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Many experts say the claims from companies like Anthropic and OpenAI are overblown. “The narrative that all of the capabilities of the Chinese technologies coming from an Anthropic model is not as true as people say it is,” said Charles O’Neill, a head of model training at Baseten, a U.S. company that sells access to Chinese technologies.

Here is a guide to a niche technical process that has now become a geopolitical issue.

What exactly is distillation?

First developed in the early 2010s, distillation was initially a way for AI researchers to build more efficient technologies. Using this technique, they could collect data from an established system and use that data to build a new system able to run on less expensive hardware.

“Think of one model as the teacher and the other as a student,” Geoffrey Hinton, a former Google researcher who helped develop the technique, recently told The New York Times.

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Companies still use distillation in this way. But more recently, the technique has also become a way for companies to collect data from technologies built by others.

Basically, an outside company looking to distill a competitor’s system will set up many accounts on the competitor’s service, say Anthropic’s Claude or OpenAI’s GPT. The distilling company will then assign those systems to particular tasks, such as computer coding or mathematics.

The distiller can then use the information generated by these established AI systems to help train a new system of their own.

Is distillation illegal?

Some legal scholars say that distillation could violate the Defend Trade Secrets Act, a law that allows companies to sue over the theft of trade secrets. But U.S. courts have not decided this issue.

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Critics of Anthropic and OpenAI point out that the two companies have engaged in similar behavior.

Anthropic is facing multiple lawsuits that accuse the San Francisco startup of illegally using copyrighted internet data to train its systems. Last year, as part of a landmark legal settlement, the company agreed to pay $1.5 billion to a group of authors and publishers after a judge ruled that it had illegally downloaded and stored millions of copyrighted books. The settlement was the largest payout in the history of U.S. copyright cases.

OpenAI and other companies face similar suits, including one brought by the Times in 2023. That suit contends that OpenAI and its partner Microsoft used millions of articles published by the Times to train chatbots, which now compete with the news outlet as a source of information. OpenAI and Microsoft deny the claims.

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Are Chinese companies really copying American systems?

Chinese firms have most likely distilled proprietary American systems. But it is not completely clear what they have done.

After Chinese startup DeepSeek shocked American researchers and investors last year by releasing a particularly powerful and efficient system, OpenAI accused DeepSeek of distilling its technologies.

As Chinese systems continued to improve over the past nine months, Anthropic made similar claims. In June, Anthropic sent a letter to Sens. Tim Scott, R-S.C., and Elizabeth Warren, D-Mass., accusing Chinese tech giant Alibaba of distilling its technologies.

The Chinese companies have not responded publicly to the accusations.

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Does distillation alone explain how China’s models remain competitive?

No. When companies distill a proprietary system, they only have access to part of it: the words and characters and other data generated by the system. They do not have access to the system’s underlying computer code, as they would with an open source technology.

Using outputs from a proprietary system like Claude Fable from Anthropic, a Chinese company can accelerate the development of its own technology. But those outputs are only part of the puzzle.

“You are not getting access to everything you would use when you are distilling your model in-house,” said Rehaan Ahmad, a co-founder of Silicon Valley startup alphaXiv, a company that tracks the latest AI research.

Before using those outputs, a Chinese company must first build a system that is already pretty powerful in its own right. Through distillation, it can then hone this model in important ways, but this requires additional work, money, computing power and talent.

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Can Anthropic and OpenAI stop companies from distilling?

They can curb the practice — and they have tried.

If Anthropic or OpenAI suspect that someone is distilling their systems, they may shut down the offender’s account. But others will most likely pop up. And if Anthropic and OpenAI shut down too many accounts, they may end up barring legitimate users.

“It is basically impossible to stop distillation,” Lino Le Van, another alphaXiv researcher, said.