OpenAI’s Founding Agreement

As Darryll mentioned on Friday, Elon Musk has sued OpenAI. And because OpenAI is a nonprofit organization, and because much of the suit is based on its nonprofit status, it seems only fitting that we look at the suit in some depth. So this week, I’m  going to look at a couple issues surrounding Musk’s suit against OpenAI. (If you want to read the complaint, you can find it here.)

Musk’s first cause of action is for breach of contract. And what contract? Musk describes it as the “Founding Agreement” of OpenAI. According to Musk, this Founding Agreement had two parts: that OpenAI

(a) would be a nonprofit 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.

Of course, there isn’t a signed version of this Founding Agreement. Musk asserts that it is memorialized, among other places, as part of OpenAI’s certificate of incorporation.

And, he claims, Sam Altman and OpenAI breached this agreement, both because OpenAI is pursuing profit and because ChatGPT-4 isn’t open-source and is being used for proprietary commercial reasons.

Now, it strikes me that this claim has a couple fundamental flaws. The first is, at least as memorialized, the agreement doesn’t appear to say what Musk claims it says. See, Musk included the certificate of incorporation as Exhibit 1. And the certificate of incorporation does say that OpenAI is organized as a nonprofit corporation under Delaware law. Its specific purpose is to “provide funding for research, development and distribution of technology related to artificial intelligence.” But it’s not limited to just providing funding; later in the same paragraph, it’s permitted to “engage in any lawful act of activity for which nonprofit corporations may be organized under the General Corporation Law of Delaware.”

And, to Musk’s credit, and in spite of a ton of insinuating throughout the complaint that OpenAI isn’t a nonprofit because it seeks a profit,[fn1]  in fact, in paragraph 4, the complaint acknowledges that OpenAI, Inc. is a nonprofit.

But what about the claim that OpenAI breached the contract when it released ChatGPT-4 as a non-open-source program?

Quick confession: I’ve never used ChatGPT, and I don’t frankly plan to. I have no idea whether its open source, though people who know these things say it’s not.

But also, the certificate of incorporation, which Musk says memorializes the Founding Agreement, says nothing about OpenAI producing open source software. And this ends up being a question of contract, but to even make his breach of contract case, Musk is going to face the burden of demonstrating that there was a contract, that contract required OpenAI’s products, including ChatGPT-4, to be open source, and that it was not open source.

It’s possible that he can, but I’d think that if you had written evidence of a contract, you’d include it in the complaint, so if what he included doesn’t mention the requirement, I’m skeptical that there was any such agreement that its products would be open source.

So what I’m saying is, this looks to me like a steep uphill climv, even on the first element. 

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[dn1] I assume that all readers here understand that “nonprofit” doesn’t mean that an organization can’t pursue or earn a profit; it just imposes a noninurement requirement, forbidding the nonprofit from sharing its profits with individuals or other non-exempt organizations. 

Samuel D. Brunson

Photo by Cytonn Photography on Unsplash