Elon Musk seeks to prevent OpenAI from transitioning to a commercial entity.

• Elon Musk is seeking a federal court order to prevent OpenAI from becoming a fully profitable enterprise.
• On Friday, Marc Toberoff, the lead counsel for Musk, filed a motion for a preliminary injunction.
• In the filing, attorneys contended that OpenAI should not be allowed to operate as a Frankenstein-like entity, constructed from various corporate forms that serve Microsoft's financial interests.

Elon Musk is seeking to prevent OpenAI from becoming a fully commercial enterprise through a federal court intervention.

On Friday, attorneys representing Elon Musk, his AI startup xAI, and former OpenAI board member Shivon Zilis filed for a preliminary injunction against OpenAI. The injunction would prevent OpenAI from allegedly forcing its investors to refrain from funding competitors, including xAI and others.

The ongoing legal battle between Musk, OpenAI, its CEO Sam Altman, and other involved parties and supporters, including tech investor Reid Hoffman, has intensified with the latest court filings.

In March 2024, Musk sued OpenAI in a San Francisco state court, but later withdrew the complaint and refiled it in federal court. In the federal suit, led by Marc Toberoff in Los Angeles, Musk's attorneys claimed that OpenAI had violated federal racketeering, or RICO, laws.

In November, they expanded their complaint against Microsoft and OpenAI, accusing them of violating antitrust laws by asking investors to refrain from investing in rival companies, including Musk's xAI.

An OpenAI spokesperson stated that Elon's fourth attempt, which repeats the same unfounded criticisms, remains devoid of any value.

Microsoft declined to comment.

In their request for a preliminary injunction, Musk's lawyers contend that OpenAI should be barred from profiting from unethically obtained competitive data or collaboration through the Microsoft-OpenAI board interlocks.

In recent years, OpenAI has become one of the most prominent startups, with ChatGPT gaining significant popularity and driving corporate interest in AI and large language models.

In July 2023, Musk's newer AI business released its Grok chatbot and is currently raising up to $6 billion at a $50 billion valuation, with plans to purchase 100,000 chips, as reported by CNBC earlier this month.

The lawyers wrote in the filing that Microsoft and OpenAI are now seeking to maintain their dominance in the generative AI industry by boycotting competitors' access to investment capital, while continuing to benefit from years of shared competitively sensitive information during the formative years of generative AI.

OpenAI's attorneys claimed that the terms requested by investors amounted to a "group boycott" that "denies xAI access to crucial investment funds."

The lawyers later stated that OpenAI cannot function as a Frankenstein, constructed from various corporate forms that serve Microsoft's financial interests.

Microsoft relinquished its observer position on OpenAI's board in July, despite CNBC reporting that the Federal Trade Commission would continue to scrutinize the impact of two companies on the AI sector.

The FTC announced at the beginning of the year that it would launch a "market inquiry into the partnerships being formed between AI developers and major cloud service providers," including OpenAI, Amazon, Alphabet, Microsoft, and Anthropic.

Attorneys for Musk argue in the filing that OpenAI should not be allowed to profit from unethically obtained competitive information or coordination through the Microsoft-OpenAI board interlocks.

In 2015, OpenAI was launched as a non-profit organization. In 2019, it converted into a capped-profit model, with the OpenAI non-profit serving as the governing entity for its for-profit subsidiary. Now, OpenAI is in the process of becoming a fully for-profit public benefit corporation, which could make it more appealing to investors. The restructuring plan would also allow OpenAI to maintain its non-profit status as a separate entity, as previously reported by CNBC.

Microsoft has invested nearly $14 billion in OpenAI but is expected to record a $1.5 billion loss in the current period due to an anticipated loss from OpenAI.

In October, Thrive Capital led a major funding round for OpenAI, valuing the startup at $157 billion, with Microsoft and Nvidia among the investors who also participated.

Generative AI is a rapidly growing market, with startups such as xAI, Anthropic, and tech giants like Google facing increasing competition. Business spending on generative AI has surged 500% this year, and it is predicted to reach $1 trillion in revenue within a decade, according to recent data from Menlo Ventures.

On Saturday, CNBC attempted to contact Musk's legal team, but they declined to provide any comment.

— CNBC's Hayden Field contributed reporting

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