Eliza Labs, an AI software company, has sued Elon Musk’s X Corp. (formerly Twitter). The company accused X of exploiting Eliza’s technology before suspending its account and rolling out copycat AI products. The company called X’s move a “calculated and cunning” attempt to undermine competition.
Eliza Labs Accuses X of Theft & Deception
According to the filing on Wednesday, the software startup Eliza Labs filed a lawsuit against X, alleging theft of proprietary AI technology, anti-competitive practices, and market abuse. Eliza claims that X deceived it into sharing proprietary expertise about artificial intelligence “agents” that can operate autonomously on social media.
The company accuses X of violating antitrust law. It argues that X used its dominant position on social media to stifle competition and inflate pricing.
Eliza asserts that X approached it in 2024 to discuss ways for AI agents to function on the platform. During those talks, Eliza and its founder, Shaw Walters, shared a detailed plan for the firm’s roadmap and future vision. However, the scenario quickly turned into something brutal.
X Manipulates Eliza to Pay $50,000
After a few weeks of the discussion, X forced Eliza to pay $50,000 a month for an enterprise license to continue operating. According to the company, this move by X was part of a broader plan to coerce Eliza developers into paying “exorbitant” sums or risk losing access to the site. But Eliza refused to pay any amount for such services.
Eliza said in the filing, “In the weeks leading to the deplatforming, X began to push plaintiffs to adopt an exorbitantly expensive ‘Enterprise License’ or ‘Enterprise API’ (for $50,000/month, or $600,000.00/year).”
Proceedings and Significance
The lawsuit raises important questions about ethics, startups’ vulnerability, and the limits of tech giants’ market power in AI innovation. Eliza preemptively challenged a possible defence based on Section 230, a U.S. law that shields tech companies from certain legal claims. Now, the case is presented before the federal court in San Francisco, awaiting a final decision.
