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Elon Musk sues OpenAI for breach of foundational contract

Tesla and SpaceX chief executive Elon Musk has initiated a lawsuit against AI giant and ChatGPT creator OpenAI, accusing the company of breaching a foundational contract that said the company would be a non-profit that develops artificial intelligence to benefit humanity rather than for profit.

user iconDaniel Croft 05 March 2024 Corporate Counsel
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Editor’s note: This article originally appeared on Lawyers Weekly’s sister brand, Cyber Daily.

In his lawsuit, which was filed in the Superior Court of California for the County of San Francisco, Musk was a co-founder of OpenAI alongside CEO Sam Altman and president Greg Brockman and was responsible for bankrolling much of the company’s initial start-up costs in 2015.

Musk said he was convinced to fund the company on the condition that OpenAI would remain non-profit and exclusively develop artificial intelligence (AI) technology for the benefit of the world and its people.


Additionally, its code would be open to the public, as the company name suggests, to prevent it from restricting the technology’s access to private organisations willing to pay for it.

Now, Musk is accusing the company of becoming a private moneymaker under Microsoft.

“OpenAI, Inc has been transformed into a closed-source de facto subsidiary of the largest technology company in the world: Microsoft,” stated the Tesla CEO’s lawsuit.

As laid out in the lawsuit document, Musk has made a number of major contributions to OpenAI, not limited to tens of millions in funding, assistance in recruiting top staff and strategic advice on directions for research, all of which was done provided OpenAI remained non-profit, as laid out in what Musk refers to as the “founding agreement”, an agreement that OpenAI has reaffirmed in the company’s certificate of incorporation and other documents.

Musk said that in 2023, however, the agreement was breached when OpenAI became a closed-source entity and began acting as a Microsoft subsidiary.

He has also accused OpenAI of “not just developing but is actually refining” AGI – referring to artificial general intelligence that is as smart (or smarter) than humans – to maximise Microsoft’s profits.

OpenAI entered into an exclusive licensing agreement with OpenAI back in 2020 for Microsoft to use the GPT-3 language model.

Alongside Musk seeking a ruling from the courts that would require OpenAI to make its technology and code freely available to the public, he is also seeking a ruling that would define both GPT-4 and the recently named Q* (a technology explored by OpenAI that, in a nutshell, is AI that is smarter than humans) as artificial general intelligence, meaning it would be outside the licensing of Microsoft.

It is worth noting that Q* recently caused a major headache for both Altman and OpenAI after the CEO was fired by the company’s board for allegedly staying quiet on technology with the ability to exceed human intelligence. Altman was reinstated after a weekend of drama at the company, in which a majority of OpenAI's staff threatened to walk.

Musk’s lawsuit is likely also spurred on by Altman’s recent call for US$7 trillion in funding to completely transform the GPU manufacturing industry in light of the AI revolution.

The need for such a large sum comes from AI’s biggest developmental limitation – computing power. AI is dependent on powerful GPU (graphics processing unit) chips for its development, and stocks are in short supply.

The OpenAI chief executive is currently in talks with global investors, including those from the United Arab Emirates (UAE), to source the money, according to The Wall Street Journal.

However, many have said that $7 trillion is far more than what will be needed, with NVIDIA CEO Jensen Huang saying the price tag is way too high.

“You can’t assume just that you will buy more computers,” Huang told UAE AI minister Omar Al Olama.

“You have to also assume that the computers are going to become faster, and therefore, the total amount that you need is not as much.”

Huang said the cost of building AI data centres should be roughly US$2 trillion by 2029.

“There’s about a trillion dollars’ worth of installed base of data centres,” he said.

“Over the course of the next four or five years, we’ll have $2 trillion worth of data centres that will be powering software around the world.”