Elon Musk launches legal war against OpenAI

Elon Musk is pursuing legal action to prevent OpenAI from fully transitioning into a for-profit entity. Musk, alongside his AI startup xAI and former OpenAI board member Shivon Zilis, filed for a preliminary injunction in federal court on November 29, 2024. The motion aims to halt OpenAI’s restructuring plans, alleging that the organization is engaging in anti-competitive practices including pressuring investors not to support rival firms.

Musk’s legal team argues that OpenAI, which has received substantial backing from Microsoft, is attempting to monopolize the generative AI market by imposing conditions on its investors. This includes restrictions that would allegedly prevent them from funding competing startups like Musk’s xAI. His initial lawsuit, filed in March 2024 in San Francisco, claimed breach of contract and was later withdrawn. Musk subsequently refiled complaints in August 2024 in federal court, further clarifying his intent to challenge OpenAI’s operations.

The filing manifests a deeper contention between Musk, OpenAI, and its CEO Sam Altman, with mentions of other significant stakeholders such as investor Reid Hoffman and Microsoft. Musk’s attorneys assert that OpenAI’s actions violate federal racketeering and antitrust laws, accusing the company of essentially benefiting from “wrongfully obtained competitively sensitive information” due to its ties with Microsoft. The legal team contends that this strategy constitutes a “group boycott” aimed at denying xAI access to crucial investment capital.

An OpenAI spokesperson dismissed Musk’s latest claims, insisting that they are unfounded. “Elon’s fourth attempt, which again recycles the same baseless complaints, continues to be utterly without merit,” they stated. OpenAI was originally established as a non-profit in 2015 before shifting to a capped-profit model in 2019, which allowed its governing non-profit entity to manage for-profit ventures. However, the company is now moving toward becoming a fully for-profit public benefit corporation.

Musk is once again after OpenAI

Microsoft has invested nearly $14 billion into OpenAI, although it has faced financial setbacks related to its investment strategy, such as recording a $1.5 billion loss associated with OpenAI in its recent earnings report. OpenAI’s efforts to expand and remain competitive in the evolving AI landscape have included a substantial funding round that valued the company at $157 billion before the alleged manipulation of investor relations came to light.

As scrutiny intensifies, investigations are ongoing into the nature of the partnerships and investments forming within the AI sector, specifically those involving major players like OpenAI, Microsoft, and others. The Federal Trade Commission announced plans to monitor the relationships influencing the industry, reflecting the increasing importance of regulatory oversight amid significant corporate activity in generative AI.

Featured image credit: Kerem Gülen/Midjourney