Elon Musk, a billionaire businessman and co-founder of OpenAI, is stepping up his legal fight against the AI giant to stop it from becoming a fully for-profit company.
Musk, his AI startup xAI, and former OpenAI board member Shivon Zilis filed a preliminary injunction on Friday. They were accompanied by their lawyers.
The goal of this order is to stop OpenAI from reorganizing its business and from doing things that Musk says hurt competition in the fast-growing artificial intelligence industry.
The Roots of the Conflict
OpenAI started out as a non-profit in 2015 with the goal of making sure AI helps people. In 2019, it changed its business plan to a “capped-profit” model.
This mixed structure gave investors limited returns while keeping the non-profit status of the governing group.
OpenAI is now moving toward becoming a fully for-profit public benefit corporation. Musk says this goes against the company’s original goal.
Musk left OpenAI in 2018 because he was worried that it was becoming more focused on making money under CEO Sam Altman.
Since then, OpenAI has become a major player in the AI field thanks to the popularity of its generative AI products, such as ChatGPT, which have changed the way natural language processing is done.
Musk’s Legal Claims
Musk’s lawyers say that OpenAI’s plan to restructure and its claimed use of restrictive agreements on investors are illegal under federal antitrust laws and the Racketeer Influenced and Corrupt Organizations Act (RICO).
The lawsuit says that OpenAI’s agreements make it so that its investors can’t give money to competing companies like Musk’s xAI, which creates a “group boycott.”
Musk’s lawyers said that Microsoft and OpenAI were unfairly benefiting from shared, competitively sensitive information and were now trying to solidify their dominance by making it impossible for rivals to get investment capital.
As a result of its close ties to OpenAI, Microsoft has been under close investigation by the Federal Trade Commission (FTC). Microsoft has invested nearly $14 billion in OpenAI.
The FTC has been looking into what relationships between AI developers and big cloud service providers mean for society as a whole.
OpenAI’s Response
OpenAI has said that Musk’s claims are “baseless” and that the lawsuit is an attempt to stop its growth and make it less competitive.
A spokesperson for OpenAI said, “Elon’s fourth attempt, which again repeats the same baseless complaints, is still completely without merit.”
Even though Musk has said bad things about OpenAI, the company has done very well and was recently valued at $157 billion in a funding round.
Investors like Thrive Capital, Microsoft, and Nvidia took part in the round, which made OpenAI even more important in the AI business.
xAI: Musk’s Counterstrike
Because of OpenAI’s quick growth, Musk started his own AI company called xAI in July 2023. The company released Grok, a robot, and wants to raise up to $6 billion at a value of $50 billion.
It is also said that xAI is buying 100,000 Nvidia chips, which shows that it wants to be a major player in the generative AI business.
Musk’s lawsuit shows what he sees as OpenAI’s departure from the values that it was founded on. He has spoken out against OpenAI’s partnerships, especially its one with Microsoft, which he says hurts the growth of open-source AI.
Broader Implications for the AI Industry
The FTC is paying close attention to the AI industry. Chair Lina Khan announced that the agency would be looking into deals between AI makers and cloud service providers.
The goal of this investigation is to make sure that business practices that are meant to be competitive don’t get in the way of new ideas or benefits for consumers. Some of the companies being looked at are OpenAI, Microsoft, Amazon, Alphabet, and Anthropic.
Microsoft gave up its observer seat on OpenAI’s board in July, which showed that it was trying to address possible antitrust issues.
That being said, the FTC is still keeping an eye on how the two companies affect AI.
What’s Next?
While Musk’s lawsuit is still going on, the outcome could have big effects on the AI business. If Musk’s order is upheld, it could stop OpenAI from becoming a fully for-profit business, which could make it harder for the company to get funding and stay on top.
Musk sees the case as more than just a business dispute. It’s a fight to protect the values that OpenAI was built on.
This court case shows how the AI business is growing and how there is tension between new ideas, competition, and ethical concerns about AI development.
Musk’s lawyers said that OpenAI “cannot lumber about the marketplace as a Frankenstein, stitched together from whichever corporate forms serve Microsoft’s financial interests.”
It’s still too early to tell if this case will sway the courts, but everyone has a lot at stake.