Elon Musk Files Lawsuit Against Sam Altman & OpenAI For Breach of Contract & Fiduciary Duties, Seeking Declaration That OpenAI Achieved Artificial General Intelligence (AGI)

Christa Laser
March 1, 2024
5 min read

On Feb. 29, 2024, Elon Musk brought suit against Sam Alman, Gregory Brockman, OpenAI, Inc. (OpenAI’s non-profit arm) and more over OpenAI’s development of what Musk asserts could be artificial general intelligence (AGI) and alleged misuse of AGI for for-profit purposes.  Musk asserts that OpenAI’s for-profit activities, especially if they have reached the point of AGI, are a breach of contract and breach of fiduciary duties to Musk, who donated to OpenAI Inc. under the belief that the funding would be used exclusively for non-profit purposes including ensuring that AGI is not solely in the hands of mega-corporations. 

Musk’s lawsuit focuses on his concern that AGI is “the greatest existential threat we face today.” Compl. ¶ 18.  Musk’s breach of contract claims asserts a breach of what he calls the “Founding Agreement” for OpenAI Inc. that OpenAI “(a) would be a non-profit developing AGI for the benefit of humanity, not for a for-profit company seeking to maximize shareholder profits; and (b) would be open-source, balancing only countervailing safety considerations, and would not keep its technology closed and secret for proprietary commercial reasons.”  Compl. ¶ 124.  However, the Founding Agreement is not a written contract.  Instead Musk asserts that the Founding Agreement was the spirit behind the written contract at issue, the Articles of Incorporation of OpenAI, Inc.  

The OpenAI, Inc. Articles of Incorporation state, “This Corporation shall be a nonprofit corporation organized exclusively for charitable and/or educational purposes . . . .  The specific purpose of this corporation is to provide funding for research, development and distribution of technology related to artificial intelligence. The resulting technology will benefit the public and the corporation will seek to open source technology for the public benefit when applicable. The corporation is not organized for the private gain of any person.” Compl. Ex. 1.

A close-up of a documentDescription automatically generated

Musk asserts that Defendants breached its contractual obligations by licensing GPT-4 to Microsoft, failing to disclose GPT-4’s operation and training to the public, and permitting Microsoft to occupy a seat on OpenAI Inc.’s Board of Directors.  Compl. ¶ 125.  OpenAI’s structure allows the Board of Directors to determine when OpenAI has achieved artificial general intelligence (AGI), but Microsoft is on the Board despite that the Board’s determination that OpenAI reached AGI will result in exclusion of the AGI technology from the IP licenses OpenAI granted to Microsoft.

Musk also brings claims for promissory estoppel, asking that Altman and OpenAI be held to their promises to keep OpenAI dedicated to the public benefit, Compl. ¶¶ 128–132, and for breach of fiduciary duty, including an obligation to use Musk’s donations for the purposes for which they were made.  Compl. ¶ 134.  Non-profits who accept donations with a specific purpose have an obligation to use the funds for the designated purposes or risk of breach of fiduciary duty claim.

Musk also brings a catch-all claim for unfair business practices under California law, a broad claim that allows for an injunction (an order to cease engaging in behavior) or equitable remedies like restitution (repayment to the person harmed) or disgorgement (taking any ill-gotten gains away).  Of course, a court considering equitable remedies will consider what is fair and balance any hardships to either party, so extreme remedies like payment to Musk of all the profits of OpenAI entities would be unlikely despite the availability of disgorgement as a potential remedy for such claims.

Musk also seeks an accounting, meaning that the court will order the Defendants to track and disclose how donated money has been used by OpenAI entities.  

Notably, in the request for relief, Musk asks the court to determine whether OpenAI has achieved AGI.  Musk’s claims that OpenAI achieved AGI are based primarily on uncited quotations of a research paper written by Microsoft scientists stating that GPT-4 can “reasonably be viewed as an early (yet still incomplete) version of an artificial general intelligence (AGI) system.”  It is notable that Musk does not cite or attach the complete paper, in which the researchers explain that perhaps some aspects of human intelligence like planning and learning are not met by GPT-4.  

Anything quoted in a complaint can be brought into the early motion to dismiss stage of a proceeding under a doctrine called judicial notice, so we can expect that Defendants will bring the full paper in for context to show that the paper does not support that GPT-4 is an AGI.  A court determining that Musk does not adequately plead that OpenAI achieved AGI could leave the claims in tact by finding that a determining of whether OpenAI achieved AGI is not essential to the claims.  Alternatively, if the court does believe that it is essential to prove the OpenAI achieved AGI to support Musk’s claims for breach of contract, the court will likely give Musk the opportunity to replead with a more specific allegation like “OpenAI has achieved AGI.”  So far, Musk doesn’t say this.  Nonetheless, Musk also references “Q* and/or other OpenAI next generation large language models,” and it is possible that Musk believes OpenAI will soon achieve AGI with one of these models.

A paper with text on itDescription automatically generated

This case was filed in state court in San Francisco, California.  However, Musk is currently a resident of Texas, opening the possibility for federal diversity jurisdiction to apply.  If Defendants can show that the amount in controversy would exceed $75,000, Defendants can remove the lawsuit to federal court to be decided at the federal level.  The removed case would nonetheless apply California contract law, etc.