The Agentic AI initiative, Eliza Labs, has initiated legal proceedings against Elon Musk’s xAI, alleging that the AI firm utilized monopolistic tactics aimed at “deplatforming” agentic AI launchpads.
The lawsuit asserts that xAI sought to “extract” proprietary information, such as technical documentation and usage statistics concerning the development of Eliza Labs’ platform, with the intention of replicating its ideas before subsequently “banishing” Eliza Labs from xAI.
Shaw Walters, co-founder of Eliza Labs, contends in the lawsuit that the initial relationship between the two entities was friendly, with xAI encouraging Walters to exchange ideas. He mentioned that they also leveraged xAI’s application programming interface (API) because it was available at no cost. Walters remarked:
“The collaborative atmosphere shifted to a transactional one, just as X was introducing Ani and an updated version of Grok. All of a sudden, they insisted we pay $50,000 monthly for an enterprise license — totalling $600,000 yearly — or risk legal ramifications.
We were already spending over $20,000 annually through various licenses and fees,” Walters added. Cointelegraph contacted Walters for additional commentary, but he opted not to elaborate.
This lawsuit underscores the increasingly litigious atmosphere of the artificial intelligence sector, as legal disputes regarding monopolistic conduct, intellectual property rights, and liabilities of AI service providers continue to escalate.
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Lawsuits rise in the emerging AI sector
The AI industry remains in its early stages, grappling with significant regulatory and legal uncertainties surrounding this emerging technology.
These regulatory ambiguities accompany the conventional legal challenges faced by technology companies, including trademark and patent violations, rendering the AI sector a litigation-prone environment.
In February 2024, Elon Musk filed a lawsuit against Sam Altman, the founder of OpenAI, and OpenAI itself, concerning the company’s shift towards becoming a for-profit entity.
Musk maintained that the organization strayed from its foundational mission as a non-profit, open-source venture aimed at generating public-serving tools.
The lawsuit was subsequently retracted a few months later in June, but it was withdrawn without prejudice, allowing Musk the option to file the lawsuit again until it is either dismissed or withdrawn with prejudice.
In July 2024, The New York Times brought a lawsuit against OpenAI over the incorporation of copyrighted material in the firm’s large-language model (LLM), ChatGPT, demanding the disclosure of detailed source material for AI-generated outputs.
Xai, an Ethereum-centric gaming firm, litigated against Elon Musk’s xAI for trademark infringement in August 2025, asserting that the resemblance of the trademarks has caused consumer confusion and harmed its business.
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