Billionaire revives legal fight against AI start-up that he co-founded

Elon Musk is the founder of another AI start-up, xAI © Jordan Strauss/Invision/AP

Elon Musk has filed a new lawsuit against OpenAI and its chief executive Sam Altman, reviving his claim that the artificial intelligence start-up he co-founded backtracked on its mission to benefit humanity when it signed a commercial partnership with Microsoft.

The tech billionaire’s lawsuit was filed in a California federal court on Monday, around two months after he abruptly withdrew a similar case in state court.

The latest filing includes new allegations that Altman and another OpenAI co-founder Greg Brockman broke federal civil racketeering laws, and claims that Musk and other investors were induced to invest in OpenAI by its “fake humanitarian mission”.

“Elon Musk’s case against Sam Altman and OpenAI is a textbook tale of altruism versus greed,” according to the lawsuit. “Altman, in concert with other defendants, intentionally courted and deceived Musk, preying on Musk’s humanitarian concern about the existential dangers posed by AI.”

It said Altman and Brockman “assiduously manipulated Musk into co-founding their spurious non-profit venture by promising that it would chart a safer, more open course than profit-driven tech giants”.

“Once OpenAI’s technology approached transformative [artificial general intelligence] Altman flipped the narrative and proceeded to cash in,” the lawsuit said. “In partnership with Microsoft, Altman established an opaque web of for-profit OpenAI affiliates, engaged in rampant self-dealing, seized OpenAI’s board and systematically drained the non-profit of its valuable technology and personnel.”

The start-up signed an investment deal with Microsoft in January 2023 worth $10bn that gave the tech giant a share of its profits and allowed it to integrate OpenAI’s technology into its cloud and search engine services.

Since 2019, Microsoft has invested about $13bn into OpenAI, giving it an early leading edge over other Silicon Valley tech giants in the arms race to develop powerful AI systems.

However, Microsoft’s complex investment structure in OpenAI has since sparked antitrust investigations by US and EU regulators.

Musk’s latest lawsuit has asked the court to decide whether OpenAI’s latest models have achieved AGI — software capable of mimicking human intelligence. The lawsuit said that benchmark would render OpenAI’s licensing agreement with Microsoft “null and void” as the Microsoft investment gives it a share of OpenAI’s “pre-AGI” profits only. Musk alleged that OpenAI has a financial interest in delaying a public finding that it has attained AGI.

He is also suing for damages based on “an accounting of all gains, profits and advantages” OpenAI had earned as a results of Musk’s contributions.

The renewed legal battle is the latest twist in an ongoing battle between Musk and Altman, two prominent Silicon Valley figures involved in the race for AI dominance. It began when Musk left OpenAI’s board in 2018 following a disagreement over the direction of its research. OpenAI’s for-profit division was established a year later.

Musk launched his own for-profit AI start-up, xAI, last year. Last month, he said he would seek approval from Tesla’s board for the carmaker, which he runs, to invest $5bn in the company. xAI was valued at $18bn in a fundraising round in May.

OpenAI was valued at $86bn in a tender offer for employee shares that completed in February. Musk claimed in the lawsuit that the company was “recently valued at a staggering $100bn”.

OpenAI declined to comment on the new lawsuit. It rejected Musk’s earlier lawsuit, calling the claims “incoherent and frivolous”, and published a blog post that included several of Musk’s emails from the early days of the company, which appeared to show he acknowledged the company needed to raise large sums of money to fund the computing resources required to develop AI models.

A lawyer for Musk, Marc Toberoff, told the New York Times that the “previous suit lacked teeth”. “This is a much more forceful lawsuit,” he said.

Additional reporting by Cristina Criddle