Elon Musk is requesting that a federal judge prevent OpenAI from becoming a wholly for-profit company.
On Friday, lawyers for Musk, his AI company xAI, and Shivon Zilis, a former board member of OpenAI, requested a preliminary injunction against OpenAI. Additionally, the injunction would prevent OpenAI from purportedly pressuring its investors to forgo backing rivals like xAI and others.
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According to the most recent court documents, the legal dispute between Musk, OpenAI and its CEO Sam Altman, as well as other long-standing supporters and parties including Microsoft and tech billionaire Reid Hoffman, has intensified.
Musk first filed a lawsuit against OpenAI in March 2024 in a state court in San Francisco. He later withdrew the complaint and filed it again in a federal court a few months later.In the case, Musk’s Los Angeles-based attorneys, lead by Marc Toberoff, claimed that OpenAI had broken federal racketeering, or RICO, laws.
In the middle of November, they broadened their complaint to include claims that OpenAI and Microsoft had broken antitrust rules when the Chat GPT creator allegedly requested that investors refrain from funding competitors, including Musk’s most recent venture, xAI.
Microsoft chose not to respond.
Musk’s lawyers contend in their application for a preliminary injunction that OpenAI should not be allowed to get access to improperly obtained competitively sensitive information or coordination through the Microsoft-OpenAI board interlocks.
According to a statement from an OpenAI representative, Elon’s fourth attempt, which repeats the same unfounded grievances, is still completely without substance.
With ChatGPT becoming a huge hit and igniting corporate excitement for AI and associated large language models, OpenAI has become one of the largest firms in recent years.
Earlier this month, CNBC reported that Musk’s newer AI company, Grok, has unveiled its Grok chatbot and is funding up to $6 billion at a $50 billion valuation, partly to purchase 100,000 Nvidia chips, since he promised xAI’s debut in July 2023.
While continuing to profit from years of shared, competitively sensitive information during the early days of generative AI, Microsoft and OpenAI now aim to solidify their dominance by denying rivals access to venture funds (a group boycott), the attorneys wrote in the petition.
According to the lawyers, the conditions OpenAI requested investors to accept amounted to a collective boycott, preventing xAI from obtaining necessary investment funds.
The attorneys went on to say that OpenAI cannot stumbling around the market like a Frankenstein, pieced together from whatever corporate structures suit Microsoft’s financial interests.
Microsoft resigned its observer seat on the OpenAI board in July, but according to CNBC, the FTC will still keep an eye on how two corporations are influencing the AI sector.
At the start of the year, FTC Chair Linda Khan said that the federal agency would launch a market investigation into the alliances and investments being made by AI companies with significant cloud service providers. The FTC cited a number of businesses in the report, including Microsoft, Amazon, Alphabet, Anthropic, and OpenAI.
Musk’s lawyers also contend in the filing that OpenAI should not be allowed to profit from improperly acquired competitively sensitive data or cooperation through the Microsoft-OpenAI board interlocks.
OpenAI began as a non-profit in 2015 and changed to a so-called capped-profit model in 2019, where its for-profit subsidiary was governed by the OpenAI non-profit. It is currently undergoing a transformation into a fully for-profit public benefit corporation, which may increase its appeal to investors. According to an earlier report by CNBC, the restructure plan would also enable OpenAI to maintain its non-profit status as a distinct entity.
In October, as part of its fiscal first-quarter earnings release, Microsoft disclosed that it will suffer a $1.5 billion loss in the current period, primarily due to an anticipated loss from OpenAI, despite having invested close to $14 billion in the technology.
OpenAI closed a significant investment round in October, valuing the business at $157 billion. The funding was led by Thrive Capital, with participation from Microsoft and Nvidia among other investors.
Startups like xAI and Anthropic, as well as IT behemoths like Google, have become more and more competitive with OpenAI. According to new data from Menlo Ventures, company investment on generative AI increased 500% this year, and the market is expected to reach $1 trillion in revenue within ten years.
On Saturday, CNBC contacted Musk’s lawyers. Requests for comment were not answered.
Hayden Field of CNBC provided reporting assistance.
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