OpenAI Counter-Sues Elon Musk: A Legal Battle Over AI Supremacy

Last Updated on April 12, 2025 by factkeeps

OpenAI vs Elon Musk

The ongoing feud between OpenAI and its co-founder, Elon Musk, has taken a dramatic turn, with OpenAI launching a legal counteroffensive against Musk and his competing AI venture, xAI. In a court filing submitted to the US District Court for the Northern District of California, OpenAI accuses Musk of orchestrating a “relentless” and “malicious” campaign to undermine the company after his departure in 2018.

The dispute centers on Musk’s alleged attempts to disrupt OpenAI’s operations, damage its reputation, and gain an unfair competitive advantage for xAI. OpenAI is seeking an injunction to halt Musk’s actions and compensation for damages already incurred.

The Origins of the Conflict

OpenAI was founded in 2015 with the mission of developing artificial general intelligence (AGI) for the benefit of humanity. Musk was initially involved, serving on the non-profit board and pledging $1 billion in donations. However, tensions arose between 2017 and 2018 when Musk demanded “absolute control” of the organization or its absorption into Tesla. After his demands were rejected, Musk quit OpenAI, declaring it doomed to fail without him. OpenAI alleges that Musk never fulfilled his $1 billion pledge.

OpenAI’s Success and Musk’s Alleged Retaliation

Following Musk’s departure, OpenAI restructured into a “capped-profit” entity in 2019 to attract investment while maintaining its mission. The company achieved significant breakthroughs with products like GPT-3, ChatGPT, and GPT-4, which gained widespread adoption and acclaim. OpenAI claims these successes fueled Musk’s antagonism, leading him to launch xAI in March 2023 and engage in a series of actions aimed at harming OpenAI:

Moratorium Call: Musk supported a development moratorium on AI more advanced than GPT-4, allegedly to stall OpenAI while others caught up.
Public Attacks: Musk used his social media platform, X (formerly Twitter), to label OpenAI a “lie,” “evil,” and a “total scam.”
Legal Actions: Musk filed lawsuits against OpenAI, claiming breaches of a “Founding Agreement,” which OpenAI dismisses as meritless.
Sham Bid: In February 2025, a Musk-led consortium made a $97.375 billion offer for OpenAI’s assets, which OpenAI alleges was a disruptive stunt lacking evidence of financing.

OpenAI’s Counterclaims

OpenAI’s counter-suit alleges two primary claims against Musk and xAI:

Unfair Competition: OpenAI argues that Musk’s “sham bid” constitutes unfair and fraudulent business practices under California law, designed to disrupt OpenAI and benefit xAI.
Tortious Interference: OpenAI claims Musk’s actions intentionally disrupted its relationships with investors, employees, and customers, causing financial harm and threatening its mission.

The Stakes

With billions of dollars and the future of AGI at stake, this legal battle is far from over. OpenAI argues that Musk’s actions have forced it to divert resources and expend funds, causing irreparable harm to its operations and reputation. The dispute highlights the high-stakes nature of the AI industry and the intense competition among its key players.