Elon Musk asked a federal court to prevent OpenAI from turning into a fully for-profit company.
Lawyers representing Musk, his artificial intelligence startup xAI and former OpenAI board member Shivon Zilis filed for a preliminary injunction against OpenAI on Friday. The ban will also prevent OpenAI from allegedly asking its investors not to provide funds to competitors such as xAI.
The latest court filings show that Musk, OpenAI and its CEO Sam Altman, as well as other long-time players and backers including tech investors Reid Hoffman and Microsoft.
Musk initially sued OpenAI in San Francisco state court in March 2024, then withdrew the lawsuit and refiled it in federal court a few months later. Musk’s lawyer IIn a federal lawsuit led by Marc Toberoff of Los Angeles, OpenAI violated federal racketeering laws (RICO).
In mid-November, they expanded their complaint to accuse Microsoft and OpenAI of violating antitrust laws when Chat GPT maker OpenAI allegedly asked investors to agree not to invest in rival companies, including Musk’s latest startup, xAI.
“Elon’s fourth attempt, again repeating the same baseless complaint, remains No advantages at all“, an OpenAI spokesperson said in a statement.
Microsoft declined to comment.
In the motion for a preliminary injunction, Musk’s lawyers argued that OpenAI should be prohibited from “benefiting from incorrectly obtained competitively sensitive information or coordination through the Microsoft-OpenAI board interlock.”
OpenAI has become one of the biggest startups in recent years, with ChatGPT becoming a hot product and sparking corporate enthusiasm for artificial intelligence and related large-scale language models.
Since Musk announced the debut of xAI in July 2023, his new artificial intelligence business has released its Grok chatbot and raised up to $6 billion at a $50 billion valuation, in part to buy 100,000 bots NVIDIA CNBC reported earlier this month.
“Microsoft and OpenAI now seek to solidify this dominance by cutting off competitors’ access to investment capital (a collective boycott), while continuing the competitive nature shared over the years from the formative years of generative AI,” the lawyers wrote in a statement. benefit from sensitive information.
The lawyers wrote that the terms OpenAI required investors to agree to amounted to a “collective boycott” and “prevented xAI from obtaining necessary investment capital.”
The lawyers later added that OpenAI “cannot be Frankenstein-like, lumbering around in the marketplace, serving Microsoft’s pecuniary interests in whatever form it takes.”
In July this year, Microsoft gave up its observer seat on the OpenAI board of directors, although CNBC reported that the Federal Trade Commission will continue to monitor the two companies’ influence on the AI industry.
FTC Chairman Linda Khan announced earlier this year that the federal agency would launch a “market investigation into emerging investments and partnerships between artificial intelligence developers and major cloud service providers.” Some of the companies mentioned in the FTC study include OpenAI, Amazon, Alphabet, Microsoft and Anthropic.
In the filing, Musk’s lawyers also argued that OpenAI should be prohibited from “benefiting from incorrectly obtained competitively sensitive information or coordination through the linkage between Microsoft and the OpenAI board of directors.”
OpenAI initially debuted as a nonprofit in 2015 before transitioning to a so-called capped profit model in 2019, in which the OpenAI nonprofit is the managing entity for its for-profit subsidiary. It is transforming into an entirely for-profit public benefit corporation, which could make it more attractive to investors. According to previous reports by CNBC, the restructuring plan will also allow OpenAI to retain its non-profit status as an independent entity.
Microsoft has invested nearly $14 billion in OpenAI, but revealed in its first fiscal quarter financial report in October that the company would record a loss of $1.5 billion for the period, mainly due to OpenAI’s expected losses.
In October, OpenAI completed a major round of financing, valuing the startup at $157 billion. Thrive Capital led the round, with investors including Microsoft and Nvidia also participating.
OpenAI faces challenges from startups such as xAI, Anthropic and others such as Google. The generative artificial intelligence market is Expected to exceed US$1 trillion Revenues have grown significantly in a decade, with enterprise spending on generative AI soaring 500% this year, according to the latest data from Menlo Ventures.
CNBC reached out to Musk’s attorney on Saturday. They did not respond to requests for comment.
—CNBC’s Hayden Field contributed reporting
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