Mar 1, 2024 - Business

Elon Musk's OpenAI lawsuit threatens Microsoft

Photo illustration of Elon Musk peering through a window in the form of Microsoft's logo

Photo illustration: Sarah Grillo/Axios. Photo: Chesnot/Getty Images

Elon Musk's lawsuit against OpenAI and its CEO Sam Altman seeks to disrupt the ChatGPT creator's relationship with Microsoft, its most important investor and customer.

Why it matters: Microsoft has tied its AI fortunes closely to OpenAI, as evidenced by how quickly the tech giant jumped to restore Altman to the top job when he was briefly ousted last year.

The fine print: The lawsuit specifically seeks to prevent Microsoft from using OpenAI for its "financial benefit."

  • Musk alleges that OpenAI and Altman have abandoned the company's founding agreement to pursue AI research for the good of humanity rather than profit, Axios' Ivana Saric and Scott Rosenberg write.
  • The company — to which Musk says he gave $44 million between 2016 and 2020 — has set its original mission "aflame," the lawsuit alleges.

Friction point: OpenAI is "not just developing but is actually refining" artificial general intelligence (AGI) "to maximize profits for Microsoft," Musk says in the lawsuit.

  • OpenAI solicited donations by assuring contributors that it "would remain a non-profit irrevocably dedicated to creating safe AGI for public benefit, and that all donated funds would be used in accordance with that 'irrevocable' mandate," the suit says.
  • OpenAI and Microsoft did not immediately respond to requests for comment.

Reality check: Legal experts say Musk faces an uphill battle.

  • "Frankly, I don't see a pathway for this suit to win," Samuel Brunson, an expert on nonprofit law at the Loyola University Chicago School of Law, tells Axios in an email interview.
  • The complaint "claims that OpenAI can't license AGI to Microsoft, but it also acknowledges that the license lets the board of OpenAI determine whether something constitutes AGI," Brunson added.
  • Separately, there's nothing to stop the nonprofit company from forming for-profit subsidiaries, Tulane University business law professor Ann Lipton tells Axios. "The issue is that the nonprofit company can't distribute its profits to equity h0lders," she says.

Context: Musk — who has long warned that AI could eventually topple society — has founded his own AI startup, X.ai, as a for-profit entity.

  • He's also threatened to pursue AI initiatives on his own if Tesla — where he's the CEO and a major shareholder — doesn't give him more control of the company.

Threat level: Microsoft investors don't seem particularly worried. The company's stock closed up 0.4% Friday.

  • "If I were Microsoft, I wouldn't be very concerned," Brunson says.
  • Lipton noted that boards have a lot of latitude in terms of how they decide to manage a businesses. "He's trying to convert a handful of conversations about the high-level goals of an organization into something like a binding promise for how entities would be governed and that simply is not how business law operates," she says.

What we're watching: Musk pledged to contribute any damages awarded to him "to a non-profit or charity."

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