secrets legislation, and geopolitical AI competition.

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