Read the Authors Guild v Google dismissal. The court considered it fair use because Google's project was built explicitly to let users find and purchase books, giving revenue to the copyright holders. Copilot does not do that.
That's a reference to factor four of the fair use test, "the effect of the use upon the potential market for or value of the copyrighted work." (17 USC 107).
None of the factors are dispositive, however. For example, a scathing book review that quotes a passage to show how bad the writing is might eviscerate sales of the book, but such a use is usually protected. For a counter-example, see Harper & Row v. Nation Enterprises 471 U.S. 539 (1985).
