Mutual success has only heightened tensions between Microsoft and OpenAI, whose partnership helped kickstart the AI boom. Now, the Financial Times reports the latest escalation between the two heavyweights: Microsoft is considering suing OpenAI.

The drama is a bit of a corporate love triangle, and concerns a $50 billion deal to offer OpenAI’s new product, Frontier, on Amazon Web Services, the e-commerce giant’s cloud computing platform. Microsoft believes this violates the spirit and the letter of its own exclusivity agreement with OpenAI, which holds that all access to OpenAI’s AI models should only be through Microsoft’s Azure cloud platform.

Frontier is still unreleased, and no legal action has been set into motion yet, as both companies are still in talks. But Microsoft is signaling that it isn’t gun-shy.

“We know our contract,” a person familiar with Microsoft’s position told the FT. “We will sue them if they breach it. If Amazon and OpenAI want to take a bet on the creativity of their contractual lawyers, I would back us, not them.”

Once, OpenAI depended on Microsoft’s billions of dollars of investment. But with the runaway success of ChatGPT, it’s now approaching a trillion dollar valuation and has long started seeking greater independence from its patron, which isn’t quite willing to let go, especially as OpenAI has become one of its biggest competitors. 

Last year, the two clashed as OpenAI restructured itself into a for-profit public benefit corporation, but eventually settled on a new agreement in September. Microsoft relinquished its right to be OpenAI’s exclusive cloud provider, but retained a clause that requires all of OpenAI’s API calls, or calls to access its AI models, to be routed through Azure, the reporting noted.

Microsoft now feels that OpenAI is trying to weasel its way around this clause, with both companies’ lawyers fighting for weeks over the latter’s agreement with Amazon, sources told the FT. 

With Frontier, Amazon and OpenAI are developing a “Stateful Runtime Environment” that runs in Amazon’s Bedrock AI platform, designed to access data stored on AWS and allow OpenAI agents to keep context, remember prior work, integrate across different software tools, and access computing power, in effect making it more useful for ongoing projects. 

But Microsoft doesn’t believe it’s possible for OpenAI to let Amazon run its AI tech without violating the API clause. Amazon is seemingly aware of how suspicious this looks, with an internal memo providing strict instructions to staff to describe the SRE as only being “powered by,” “enabled by” or “integrates with” OpenAI, but not phrases like “enables access” to OpenAI’s tech, per the FT.

A lawsuit, however, would be inconvenient for both parties. One source told the FT that Microsoft was unlikely to sue OpenAI because it would invite further scrutiny while it’s already facing investigations in the US, UK, and EU into its alleged anti-competitive licensing practices with Azure.

Meanwhile, OpenAI is reportedly gunning to go public in a historic trillion dollar IPO. A lawsuit could throw a wrench into those plans, which are already being hamstrung by a lawsuit by Elon Musk accusing OpenAI of abandoning its beneficent non-profit roots.

“The last thing OpenAI needs is another court case right now,” the person familiar with Microsoft’s position told the FT.

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