“I’m sorry your honor I didn’t understand what I was signing” I don’t think has ever been a valid reason in a courtroom, similar to “I’m sorry I didn’t know I was committing a crime” is not a valid defense.
When the terms were written, it's exceedingly unlikely that they intended it or anyone understood it to be blanket permission to allow a trained AI to copy code for others and no user would have interpreted it that way. Microsoft/Github can't necessarily unilaterally increase the intended range without making it clear in the terms.
If it got to a court case, and both sides could afford it, it could be a lengthy one.
(This comment is not legal advice. I am not a lawyer.)
By uploading your code, you give Github an exclusive license to use it to improve their services. Copilot is such a service. Just because it's an AI and it provides others code does not somehow invalidate the license you gave.
Many online services have very wide terms around what they can do with your data, which most people who bother to read them interpret as being what is required for them to handle the service for you without breaking copyright law. In that context, being able to use and analyse your data to improve their services could be another catch-all that lets them do specific performance optimisation on their backend.
One party instead deciding they've got blanket permission to do whatever they like with your work, including selling it to others, may well not hold up in court.
Contracts aren't programs and one party tricking the other rarely works out in court - courts world-wide tend to rule against trickery and deception.
I am very surprised there hasn’t been a legal challenge to it.