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OpenAI has accused the Chinese AI company DeepSeek of improperly leveraging its proprietary technology to develop a competing artificial intelligence model, raising fresh concerns over intellectual property security in the rapidly evolving AI sector.

The dispute revolves around a process known as “distillation,” where smaller AI models enhance their capabilities by learning from more advanced systems. While this is a standard practice in AI development, OpenAI asserts that DeepSeek may have breached its policies by using the technique to create its own model.

Microsoft Uncovers Suspicious Activity

Security researchers at Microsoft—OpenAI’s largest investor—detected unusual data extraction activity linked to DeepSeek last year. Reports suggest that individuals associated with the Chinese startup were collecting vast amounts of data through OpenAI’s API. Following this discovery, Microsoft alerted OpenAI, and both companies launched an investigation into potential unauthorized access.

In response, OpenAI enforced stricter security measures and restricted accounts suspected of being connected to DeepSeek, reinforcing its policy that prohibits the use of its technology to train rival AI systems.

National Security and Market Impact

The allegations against DeepSeek extend beyond intellectual property concerns to broader national security implications. Some experts warn that AI models developed in China may store and process user data in ways that pose privacy risks—echoing similar concerns that led to regulatory scrutiny of Chinese tech firms in global markets.

DeepSeek’s latest AI model, R1, has demonstrated strong performance despite being developed with fewer resources than its Western counterparts. The company claims to have trained its model using only 2,048 Nvidia H800 GPUs and a budget of $5.6 million, sparking speculation over whether it benefited from unauthorized data.

The emergence of DeepSeek’s AI advancements has also influenced the financial markets. The announcement of its R1 model coincided with a sharp decline in Nvidia’s stock, wiping billions off its valuation before rebounding.

Ongoing Legal and Ethical Challenges in AI

Ironically, OpenAI itself is facing legal scrutiny over its own data usage. The company is currently battling lawsuits from major publishers, including The New York Times, over allegations that it trained AI models on copyrighted materials without permission.

As AI technology advances, the industry faces growing challenges in protecting intellectual property while ensuring ethical AI development. OpenAI’s actions signal a broader push to safeguard innovation from unauthorized use, as competition in the global AI race intensifies.