Musk Sues OpenAI, Altman for Breaching Founding Mission (2)

Elon Musk sued OpenAI and its Chief Executive Officer Sam Altman, alleging they violated the artificial intelligence startup’s founding mission by putting profit ahead of benefiting humanity.

The 52-year-old billionaire, who was a co-founder of OpenAI but is no longer involved, said in a lawsuit filed late Thursday in San Francisco that the company’s close relationship with Microsoft Corp. has undermined its original mission of creating open-source technology that wouldn’t be subject to corporate priorities.

Musk, who is also CEO of Tesla Inc., has been among the most outspoken about the dangers of AI and artificial general intelligence, or AGI. The release of OpenAI’s ChatGPT more than a year ago popularized advances in AI technology and raised concerns about the risks surrounding the race to develop AGI, where computers are as smart as an average human. Musk also owns the social network X and is raising money for an AI venture called xAI that features its own competing chatbot Grok.

“To this day, OpenAI Inc.’s website continues to profess that its charter is to ensure that AGI ‘benefits all of humanity,’” the lawsuit said. “In reality, however, OpenAI Inc. has been transformed into a closed-source de facto subsidiary of the largest technology company in the world: Microsoft.”

Elon Musk

Photographer: Tolga Akmen/EPA/Bloomberg

Spokespeople for OpenAI, Musk and Microsoft didn’t respond to requests for comment.

The case marks an escalation in the one of the highest-profile clashes in the emerging field of AI, pitting two of its most prominent players against each other. It will have implications not just for OpenAI, which is seeking to raise funds at a valuation of $100 billion or more, but also for Microsoft, which has invested about $13 billion in OpenAI. The Redmond, Washington-based firm’s shares have soared 68% in the last year, making it the most valuable company in the world, as it seeks to become a leader in AI adoption.

Musk is suing for breach of contract, breach of fiduciary duty and claims of unfair business practices, among other grievances. He is bringing the suit in the capacity of a donor to the nonprofit parent organization as recently as 2019 and is seeking to force OpenAI to stop benefitting Microsoft and Altman personally.

In the lawsuit, he asks for an order to compel OpenAI to make all of its research and technology open to the public and for Altman to be required to give up any money he has earned as a result of the practices alleged to be unlawful. Musk is also seeking unspecified damages, which the lawsuit says he would contribute to charity if any compensation is won.

Musk invested tens of millions of dollars in OpenAI, as well as his time and other resources, “on the condition that OpenAI would remain a nonprofit irrevocably dedicated to creating safe, open-source AGI for public benefit,” only to then have OpenAI abandon its mission, according to the suit.

Musk’s claim that OpenAI’s close relationship with Microsoft goes against the company’s original commitment to public, open-source AI, will be “an extraordinarily hard claim legally to make,” according to securities attorney and Northwestern University adjunct law professor Andrew Stoltmann. These are often called illusory promises and they generally aren’t enforceable under the law, Stoltmann said, noting that Musk has a history of using lawsuits as a way to send a message.

Since introducing ChatGPT and GPT-4, the large language model that powers the chatbot, OpenAI has set off a wave of AI adoption in businesses around the world. Microsoft has been one of the most aggressive in incorporating the technology into its wide array of cloud and enterprise services. Musk contends that OpenAI’s GPT-4 can be viewed as an AGI system. Altman expects AGI to be reached in the next four to five years, according to a December Time Magazine profile of him.

The world’s richest person, Musk helped establish OpenAI in 2015 but stepped away from the company some two years later over philosophical differences about the development of the technology.

The lawsuit argues that Musk first grew alarmed about powerful AI falling into corporate control when Google moved to buy DeepMind, the British research lab. Musk recruited Luke Nosek, who earlier had co-founded PayPal with Musk, in a bid to buy DeepMind in late 2013. They ultimately failed and Google acquired DeepMind a year later.

Read More: xAI Potential Investors Focus on ‘Muskonomy,’ OpenAI Success

In the filing, Musk took aim at the restructuring of OpenAI’s leadership last year, a tumultuous period during which Altman was ousted as CEO and then quickly reinstated with support from Microsoft. Musk argued in the suit that Altman, OpenAI President Greg Brockman and Microsoft worked together to oust the majority of the startup’s board, who had been responsible for enforcing its original mission of developing technology for the benefit of humanity.

Sam Altman

Photographer: Dustin Chambers/Bloomberg

“Altman hand-picked a new board that lacks similar technical expertise or any substantial background in AI governance, which the previous board had by design,” the lawsuit said. “The new board consisted of members with more experience in profit-centric enterprises or politics than in AI ethics and governance. They were also reportedly ‘big fans of Altman.’”

The Securities and Exchange Commission is investigating whether the company misled its investors during that process last year, according to a person familiar with the matter. The Wall Street Journal earlier reported on the probe. Other regulatory agencies, including the European Union and multiple US authorities, are also probing the relationship between OpenAI and Microsoft. The concerns broadly speak to whether OpenAI has been transparent enough about its for-profit dealings and whether its for-profit partnerships are too powerful.

The suit also asks for more scrutiny on Altman’s actions personally, and “the board’s ability to control Mr. Altman’s use of OpenAI to advance his own economic interests, which so far appear to have gone unchecked.” The suit cites Altman’s signing of a letter of intent in 2019, “to buy $51 million worth of chips from a start-up in which Mr. Altman was heavily invested.”

“Mr. Musk is a party to OpenAI’s founding agreement and that gives him the right to sue if he believes Mr. Altman and others are straying from the promises they made in that agreement,” said Larry Hamermesh, a retired University of Pennsylvania law professor who is an expert in Delaware corporate law.

Musk has been building a trail of legal challenges. Last November hesued the nonprofit group Media Matters for America, accusing it of “maliciously” driving away advertisers from X, and in July sued another nonprofit, The Center for Countering Digital Hate. A judge on Thursday looked set to dismiss that case.

In December, X lost its effort to block a California law that seeks to control toxic posts on social media by requiring companies to disclose their content-moderation polices.

Musk has also threatened to sue over artificial intelligence before. Last April he posted on Twitter, now X, that he might take legal action against Microsoft for what he said was its use of the social media platform’s data to train its AI technology. “They trained illegally using Twitter data. Lawsuit time,” he wrote. And he threatened to go after Meta Platforms Inc.’s Threads, after it launched a social media service that rivals X.

SpaceX, another company Musk heads, sued the US military over government contracts awarded to Boeing Co. and Lockheed Martin Corp. Musk later dropped the suit. SpaceX is now suing to get the National Labor Relations Board declared unconstitutional after the US labor agency accused the company of retaliating against eight employees who circulated an open letter critical of Musk.

(Updates with comment from lawyer. A previous version of this story corrected the location of Microsoft’s headquarters and clarified Musk is no longer involved in OpenAI)

--With assistance from Agatha Cantrill, Mark Bergen, Bob Van Voris, Jef Feeley and Chris Dolmetsch.

To contact the reporter on this story:
Saritha Rai in Toronto at srai33@bloomberg.net

To contact the editors responsible for this story:
Edwin Chan at echan273@bloomberg.net

Molly Schuetz, Jake Rudnitsky

© 2024 Bloomberg L.P. All rights reserved. Used with permission.