Musk adds Microsoft to OpenAI lawsuit

After being withdrawn in July, Elon Musk’s lawsuit against OpenAI, which claimed the business had abandoned its non-profit goal, was resurrected in August. The lawsuit now includes Microsoft, Reid Hoffman, a co-founder of LinkedIn, and Dee Templeton, a Microsoft vice president and former board member of OpenAI, as new defendants in an amended complaint. Where Microsoft has been named as a defendant in an amended lawsuit filed by Elon Musk against OpenAI, which he describes as a “de facto merger” and charges with anticompetitive behaviour.

Musk was one of the founding founders of OpenAI, a non-profit organization founded with the goal of researching and developing AI for the good of humanity. In 2018, he departed the organization due to differences regarding its future.

Microsoft and OpenAI are accused of creating a monopoly in the lawsuit, which also names Reid Hoffman as a defendant. Elon Musk described OpenAI as a “de facto merger” and accused it of anticompetitive activities; Microsoft has been named as a defendant in this new case.

New plaintiffs are also included in the modified filing: Musk’s AI business, xAI, and Shivon Zilis, a former board member of OpenAI and executive at Neuralink.

In an attempt to “starve” competitors of AI expertise, Musk said OpenAI is paying its employees “lavish compensation.”

Citing “lavish compensation” proposals as one example, the complaint charges Microsoft and OpenAI with establishing an AI monopoly and committing “intensified” anticompetitive behaviour.

“OpenAI has tried to starve competitors of AI talent by aggressively recruiting employees with offers of lavish compensation, and is on track to spend $1.5 billion on personnel for just 1,500 employees,” Musk’s attorneys stated in the amended complaint, which was submitted to a federal court in Northern California.

In the amended complaint, Musk’s lawyers said, “OpenAI has tried to starve competitors of AI talent by aggressively recruiting employees with offers of lavish compensation, and is on track to spend $1.5 billion on personnel for just 1,500 employees.” The complaint was filed in a Northern California federal court.

The attorneys for Musk stated that the defendants “possess a nearly 70% share of the generative AI market, constituting a monopoly, or, in the alternative, an attempt or conspiracy to monopolize the generative AI market.”

The defendants “possess a nearly 70% share of the generative AI market, constituting a monopoly, or, in the alternative, an attempt or conspiracy to monopolize the generative AI market,” according to Musk’s lawyers.

The latest development in the long-running dispute between Musk and OpenAI CEO Sam Altman is the updated lawsuit. Musk initially filed a lawsuit against OpenAI and its cofounders Altman and Greg Brockman in March, claiming that the company’s partnership with Microsoft, which has contributed over $13 billion to the venture, compromised its non-profit objective. In response, OpenAI referred to the lawsuit as “incoherent” and “contradictory.”

After contributing to the creation of OpenAI in 2015, Musk abruptly cancelled his lawsuit. He filed the most recent lawsuit in August, claiming that he was “deceived” into confounding OpenAI and that the business has abandoned its original goal of creating AI that benefits humanity in favour of financial interests. In September, OpenAI announced that it was switching to a for-profit governance model.

In the latest complaint, OpenAI is accused of engaging in anticompetitive behaviour when it requested investors in its most recent funding round to refrain from funding other companies, such as Musk’s business xAI. The lawsuit cites a Financial Times article from October that claimed this was one of the conditions demanded of possible investors in the $6.6 billion investment round that was concluded last month.

SoftBank invested $500 million in OpenAI during that round. SoftBank still has the option to invest in additional AI firms, according to Navneet Govil, chief financial officer of SoftBank’s Vision Funds, who previously spoke with Business Insider. “Our view is if it’s a disruptive company and the addressable market is large, there’s room for more than one player,” Govil said to Hasan Chowdhury of BI.

Business Insider’s requests for response, issued outside of regular business hours, were not immediately answered by Microsoft, OpenAI, or Hoffman. Hoffman referred to Musk’s lawsuit against OpenAI in September as a case of “sour grapes.”

The updated lawsuit claims that Templeton, who was briefly appointed by Microsoft to serve as an observer on the non-voting board at OpenAI, was in a position to promote agreements between Microsoft and OpenAI that would have violated antitrust laws.

In violation of antitrust regulations, “the prohibition on interlocking directorates is intended to prevent the sharing of competitively sensitive information and/or to provide a forum for the coordination of other anticompetitive activity,” the lawsuit states.

In Musk’s complaint, Rob Bonta, the attorney general of California, is included as a defendant alongside Microsoft, Hoffman, and Templeton. According to a Bloomberg story this month, OpenAI is discussing the process of altering its corporate structure with Bonta’s office.

Zilis, who left OpenAI’s board in 2023 after almost four years of service, was standing as an “injured employee” under the California Corporations Code, according to the updated complaint. According to the complaint, Zilis frequently voiced internal concerns about OpenAI’s dealmaking, but they were ignored; these concerns were largely the same as Musk’s.

Zilis, who oversaw Neuralink research and served as a project director at Tesla from 2017 to 2019, has strong ties to Musk. Musk’s brain-computer interface project is called Neurolink. She is also the mother of Musk’s twins, Strider and Azure, as well as Techno Mechanicus.

In January 2018, OpenAI CEO Sam Altman suggested that the company sell its own cryptocurrency before deciding to switch to a capped-profit structure. This is one of the unique details included in the 107-page revised lawsuit.

In an email to Musk dated January 21, 2018, Altman wrote, “Heads up, spoke to some of the safety team and there were a lot of concerns about the ICO and possible unintended effects in the future,” as evidenced by an exhibit included with the amended complaint. An unregulated method of raising money for cryptocurrency businesses is an initial coin offering, or ICO. “I want to stress the importance of maintaining confidentiality, but I think it’s crucial that we get support and give people an opportunity to voice their opinions in advance.”