Elon Musk threw down the gauntlet to Sam Altman

• Elon Musk has filed a lawsuit against OpenAI and its CEO, Sam Altman, years after leaving the startup.
• Despite Musk's claims, legal experts say his case against OpenAI appears weak.
• But Musk's lawsuit could still hobble OpenAI, tie it up in court and expose dirty laundry.

It was last May, and Elon Musk was sitting down for an interview with CNBC's David Faber.

When asked about Altman and OpenAI, Musk seemed visibly frustrated.

“This wouldn't exist without me,” Musk He said.

“It seems strange that something that is non-profit and open source can somehow turn into for-profit closed source,” he added. “This is the exact opposite of what I gave them the money for. Is this legal? It doesn't seem legal.”

Musk's answer may be the writing on the wall that the billionaire is willing to sue Altman and OpenAI.

On Thursday, Musk filed a lawsuit against OpenAI and its CEO, claiming that the company's partnership with Microsoft violates its mission by putting profit over creating open source technology that will benefit humanity.

The two have sparred before, and Altman was more diplomatic in his answers publicly when asked about Musk, even calling the Tesla CEO his hero.

But now, Musk has thrown down the gauntlet, likely marking the point of no return for their relationship as he seeks in his lawsuit to force OpenAI to make its research and technology open source, cut Microsoft off from GPT-4, and block Altman. Microsoft will benefit from the company.

“It appears he's trying to slow them down so he can catch up with his own efforts,” Kyle Lawrence, a corporate and securities lawyer at Falcon Rappaport & Berkman, told Business Insider. “This is how a lot of the big tech giants operate. They succeed by stifling the ability of other organizations to get ahead.”

After all, Musk is not a disinterested party at all.

Musk's lawsuit comes after the billionaire launched his own artificial intelligence company last year. Musk said he invested tens of millions of dollars in OpenAI during its founding, but withdrew from the company's board in 2018.

At the time, Musk said he left to avoid a potential conflict of interest with Tesla and its AI efforts.

Weak condition

David Hoffman, a contract law expert from the University of Pennsylvania, said that despite Musk's admiration, his case against OpenAI appears fragile at best.

“It would be very difficult to claim breach of contract without a written contract,” Hoffman said.

Musk's case says that OpenAI has deviated from the “Foundational Agreement,” but there appears to be no such written agreement. The complaint relies on unwritten contract claims, which would be difficult to stop in court, Hoffman said.

Instead, Musk's case cites an email from Altman (which sounds more like an informal negotiation than a contract) and OpenAI's certificate of incorporation (which Musk did not sign and does not mention keeping the company open source).

Because OpenAI is a nonprofit, it would be difficult for a billionaire to claim that OpenAI's board has any fiduciary duties to him, Samuel Brunson, a nonprofit legal expert from Loyola University, told Business Insider.

Kyle Lawrence, a corporate and securities lawyer with Falcon Rappaport & Berkman, said the billionaire's argument about OpenAI's failure to act for the “good of humanity” is more philosophical than a concrete legal argument.

“Who can say that what they are doing does not benefit humanity?” Lawrence said. “They can easily say they need a billion dollars to do this, and who can say that the mechanism they put in place to get that billion dollars conflicts with their goal of benefiting humanity?”

OpenAI may pay a heavy price

While experts say Musk's case is unlikely to succeed, OpenAI may still pay a price.

“These types of lawsuits can air a lot of dirty laundry, and can be a huge distraction that can impact their day-to-day operations,” Hoffman said.

Publicity around the lawsuit — whether Musk wins or loses — could also damage OpenAI's reputation, fanning the fire that was lit when Altman was briefly ousted. As one of the richest men in the world, Musk could tie up OpenAI in lawsuits for years, according to Lawrence.

The case could also set a dangerous bar, if Musk wins.

“If Musk wins this case, it will set a bad precedent for nonprofits everywhere,” Bronson said. “You can start to see a bunch of disgruntled donors coming forward trying to get their money back, and most nonprofits don't have the same resources that OpenAI does.”