Musk Files Lawsuit to Prevent OpenAI from Transitioning to For-Profit Status

December 2, 2024 TruthUSA

The complaint alleged that OpenAI’s co-founders obtained funding from Musk by assuring they would operate it as a nonprofit.

Elon Musk has initiated legal action against Microsoft-backed OpenAI to obstruct the nonprofit organization from transitioning into a for-profit entity, arguing this violates his agreement with the company.

Musk co-founded OpenAI alongside current CEO Sam Altman and President Greg Brockman. In 2015, Altman presented Musk with a proposal to establish an artificial intelligence (AI) charity, making “clear and repeated commitments that OpenAI would be and remain a nonprofit dedicated to the development and widespread distribution of open and safe AI for public benefit, rather than shareholder profit,” as stated in the Nov. 29 lawsuit filed in the U.S. District Court for the Northern District of California.

“To prioritize safety, Altman guaranteed that the technology developed by the nonprofit would be owned by it. Relying on these commitments, Musk consented to co-found and finance OpenAI, lending his name and credibility to attract the skilled AI scientists required for OpenAI’s success,” the lawsuit outlines.

Subsequently, Altman and Brockman suggested converting OpenAI into a for-profit organization. In September 2017, Musk clarified that he would cease donations if such a transition occurred. Altman and Brockman then provided a “firm commitment” that OpenAI would remain a nonprofit, according to the suit. Following these assurances, Musk invested an additional $10.27 million.

In 2019, Microsoft invested $1 billion in the nonprofit, which triggered a series of “increasingly problematic” changes at OpenAI, the lawsuit claims.

The complaint accuses Microsoft and Altman of transferring the nonprofit’s personnel and intellectual property to for-profit ventures launched by Altman, in which Microsoft obtained a “massive stake.”

In November 2023, OpenAI’s board removed Altman from his role after uncovering “numerous conflicts of interest and deceptions.”

However, Microsoft intervened to reinstate Altman and pressured board members to resign from their positions, according to the lawsuit. The suit also claims that Microsoft eventually gained access to all of OpenAI’s proprietary information.

The complaint asserts that OpenAI and Microsoft prevent investors from financing OpenAI’s competitors, specifically naming Musk’s AI venture, xAI.

Now, Microsoft and OpenAI together dominate nearly 70 percent of the generative AI market while engaging in “anticompetitive conduct.” The lawsuit contends that OpenAI is aiming to transition into a for-profit entity, which would serve as the “final death knell” to the commitments it made to Musk and the public.

“OpenAI and Microsoft exploiting Musk’s donations to construct a for-profit monopoly, particularly aimed at xAI, is simply too much,” the complaint stated.

“OpenAI’s evolution from a nonprofit to a for-profit behemoth is filled with explicit anti-competitive practices, blatant violations of its charitable purpose, and widespread self-dealing. Allowing this trajectory to continue will significantly harm the plaintiffs and the public as a whole.”

The lawsuit requests a preliminary injunction “to safeguard what remains of OpenAI’s nonprofit identity.”

The Epoch Times attempted to contact OpenAI and Microsoft for comments but did not receive a response by the time of publication.

OpenAI’s Position

On its website, OpenAI stated that it was established with the goal of raising $1 billion in donations but only managed to collect about $130 million.

As it became “increasingly clear” that the organization could not progress solely through donations, it opted to establish a new for-profit subsidiary guided by the OpenAI nonprofit parent organization.

While the for-profit entity is allowed to raise funds from investors, it is “legally obliged to pursue the Nonprofit’s mission and accomplish that mission through research, development, commercialization, and other core operations,” the company asserts.

“Throughout this process, OpenAI’s fundamental principles of safety and broad benefit will remain central to its mission.”

As per nonprofit regulations, no directors on the OpenAI nonprofit board hold any equity in OpenAI, the company clarifies. Altman’s “only involvement is indirect through a Y Combinator investment fund that made a minimal investment in OpenAI before he became full-time.”

The profits generated by the for-profit subsidiary distributed to employees and investors, including Microsoft, are capped, according to the company.

“Any residual value created beyond the cap will be redirected to the Nonprofit for the greater good of humanity,” it states.

The current board of the OpenAI Nonprofit includes independent directors Bret Taylor (chair), Sam Altman, Adam D’Angelo, Sue Desmond-Hellmann, Ret. U.S. Army General Paul M. Nakasone, Nicole Seligman, Fidji Simo, Larry Summers, and Zico Kolter.

Preventing Total Control of OpenAI

This is not Musk’s first legal action against OpenAI. In February, he sued the organization, only to have the complaint withdrawn without explanation in June and then revived in August.

The lawsuit had raised similar concerns regarding Altman’s alleged breach of the commitment to keep OpenAI a nonprofit. Other claims included breach of contract, fraud, and infringement of federal civil racketeering laws.

OpenAI refuted Musk’s assertions in a March blog post.

“In late 2017, we and Elon recognized that creating a for-profit entity was the next step for our mission. Elon sought majority equity, initial board control, and the CEO position. In the midst of these discussions, he withheld funding,” the nonprofit explained.

“We were unable to reach an agreement regarding a for-profit entity because we believed it was against our mission for any individual to hold absolute authority over OpenAI. Elon subsequently decided to leave OpenAI, asserting that our likelihood of success was zero and indicating his intention to create a competing AGI [artificial general intelligence] within Tesla.”

Meanwhile, Musk’s xAI has been expanding since its inception. In May, xAI secured $6 billion in funding and is now valued at $24 billion. In November 2023, xAI rolled out its Grok-1 AI model on X and has since followed up with several updates.

Musk also intends to develop a supercomputer to assist xAI’s advancement, which is expected to become operational by next autumn.

Previously, Musk called for the regulation of AI. In May 2023, he warned of potential dangers posed by AI, stating it might lead to humanity’s destruction. He urged for “whatever actions we can think of” to mitigate such risks.

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