The sensitivity label Label1 assigns permissions (User1 = Co-Author, User2 = Reviewer, User3 = Viewer) and enables Double Key Encryption (DKE). Microsoft 365 Copilot can summarize content only when the service can access the file using the user's permissions. Content protected with Double Key Encryption is not accessible to Microsoft cloud services (including Copilot); as a result, Copilot cannot open or process DKE- protected files for any user, even if they can open the file themselves in Office apps.
Therefore, no user can use Microsoft 365 Copilot to summarize File1.
Reference: Microsoft Purview Double Key Encryption-service access limitations for Microsoft cloud services, including Copilot and search indexing.