Proprietary model weights are IP, their outputs are not IP and I can't imagine a court decision that would rule otherwise because that would set an extremely far reaching and dangerous precedent, even for American businesses.
I don't think distillation as 'stealing IP' has any legal legs. They can probably claim violation of ToS at best because the terms of use do prohibit use for training rival models.
I don't think distillation as 'stealing IP' has any legal legs. They can probably claim violation of ToS at best because the terms of use do prohibit use for training rival models.