Elon Musk is asking a federal court to stop OpenAI from converting into a totally for-profit business.
Attorneys representing Musk, his AI startup xAI, and former OpenAI board member Shivon Zilis filed for a preliminary injunction against OpenAI on Friday. The injunction would also stop OpenAI from allegedly requiring its investors to refrain from funding competitors, including xAI and others.
The newest court filings represent an escalation within the legal feud between Musk, OpenAI and its CEO Sam Altman, in addition to other long-involved parties and backers including tech investor Reid Hoffman and Microsoft.
Musk had originally sued OpenAI in March 2024 in a San Francisco state court, before withdrawing that grievance and refiling several months later in federal court. Attorneys for Musk within the federal suit, led by Marc Toberoff in Los Angeles, argued of their grievance that OpenAI has violated federal racketeering, or RICO, laws.
In mid-November, they expanded their grievance to incorporate allegations that Microsoft and OpenAI had violated antitrust laws when the Chat GPT-maker allegedly asked investors to comply with not put money into rival corporations, including Musk’s newest startup, xAI.
Microsoft declined to comment.
 Of their motion for preliminary injunction, attorneys for Musk argue that OpenAI needs to be prohibited from “benefitting from wrongfully obtained competitively sensitive information or coordination via the Microsoft-OpenAI board interlocks.”
“Elon’s fourth attempt, which again recycles the identical baseless complaints, continues to be utterly without merit,” an OpenAI spokesperson said in a press release.
OpenAI has emerged as one in all the most important startups lately, with ChatGPT becoming a serious hit that has helped usher massive corporate enthusiasm over AI and related large language models.
Since Musk announced xAI’s debut in July 2023, his newer AI business has released its Grok chatbot and is raising as much as $6 billion at a $50 billion valuation, partially to purchase 100,000 Nvidia chips, CNBC reported earlier this month.
“Microsoft and OpenAI now seek to cement this dominance by cutting off competitors’ access to investment capital (a gaggle boycott), while continuing to learn from years’ price of shared competitively sensitive information during generative AI’s adolescence,” the lawyers wrote within the filing.
The attorneys wrote that the terms OpenAI asked investors to comply with amounted to a “group boycott” that “blocks xAI’s access to essential investment capital.”
The lawyers later added that OpenAI “cannot lumber concerning the marketplace as a Frankenstein, stitched together from whichever corporate forms serve the pecuniary interests of Microsoft.”
In July, Microsoft gave up its observer seat on OpenAI’s board, although CNBC reported that the Federal Trade Commission would proceed to watch the influence of two corporations over the AI industry.
FTC Chair Linda Khan announced at the start of the 12 months that the federal agency would initiate a “market inquiry into the investments and partnerships being formed between AI developers and major cloud service providers.” A number of the corporations that the FTC mentioned as a part of the study included OpenAI, Amazon, Alphabet, Microsoft and Anthropic.
Within the filing, attorneys for Musk also argue that OpenAI needs to be prohibited from “benefitting from wrongfully obtained competitively sensitive information or coordination via the Microsoft-OpenAI board interlocks.”
OpenAI originally debuted in 2015 as a non-profit after which in 2019, converted right into a so-called capped-profit model, during which the OpenAI non-profit was the governing entity for its for-profit subsidiary. It’s within the means of being converted into a totally for-profit public profit corporation that might make it more attractive to investors. The restructuring plan would also allow OpenAI to retain its non-profit status as a separate entity, CNBC previously reported.
Microsoft has invested nearly $14 billion in OpenAI but revealed in October as a part of its fiscal first-quarter earnings report that it might record a $1.5 billion loss in the present period largely on account of an expected loss from OpenAI.
In October, OpenAI closed a serious funding round that valued the startup at $157 billion. Thrive Capital led the financing while investors, including Microsoft and Nvidia, also participated.
OpenAI has faced increasing competition from startups akin to xAI, Anthropic and tech giants akin to Google. The generative AI market is predicted to top $1 trillion in revenue inside a decade, and business spending on generative AI surged 500% this 12 months, in line with recent data from Menlo Ventures.
CNBC reached out to attorneys for Musk on Saturday. They didn’t reply to requests for comment.
— CNBC’s Hayden Field contributed reporting
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