Elon Musk is all in for a legal battle with OpenAI. Even if this means having more opponents against him. Musk has named Microsoft, LinkedIn co-founder Reid Hoffman, and Microsoft VP Dee Templeton, a former OpenAI board member, as new defendants in his lawsuit against the ChatGPT parent firm.
In an amended complaint filed Thursday in Oakland, California, Musk accused OpenAI and primary backer Microsoft of antitrust violations. Calling OpenAI a ‘market-paralysing gorgon’, Musk argued that the two have monopolised the generative AI market, and leveraged their dominance to stifle competition, by discouraging investors from investing in rival firms, including Musk’s own xAI.
Further, Musk alleged that the AI company’s transition from a nonprofit to a for-profit entity was taken to benefit Microsoft, which has invested heavily billions in the firm. The lawsuit reiterated this by highlighting the recent board changes that were made after Sam Altman's brief firing and reinstatement, claiming that the two would prioritise profit over safety and transparency in the race to dominate the AI sector.
The amended complaint lists xAI and Shivon Zilis, a former OpenAI board member and, presently an executive at Musk’s Neuralink, as new complainants. OpenAI co-founders Sam Altman and Greg Brockman remain the defendants in the case.
The 107 pages-long amended lawsuit lists 26 legal claims. The original complaint filed in August has 15 claims running in the 83 pages.
Additionally, the suit reportedly cites OpenAI’s contracts with the US Department of Defense and the removal of clauses in its usage policies that banned applications with high risks of physical harm, including weapons development and military use. The lawsuit also reportedly references news of employee resignations at the xAI rival firm, attributed to dissatisfaction with the company's perceived neglect of safety in favour of maximising profits.
From friends to foes: the bittersweet tale of OpenAI and Elon Musk
Elon Musk co-founded OpenAI in 2015 alongside Sam Altman, Greg Brockman, and others, aiming to develop artificial general intelligence (AGI) for the benefit of humanity. Musk was a significant financial backer but left the organisation in 2018.
In 2019, OpenAI transitioned to a "capped profit" structure to attract funding, leading to Microsoft's initial $1 billion investment. By 2023, Microsoft had expanded its involvement into a multi-year, multi-billion dollar partnership, ultimately investing $14 billion in OpenAI. The tech giant gained a 49% stake in OpenAI's for-profit subsidiary and exclusive rights to commercially licence its technology.
OpenAI's leadership, including then-CEO Sam Altman, justified the shift from nonprofit oversight, claiming the company needed to generate revenue to compete with tech giants like Google and prevent monopolisation of AI technology. However, Musk's lawsuit alleges that this transition prioritised profit over OpenAI's founding principles of benefiting humanity and facilitated a "de facto merger" with Microsoft.
Musk initially filed a lawsuit against OpenAI in March this year, accusing the company of abandoning its original mission and operating as a "closed-source de facto subsidiary" of Microsoft. OpenAI countered the allegations, claiming Musk had previously sought "absolute control" of the organisation before his departure and released emails suggesting he attempted to merge OpenAI with Tesla. OpenAI repeatedly sought to dismiss the lawsuit, calling it a "PR stunt" and claiming Musk's legal campaign aimed to harass the company for competitive advantage.
The lawsuit was dropped in June 2024 but refiled in August as a federal case, incorporating accusations of "rampant self-dealing" by Altman to promote anticompetitive practices. Musk’s lawyers also alleged that OpenAI and Microsoft exchanged “competitively sensitive information” and pressured investors to avoid funding rival companies, including Musk's xAI.
The present AI battle
Both xAI and OpenAI have raised substantial funding this year with the latter raising $6.6 billion in October and the former securing up to $6 billion in November at a valuation of $50 billion making it the world’s sixth most valuable startup. The funding majorly coming from the sovereign funds in the Middle East will reportedly be used to purchase 100,000 Nvidia chips.
While the legal battle between the two AI giants is set to continue, Elon Musk’s advisory role in the new Trump administration, will have ramifications on USA’s AI policy at the same time helping funds flow into xAI more easily.
