Accusations that Chinese labs cheat by copying US models are misleading. The practice, known as distillation, is common across the industry (including by Elon Musk's xAI) and academia. Now, with Chinese labs dominating open source, American startups are increasingly building on top of Chinese models.

When a company distills knowledge from a competitor's AI, it's not just scraping pre-training data. It's a highly efficient process of extracting the model's intelligence, reasoning patterns, and skills. This is more akin to an apprentice directly interacting with and learning from a world-class expert than simply reading the same textbooks the expert used.

The AI industry was largely built on scraping data without permission. Apple's lawsuit frames OpenAI's alleged theft of hardware secrets as part of this same culture. This narrative makes OpenAI culturally vulnerable in a legal battle, as it appears to be a pattern of behavior rather than an isolated incident.

There is a profound hypocrisy in the AI industry's stance on intellectual property. Companies that built their foundational models by scraping the entire internet are now seeking regulatory protection to prevent others from distilling or learning from their models—mirroring how the music industry fought Napster after profiting from an open ecosystem.

Large, centralized AI models are vulnerable to 'distillation attacks,' where a smaller model can be trained cheaply by querying the larger one. This technical reality, combined with the moral hypocrisy of creators restricting copying after scraping the internet, strongly suggests a future dominated by decentralized, open-source models.

As more of the internet and code repositories are generated by leading AI models, any new model trained on this public data inadvertently "distills" the knowledge and quirks of those proprietary systems. This blurs the line between original training and outright copying.

In his trial against OpenAI, Elon Musk admitted under oath that using one AI model to train another—a practice known as distillation—is something 'all the companies do.' This confirms that a legally and ethically gray practice is widespread across the industry.

US AI labs' efforts to prevent foreign rivals from distilling their models face accusations of hypocrisy. Critics point out that these labs train their own models on vast amounts of public data without permission. This "pot calling the kettle black" dynamic complicates legal and ethical arguments against industrial-scale distillation.

US officials and AI labs allege Chinese firms are engaged in industrial-scale IP theft. They reportedly use fraudulent accounts to extract capabilities from US models like Claude to train their own, creating a facade of domestic innovation.