Elon Musk adds Microsoft as a defendant in OpenAI lawsuit, accusing them of anticompetitive conduct

• Elon Musk has added Microsoft as a defendant to an amended lawsuit against OpenAI.
• The suit, which also adds Reid Hoffman as defendant, accuses Microsoft and OpenAI of forming a monopoly.
• Musk claims OpenAI is trying to “starve” rivals of AI talent by offering staff “lavish compensation.”

Elon Musk has amended a lawsuit against OpenAI to name Microsoft as a defendant, calling their partnership a “de facto merger” and accusing them of anticompetitive practices.

The lawsuit, filed Thursday, also names Reid Hoffman, a Microsoft board member and former OpenAI board member, as a defendant. It also names Musk’s startup, xAI, and Shivon Zilis, the mother of three of his children, as plaintiffs. Zilis was previously an OpenAI board member and is now an executive at Neuralink, Musk’s brain implant company.

The complaint accuses OpenAI and Microsoft of creating an AI monopoly and engaging in “intensified” anticompetitive practices, citing “lavish compensation” offers as one example.

Lawyers for Musk said in the amended complaint, filed at a federal court in Northern California, that “OpenAI has attempted to starve competitors of AI talent by aggressively recruiting employees with offers of lavish compensation, and is on track to spend $1.5 billion on personnel for just 1,500 employees.”

Bloomberg previously reported that some OpenAI employees are making up to $800,000 a year, which can include bonuses and stock awards. It also said that most OpenAI engineering roles pay between $200,000 and $370,000, according to job postings it reviewed.

Musk’s lawyers said that the defendants “possess a nearly 70% share of the generative AI market, constituting a monopoly, or, in the alternative, an attempt or conspiracy to monopolize the generative AI market.”

The suit describes Microsoft’s partnership with OpenAI as a “de facto merger” and said, “Microsoft is now OpenAI, and OpenAI, Microsoft.” It refers to a New York Times report from last month, which says Microsoft AI chief Mustafa Suleyman is among a group of Microsoft employees who work from OpenAI’s San Francisco office.

The amended lawsuit is the latest escalation between longtime rivals Musk and Sam Altman, the CEO of OpenAI. Musk first sued OpenAI and cofounders Altman and Greg Brockman in March, accusing the company of jeopardizing its nonprofit mission by partnering with Microsoft, which has invested more than $13 billion into the startup. OpenAI responded to the suit by calling it “incoherent” and “contradictory.”

Musk, who helped create OpenAI in 2015, then dropped his lawsuit without explanation. He filed the latest suit in August, arguing that OpenAI had abandoned its founding mission to develop AI that is beneficial for humanity by putting commercial interests first, and claimed that he was “deceived” into cofounding the company. OpenAI said in September that it is moving to a for-profit governance structure.

The current lawsuit claims that OpenAI acted in an anticompetitive manner by asking investors in its most recent funding round not to invest in competitors, including Musk’s startup xAI. The suit references a report from the Financial Times in October, which said this was one of the terms asked of potential investors for the $6.6 billion funding round that was closed last month.

As part of that round, SoftBank committed $500 million to OpenAI. Navneet Govil, chief financial officer of SoftBank’s Vision Funds previously told Business Insider that SoftBank still has the ability to invest in other AI companies. Govil told BI’s Hasan Chowdhury, “Our view is if it’s a disruptive company and the addressable market is large, there’s room for more than one player.”

Microsoft, OpenAI, and Hoffman didn’t immediately respond to requests for comment from Business Insider, made outside normal working hours. In September, Hoffman called Musk’s lawsuit against OpenAI a case of “sour grapes.”