Lawyers for tech billionaire Elon Musk are suing OpenAI and other named defendants for alleged anti-competitive conduct against OpenAI, several of its co-founders, and investor and close collaborator Microsoft. A preliminary injunction was filed to prevent him from participating.
The injunction motion, filed late Friday in the U.S. District Court for the Northern District of California, accuses OpenAI, CEO Sam Altman, Chairman Greg Brockman, Microsoft President, LinkedIn co-founder and former OpenAI board member Reid Hoffman. It seeks to put a stop to the various illegal activities of former OpenAI board member and Microsoft VP Dee Templeton. The charges include:
- It discourages investors from supporting OpenAI competitors, such as Musk’s AI company, xAI.
- OpenAI’s connection to Microsoft benefits from “misappropriating competitively sensitive information.”
- Convert OpenAI’s governance structure to a for-profit status and “transfer all material assets, including intellectual property, owned, held or controlled by OpenAI, Inc., its subsidiaries or affiliates.”
- OpenAI induces the defendants to do business with organizations in which they have a “significant financial interest.”
Musk’s lawyers argue there will be “irreparable harm” if the injunction is not granted.
“Plaintiffs and the public should pause,” they wrote in the filing. “An injunction to preserve OpenAI’s non-profit nature without self-dealing is the only appropriate remedy. “Otherwise, OpenAI promised Musk, and by the time the court reaches its merits, the public will be long gone.”
The motion is the latest salvo in Musk’s legal battle with OpenAI, accusing it of abandoning its original nonprofit mission to make the fruits of AI research accessible to everyone. Musk withdrew the lawsuit last July, but revived it later this summer. The amended complaint earlier this month names new defendants, including Microsoft, Hoffman and Templeton, and two new plaintiffs: Shivon Zilis, a Neuralink executive and former OpenAI board member, and xAI.
Musk claimed in a previous complaint that he was defrauded out of more than $44 million he donated to OpenAI by exploiting “well-known concerns about the existential harm” of AI. Musk, one of OpenAI’s co-founders, left the company in 2018 due to disagreements over its direction.
OpenAI was launched as a non-profit in 2015, and converted to a ‘for-profit cap’ in 2019, with the non-profit being the controlling entity of a for-profit subsidiary. The company is in the process of converting to a fully for-profit entity so that OpenAI can maintain its non-profit status as a separate entity.
Musk created his answer to xAI last year, OpenAI. Soon after, the company launched Grok, an AI model that now powers a variety of features on Musk’s social network, X (formerly Twitter). xAI also provides APIs that allow customers to build Grok into third-party apps, platforms, and services.
In their motion for an injunction, Musk’s lawyers argued that OpenAI was depriving xAI of capital by getting investors to promise not to fund xAI and its competitors. Last October, the Financial Times reported that OpenAI had asked investors in its latest funding round not to fund OpenAI’s competitors, including xAI.
“Musk has confirmed that at least one major investor in OpenAI’s October funding round subsequently declined to invest in xAI,” Musk’s lawyers wrote.
Of course, xAI hasn’t had any trouble raising funding recently. According to reports, the startup closed a $5 billion round this month with participation from famous investors such as Andreessen Horowitz and Fidelity. With approximately $11 billion in the bank, xAI is one of the most funded AI companies in the world.
Musk’s injunction request also alleges that Microsoft and OpenAI continue to illegally share proprietary information and resources and that several of the defendants, including Altman, are engaging in self-dealing that harms market competition. For example, OpenAI chose Stripe, a payments platform in which Altman has a “significant financial interest,” as OpenAI’s payment processor, the filing notes. (Altman reportedly made billions of dollars from his Stripe holdings.)
Microsoft, which first supported OpenAI in early 2019, has strengthened its partnership over the past few years, investing a total of $13 billion in return for a virtual 49% stake in the company’s revenues. Additionally, Microsoft has allowed OpenAI to make extensive use of its cloud hardware resources, allowing startups to train, fine-tune, and run AI models like those powering ChatGPT.
Hoffman’s positions on the boards of Microsoft and OpenAI and his status as a partner at investment firm Greylock gave him a privileged view of the two companies’ dealings, Musk’s lawyers argue. (Hoffman will step down from OpenAI’s board of directors in 2023.) In the case of Templeton, whom Microsoft briefly appointed as a non-voting board observer for OpenAI, Musk’s lawyers say he is in a position to facilitate an agreement between Microsoft and OpenAI that violates antitrust rules. It is claimed that it was in .
“Maintaining OpenAI’s charitable status and suspending Altman’s further self-dealing transactions pending a final resolution protects both the organization’s founding mission and the public interest in the proper governance of the charity,” Musk’s lawyers wrote. .
Musk’s lawyers wrote that if the injunction is not granted, OpenAI may “lack sufficient funds” to pay damages if the court ultimately rules in Musk’s favor. (OpenAI is reportedly spending more than $5 billion and is nowhere near breaking even.) Moreover, they were the judges who disallowed OpenAI’s non-profit conversion, saying it would be “virtually impossible” to “unwind” the company’s deal. If OpenAI continues to accept new investments, it will result in widespread investor losses.
“No objective observer can look at OpenAI today and say it bears any resemblance to what it promised,” Musk’s lawyers wrote. “Plaintiffs respectfully request that the court maintain the status quo and halt defendant’s escalating conduct pending final disposition.”
“Elon’s fourth attempt to recycle the same baseless complaints continues to be completely without merit,” an OpenAI spokesperson said in a statement. The company previously tried to dismiss Musk’s lawsuit, calling it “wild” and baseless.
The post has been updated with a statement from OpenAI.
