Elon Musk has escalated his ongoing legal battle against OpenAI by filing a request for a preliminary injunction that seeks to halt the company's transition to a fully for-profit structure. The court filing was made on Friday by attorneys representing Musk, his AI venture xAI, and former OpenAI board member Shivon Zilis. The injunction also aims to prevent OpenAI from allegedly compelling its investors to avoid funding Musk's competitors, including xAI.
This latest development in the case marks a significant intensification in Musk's legal challenges against OpenAI and its CEO, Sam Altman, alongside other influential backers such as Reid Hoffman and Microsoft. Musk first initiated legal proceedings against OpenAI in March 2024 in a state court in San Francisco. After withdrawing and refiling the case several months later in federal court, Musk's legal team led by Los Angeles attorney Marc Toberoff has since argued that OpenAI has violated federal racketeering laws, specifically the Racketeer Influenced and Corrupt Organizations (RICO) Act.
The complaint has been further expanded in mid-November to include allegations regarding potential antitrust violations by both Microsoft and OpenAI. Musk's legal representatives assert that OpenAI has requested that its investors sign agreements refraining from investing in rival companies, thus arguably stifling competition within the AI sector. Microsoft has refrained from commenting on the ongoing litigation.
In their motion for a preliminary injunction, Musk’s attorneys assert, "OpenAI should be prohibited from benefitting from wrongfully obtained competitively sensitive information or coordination via the Microsoft-OpenAI board interlocks." Such a move, they argue, would be necessary to protect the competitive landscape of the burgeoning AI market.
An OpenAI spokesperson responded to the lawsuit by stating: “Elon’s fourth attempt, which again recycles the same baseless complaints, continues to be utterly without merit.” OpenAI has evolved into a leading player in the tech industry, especially after the success of ChatGPT, which has significantly spurred corporate interest in artificial intelligence technologies.
Since its launch in July 2023, Musk's own AI company, xAI, has made strides by introducing the Grok chatbot and is reportedly in talks to raise up to $6 billion, boasting a striking valuation of $50 billion in part to acquire 100,000 Nvidia chips. In the legal filing, Musk’s lawyers further allege that tactics used by OpenAI and Microsoft could result in "a group boycott" that effectively restricts xAI's access to critical investment capital.
The influence of Microsoft within the AI domain has been closely monitored, especially following the company’s withdrawal from its observer role on OpenAI's board in July. However, ongoing scrutiny from the Federal Trade Commission (FTC) regarding investment partnerships among major AI developers and cloud service providers remains. FTC Chair Linda Khan announced early in the year plans to commence an inquiry into the relationships being established in the rapidly evolving AI sector, with OpenAI, Microsoft, Amazon, Alphabet, and Anthropic being named in the investigation.
OpenAI, founded in 2015 as a non-profit entity, later shifted to a capped-profit model in 2019, where the non-profit continued to govern the for-profit wing. Currently, it is transitioning to a fully for-profit public benefit corporation, a move that aims to make it increasingly appealing to investors while retaining a non-profit status as a separate entity.
Despite Microsoft’s substantial investments nearing $14 billion into OpenAI, the tech giant reported a projected $1.5 billion loss attributed significantly to OpenAI's performance in its fiscal first-quarter earnings announcement. Following a major funding round that valued OpenAI at $157 billion in October, the company has attracted significant investments from Thrive Capital, Microsoft, and Nvidia.
As competition intensifies from startups like xAI and established tech giants such as Google, the generative AI sector is projected to reach over $1 trillion in revenue within the next decade. Notably, recent data indicates a staggering 500% increase in business expenditure on generative AI in the current year, reflecting the growing importance of AI technologies in business practices and their potential impacts on market dynamics.
Source: Noah Wire Services