Elon Musk asks court to block OpenAI from turning into a commercial company

Elon Musk is asking a federal court to block OpenAI from turning it into a fully commercial enterprise.

Lawyers representing Musk, his AI startup xAI, and former OpenAI director Siobhan Gillis filed for a preliminary injunction against OpenAI on Friday. The injunction would also stop OpenAI from allegedly asking investors to refrain from funding competitors such as xAI.

The latest court filings reveal a dispute between Musk and OpenAI, its CEO Sam Altman, as well as technology investor Reid Hoffman and other long-time associates and supporters. This marks an intensification of the legal battle. microsoft.

Musk originally sued OpenAI in San Francisco state court in March 2024, but withdrew the suit and filed again in federal court several months later. Musk’s lawyers in the federal lawsuit, led by Mark Toberoff of Los Angeles, argued in the complaint that OpenAI violates the federal Racketeering Act (RICO).

In mid-November, Microsoft and OpenAI violated antitrust laws after the Chat GPT maker allegedly asked investors to agree not to invest in rival companies, including Musk’s latest startup xAI. The complaint was expanded to include allegations that

Microsoft declined to comment.

In their motion for a preliminary injunction, Musk’s lawyers argue that OpenAI is prohibited from “benefiting from fraudulently obtained competitively sensitive information or arrangements made through coordination between Microsoft and OpenAI’s boards of directors.” argues that it should.

“Mr. Elon’s fourth attempt is yet another recycle of the same unsubstantiated complaint, which remains completely without merit,” an OpenAI spokesperson said in a statement.

OpenAI has emerged as one of the biggest startups in recent years, with ChatGPT becoming a huge hit and companies’ enthusiasm for AI and related large-scale language models increasing significantly.

Since Musk announced the debut of xAI in July 2023, his new AI business has released the Grok chatbot and raised up to $6 billion at a $50 billion valuation as part of a $100,000 acquisition. We are procuring it. Nvidia CNBC reported on the chip earlier this month.

“Microsoft and OpenAI are now attempting to block competitors’ access to investment funds (collective boycott) while continuing to profit from years of competitively sensitive information shared during the formative years of generative AI. “We seek to consolidate this advantage,” the lawyers wrote in the article. filing.

The lawyers wrote that the terms OpenAI asked investors to agree to amounted to a “collective boycott” that would “prevent xAI from accessing significant investment funds.”

The lawyers later added that OpenAI “cannot roam the market like Frankenstein, piecing together corporate structures that serve Microsoft’s financial interests.”

In July, Microsoft relinquished its observer seat on the OpenAI board, but CNBC reported that the Federal Trade Commission will continue to monitor the two companies’ influence over the AI ​​industry.

FTC Chair Linda Kahn announced earlier this year that the federal agency would begin “market investigations into investments and partnerships being formed between AI developers and large cloud service providers.” Companies cited by the FTC as part of its investigation included OpenAI, Amazon, Alphabet, Microsoft, and Anthropic.

Musk’s lawyers say in their filing that OpenAI should be prohibited from “benefiting from fraudulently obtained competitively sensitive information or coordination through interlocking Microsoft and OpenAI boards of directors.” It is also claimed that

OpenAI originally debuted as a nonprofit in 2015, but converted to a so-called profit cap model in 2019, with the OpenAI nonprofit becoming the governing body for its for-profit subsidiaries. The company is currently in the process of transforming into a fully profit-making public benefit corporation, which could make it more attractive to investors. CNBC previously reported that the restructuring plan will allow OpenAI to maintain its nonprofit status as a separate entity.

Microsoft has invested nearly $14 billion in OpenAI, but as part of its first-quarter earnings report in October, it announced a $1.5 billion loss for the current quarter, largely due to expected losses from OpenAI. It was revealed that this is a forecast.

In October, OpenAI closed a major funding round that valued the startup at $157 billion. Thrive Capital led the funding, with participation from investors including Microsoft and Nvidia.

OpenAI faces increasing competition from startups such as xAI, Anthropic, and technology giants such as: google. The generative AI market is expected to exceed $1 trillion in revenue within 10 years, and corporate spending on generative AI has surged 500% this year, according to recent data from Menlo Ventures.

CNBC reached out to Musk’s attorney on Saturday. He did not respond to requests for comment.

— CNBC’s Hayden Field contributed reporting

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