Elon Musk Sues OpenAI’s Brazen Transformation from Non-Profit to $80B+ Market Cap For-Profit

Elon Musk has sued OpenAI, challenging OpenAI’s transformation from a non-profit open source company to an $80B+ market cap for-profit company following its purchase by Microsoft.

Elon Musk filed a lawsuit against OpenAI on Thursday in California Superior Court. In it, he claims the company breached its contract when it moved away from open technology development and its original mission of developing AI for the benefit of humanity. Musk’s lawyers argue that OpenAI engaged in unfair business practices and failed to fulfill its fiduciary duties.

Elon Musk used to be a close friend of Google co-founder Larry Page. Google acquired DeepMind in 2014. After this, they had several conversations about the safety of AI, but both had different views on the issue. As a result of this, Musk realized that it was necessary to have a “counterbalance” to Google and its influence on AI. This becomes the origin of the emergence of OpenAI.

The company’s original goal was to make the program open source and non-commercial, which is fully reflected in the company’s name. However, after Musk left due to disagreements with the team over AI safety issues, OpenAI became the opposite of its original idea.

“Now because fate loves irony, OpenAI is closed source and frankly voracious for profit,” he said on a Spaces on X in July 2023.

Elon Musk left OpenAI’s board of directors in 2018. The company later opened a commercial division that eventually attracted about $13 billion in investment from Microsoft. In 2024, the company completed a deal that valued it at $80 billion or more, according to a New York Times report, citing people with knowledge of the deal.

Musk’s team says he invested early in OpenAI so it can “compete with, and serve as a vital counterbalance to” Google’s DeepMind in the “race for Artificial General Intelligence.” The plan was to develop AGI “to benefit humanity, not the shareholders of a private, for-profit company,” the filing states.

Court documents revealed interesting details. OpenAI’s commercial arm entered into an agreement in 2020 to exclusively license its Generative PreTrained Transformer (GPT)-3 language model to Microsoft. OpenAI has published a detailed paper describing GPT-3, allowing others to create similar technologies. Thus, Microsoft did not receive the rights to artificial general intelligence (AGI).

“Most critically, the Microsoft license only applied to OpenAI’s pre-AGI technology. Microsoft obtained no rights to AGI. And it was up to OpenAI, Inc.’s non-profit Board, not Microsoft, to determine when OpenAI attained AGI,” the filing says

The documents say that OpenAI’s GPT-4, launched in March 2023, was “not just capable of reasoning” but “better at reasoning than average humans.” However, the new model’s internal design “remains a complete secret except to OpenAI – and, on information and belief, Microsoft.”

“There are no scientific publications describing the design of GPT-4. Instead, there are just press releases bragging about performance,” the legal papers say.

In November 2023, OpenAI’s board fired the CEO and co-founder of the company, Sam Altman. After an internal scandal, the board of directors rehired him to his previous position. Musk’s lawsuit alleges that the new OpenAI lacked expertise in artificial intelligence and was ill-prepared to “make an independent determination of whether and when OpenAI has achieved AGI – and hence when it has developed an algorithm that is outside the scope of Microsoft’s license.”

It says the events of 2023 “constitute flagrant breaches of OpenAI’s Founding Agreement,” which the company has since “turned on its head.”

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

Musk’s lawsuit demands a trial by jury.

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