5 mins read

Elon Musk is seeking an injunction to stop OpenAI’s transition to a for-profit company

Lawyers for tech billionaire Elon Musk have filed for an injunction against OpenAI, several of its co-founders, and its investor and close associate Microsoft, to prevent OpenAI and other named defendants from engaging in what Musk’s lawyer claims are anti-competitive conduct.

The motion for a preliminary injunction, filed late Friday in the U.S. District Court for the Northern District of California, accuses OpenAI, its CEO Sam Altman, President Greg Brockman, Microsoft, LinkedIn co-founder and former OpenAI board member Reid Hoffman, and former OpenAI board member and Microsoft vice president Dee Templeton informed about various illegal activities and tried to stop them. The allegations include:

  1. Discourage investors from supporting OpenAI competitors such as Musk’s own AI company xAI.
  2. Benefit from “illicitly obtained competitively sensitive information” through OpenAI’s connections with Microsoft.
  3. Converting OpenAI’s governance structure to a for-profit structure and “transferring any tangible assets, including intellectual property, owned, held or controlled by OpenAI, Inc., its subsidiaries or affiliates.”
  4. Cause OpenAI to do business with organizations in which a defendant has a “significant financial interest.”

Lawyers for Musk claim that “irreparable harm” will result if the injunction is not granted.

“Plaintiffs and the public need a break,” they wrote in the filing. “An injunction to preserve what remains of OpenAI’s non-profit character, free from self-dealing, is the only appropriate remedy. If not, the OpenAI promised to Musk and the public will be long gone by the time the court rules on its merits.”

Musk’s lawsuit against OpenAI, which essentially accuses the company of abandoning its original charitable mission of making the fruits of its AI research available to all, was withdrawn in July, only to be reinstated in late summer. In an amended statement of claim in November, the suit named new defendants, including Microsoft, Hoffman and Templeton, as well as two new plaintiffs: Shivon Zilis, a Neuralink executive and former OpenAI board member, and xAI.

Musk has argued in previous lawsuits that he was defrauded of more than $44 million that he said he donated to OpenAI by exploiting his “well-known concerns about the existential harm” of AI. Musk, one of OpenAI’s co-founders, left the company in 2018 amid disagreements over its direction.

In the motion for a preliminary injunction, Musk’s lawyers allege that OpenAI is draining xAI of capital by extracting promises from investors not to fund it or its competitors. In October, the Financial Times reported that OpenAI, in its most recent funding round, required investors to refrain from also funding OpenAI’s competitors, including xAI.

“Musk has confirmed that at least one major investor in the OpenAI funding round in October subsequently declined to invest in xAI,” Musk’s attorney wrote.

Of course, xAI hasn’t had any problems raising money recently. The startup reportedly closed a $5 billion round this month with participation from prominent investors including Andreessen Horowitz and Fidelity. At around $11 billion, xAI is one of the best-funded AI companies in the world.

Musk’s motion for a preliminary injunction also alleges that Microsoft and OpenAI continue to illegally share proprietary information and resources and that several of the defendants, including Altman, engage in self-dealing that harms market competition. For example, according to the filing notes, OpenAI selected Stripe, a payments platform in which Altman has “significant financial interests,” as OpenAI’s payment processor. (Altman is said to have made billions from his Stripe holdings.)

Microsoft, which first backed OpenAI in early 2019, has expanded the partnership in recent years, investing a total of about $13 billion, in return for an effective 49% share of the company’s profits. Microsoft has also enabled OpenAI to make extensive use of its cloud hardware resources, allowing the startup to train, refine and run AI models like those that power ChatGPT.

Hoffman’s position on the boards of Microsoft and OpenAI, as well as as a partner at investment firm Greylock, gave Hoffman privileged insight into the companies’ operations, Musk’s lawyers argue. (Hoffman stepped down from OpenAI’s board in 2023.) As for Templeton, whom Microsoft briefly appointed as a non-voting board observer at OpenAI, Musk’s lawyer argues that she was able to facilitate agreements between Microsoft and OpenAI that violated antitrust rules would.

“Altman’s maintenance of OpenAI’s nonprofit status pending final resolution and halting further self-serving transactions protects both the organization’s founding mission and the public interest in the proper governance of charities,” Musk’s lawyers wrote.

Musk’s lawyer wrote that if an injunction is not granted, OpenAI may “not have sufficient funds” to pay damages if the court ultimately rules in Musk’s favor. (OpenAI is reportedly spending more than $5 billion and is nowhere near breaking even.) What’s more, they say, it would be “virtually impossible” to “unwind” the company’s transactions if a judge were to block the transition If OpenAI were to become a non-profit organization, without widespread investor loss, OpenAI should continue to accept new investments.

“No objective observer today can look at OpenAI and say that it bears any resemblance to what it promised,” Musk’s lawyers wrote. “Plaintiffs respectfully request that the Court maintain the status quo and suspend Defendants’ deteriorating conduct pending final determination.”

OpenAI did not immediately respond to TechCrunch’s request for comment. The company had previously tried to dismiss Musk’s lawsuit, calling it “violent” and baseless.