OpenAI has launched a legal counteroffensive against one of its co-founders, Elon Musk, and his competing AI venture, xAI.

In court documents filed yesterday, OpenAI accuses Musk of orchestrating a “relentless” and “malicious” campaign designed to “take down OpenAI” after he left the organisation years ago.

The court filing, submitted to the US District Court for the Northern District of California, alleges Musk could not tolerate OpenAI’s success after he had “abandoned and declared [it] doomed.”

OpenAI is now seeking legal remedies, including an injunction to stop Musk’s alleged “unlawful and unfair action” and compensation for damages already caused.   

Origin story of OpenAI and the departure of Elon Musk

The legal documents recount OpenAI’s origins in 2015, stemming from an idea discussed by current CEO Sam Altman and President Greg Brockman to create an AI lab focused on developing artificial general intelligence (AGI) – AI capable of outperforming humans – for the “benefit of all humanity.”

Musk was involved in the launch, serving on the initial non-profit board and pledging $1 billion in donations.   

However, the relationship fractured. OpenAI claims that between 2017 and 2018, Musk’s demands for “absolute control” of the enterprise – or its potential absorption into Tesla – were rebuffed by Altman, Brockman, and then-Chief Scientist Ilya Sutskever. The filing quotes Sutskever warning Musk against creating an “AGI dictatorship.”

Following this disagreement, OpenAI alleges Elon Musk quit in February 2018, declaring the venture would fail without him and that he would pursue AGI development at Tesla instead. Critically, OpenAI contends the pledged $1 billion “was never satisfied—not even close”.   

Restructuring, success, and Musk’s alleged ‘malicious’ campaign

Facing escalating costs for computing power and talent retention, OpenAI restructured and created a “capped-profit” entity in 2019 to attract investment while remaining controlled by the non-profit board and bound by its mission. This structure, OpenAI states, was announced publicly and Musk was offered equity in the new entity but declined and raised no objection at the time.   

OpenAI highlights its subsequent breakthroughs – including GPT-3, ChatGPT, and GPT-4 – achieved massive public adoption and critical acclaim. These successes, OpenAI emphasises, were made after the departure of Elon Musk and allegedly spurred his antagonism.

The filing details a chronology of alleged actions by Elon Musk aimed at harming OpenAI:   

• Founding xAI: Musk “quietly created” his competitor, xAI, in March 2023.   
• Moratorium call: Days later, Musk supported a call for a development moratorium on AI more advanced than GPT-4, a move OpenAI claims was intended “to stall OpenAI while all others, most notably Musk, caught up”.   
• Records demand: Musk allegedly made a “pretextual demand” for confidential OpenAI documents, feigning concern while secretly building xAI.   
• Public attacks: Using his social media platform X (formerly Twitter), Musk allegedly broadcast “press attacks” and “malicious campaigns” to his vast following, labelling OpenAI a “lie,” “evil,” and a “total scam”.   
• Legal actions: Musk filed lawsuits, first in state court (later withdrawn) and then the current federal action, based on what OpenAI dismisses as meritless claims of a “Founding Agreement” breach.   
• Regulatory pressure: Musk allegedly urged state Attorneys General to investigate OpenAI and force an asset auction.   
• “Sham bid”: In February 2025, a Musk-led consortium made a purported $97.375 billion offer for OpenAI, Inc.’s assets. OpenAI derides this as a “sham bid” and a “stunt” lacking evidence of financing and designed purely to disrupt OpenAI’s operations, potential restructuring, fundraising, and relationships with investors and employees, particularly as OpenAI considers evolving its capped-profit arm into a Public Benefit Corporation (PBC). One investor involved allegedly admitted the bid’s aim was to gain “discovery”.   

Based on these allegations, OpenAI asserts two primary counterclaims against both Elon Musk and xAI:

• Unfair competition: Alleging the “sham bid” constitutes an unfair and fraudulent business practice under California law, intended to disrupt OpenAI and gain an unfair advantage for xAI.   
• Tortious interference with prospective economic advantage: Claiming the sham bid intentionally disrupted OpenAI’s existing and potential relationships with investors, employees, and customers. 

OpenAI argues Musk’s actions have forced it to divert resources and expend funds, causing harm. They claim his campaign threatens “irreparable harm” to their mission, governance, and crucial business relationships. The filing also touches upon concerns regarding xAI’s own safety record, citing reports of its AI Grok generating harmful content and misinformation.

The counterclaims mark a dramatic escalation in the legal battle between the AI pioneer and its departed co-founder. While Elon Musk initially sued OpenAI alleging a betrayal of its founding non-profit, open-source principles, OpenAI now contends Musk’s actions are a self-serving attempt to undermine a competitor he couldn’t control.

With billions at stake and the future direction of AGI in the balance, this dispute is far from over.

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