Elon Musk’s Legal War With OpenAI’s Sam Altman Set for Showdown in Court
The Takeaway
- Musk’s long legal fight with OpenAI and Sam Altman heads to trial on Monday.
- Musk is seeking remedies from OpenAI as high as $187 billion, based on his expert’s estimates.
- People close to both parties have been trying to convince them to settle, but it’s unclear if either side has been receptive.
The artificial intelligence era’s biggest legal battle heads to a showdown next week, as Elon Musk and OpenAI CEO Sam Altman are scheduled to face off in a federal courtroom in Oakland, Calif., over the future of the company that pioneered the AI boom.
The trial in Musk’s lawsuit against Altman, OpenAI and its partner Microsoft starts with jury selection on Monday and is expected to run through mid-May, barring some last-ditch settlement.
People close to both Musk and OpenAI executives have been trying to convince the parties to settle by agreeing to give Musk a piece of the OpenAI foundation, according to several people familiar with the conversations. But it is unclear if either side has been receptive to their suggestions.
The trial promises to be one of the biggest spectacles of power and pettiness that Silicon Valley has produced, with a witness list that includes not only Musk and Altman, but Microsoft CEO Satya Nadella and other current and former top executives from Microsoft, OpenAI and Musk’s corporate empire.
The stakes could be monumental for OpenAI, which Musk co-founded a decade ago with Altman as a nonprofit. Musk alleges the startup broke promises to him and violated its charitable mission in several ways. He is seeking the disgorgement of assets that can be traced back to his original contributions. An economist that Musk hired estimated in December that his interest was worth up to $109 billion, at a time when OpenAI was valued at $500 billion. At OpenAI’s latest valuation, that estimated interest could equate to as much as $187 billion.
Yvonne Gonzalez Rogers, the judge hearing the case, has said that she didn’t find the methodology of Musk’s economist convincing, saying he appeared to be “pulling these numbers out of the air.”
OpenAI has said that Musk’s claims are a baseless attempt to disrupt its growth by a tycoon who competes with it through xAI, which he founded in 2023. Musk’s AI startup is now part of SpaceX, the conglomerate he leads that is planning a massive IPO for June. An OpenAI spokesperson on Friday said that Musk’s case has been about trying to attack the OpenAI nonprofit. Asked about the possibility of any legal settlement, they said: “We will continue to stand and fight for the mission.”
The implications extend to a host of other tech giants and prominent investors that have pumped money into OpenAI, including Amazon and Nvidia. They are also benefiting enormously from the AI frenzy that OpenAI initiated when it launched ChatGPT more than three years ago. OpenAI this month finalized a $122 billion funding round—the largest in history—which valued it at $852 billion including the new cash.
If a jury finds OpenAI liable, Musk is also asking the judge to issue an order reversing OpenAI’s October restructuring, which converted its for-profit wing to a corporation with traditional equity. OpenAI has said that the restructuring, already approved by regulators, was a necessary step toward its ambition of going public, so unwinding it could obstruct that plan. Lawyers following the case have said the court is unlikely to issue such a disruptive order.
Musk also wants the court to order OpenAI to observe its charitable mission by prioritizing work on AI safety and releasing its research publicly, and to remove Altman as a director of OpenAI’s nonprofit board.
“This is going to be an enormously significant case,” said Anupam Chander, who teaches AI regulation and contracts as a law professor at Georgetown University. “This is going to be a trial in the courtroom, but also in the press, where the parties are going to throw stones at each other, but they all live in kind of glass houses.”
“Many Americans don’t see a good guy in this rivalry,” he said. “For many Americans, it’s a pox on both their houses.”
The trial will retrace how Musk donated $38 million to help establish OpenAI in its early days, when it was a charity chartered to ensure that powerful AI benefits humanity. And it will show how Musk had a falling out with his co-founders—including OpenAI President Greg Brockman, whom Musk also names as a defendant—and left the fledgling organization before it took investments from Microsoft and established the for-profit arm to finance its need for pricey AI chips.
Musk alleges that by taking Microsoft’s money, keeping OpenAI’s technology proprietary and deprioritizing safety efforts, OpenAI committed fraud, was unjustly enriched and breached its “charitable trust.” He claims Microsoft abetted that breach, in part by interfering in the OpenAI board’s brief ouster of Altman in 2023.
Musk first sued OpenAI two years ago, then dropped that suit and refiled after hiring Marc Toberoff, a prominent Hollywood attorney with a flair for drama. In the renewed complaint, Toberoff set the tone for the lawsuit, writing that OpenAI’s “perfidy and deceit are of Shakespearean proportions.”
Since Musk filed the suit, he and Altman have traded insults and accusations in an endless series of social media posts and legal filings—one reason people have been skeptical that a settlement could be reached. Altman has accused xAI of creating “anime sex bots for children,” while Musk has referred to him on X as “Scam Altman.”
Among the unresolved legal questions on the trial’s eve: whether OpenAI’s nonprofit or for-profit entity would have to disgorge billions of dollars if it loses, and who would receive those funds.
Musk has said he doesn’t want any money for himself, but wants the OpenAI corporation to transfer any money to its nonprofit. Microsoft countered in a legal filing Wednesday that such an outcome is “anomalous and untenable” because it would return money to the very nonprofit that Musk alleges betrayed its mission.
Musk’s lawyers have said he would drop his fraud claims as long as the court agrees to proceed on the claims of breach of charitable trust and unjust enrichment.
OpenAI’s lawyers responded in a legal filing Wednesday that Musk shouldn’t be allowed to make his decision conditional on the court. They seized on his latest move to argue that Musk “has no standing to sue on behalf of the public [or] the OpenAI nonprofit.” If Musk no longer says he was injured personally, their argument goes, that leaves him without standing to argue for OpenAI to give up its money. “A plaintiff cannot come to court just to air a grievance,” they said.
Late Friday, Judge Gonzalez Rogers affirmed that the breach of charitable trust and unjust enrichment claims are going to trial, and therefore dismissed the fraud claims as Musk’s lawyers requested.
During evidence discovery, both parties unearthed email records supporting their sides. Musk’s lawyers will invoke threads in which Altman stated he was enthusiastic about OpenAI maintaining its charitable structure and private notes from Brockman contemplating the fastest way he could become a billionaire.
OpenAI’s lawyers are sure to point to email records of Musk proposing that OpenAI could merge with Tesla, his own for-profit corporation. They will also argue that Musk waited too long to bring his case, and the statute of limitations has expired.
Chander said he already plans to discuss the trial when he teaches his contracts course in the fall to illustrate the perils of resting millions of dollars on a handshake deal. “I think this is all going to be new legal ground,” he said. “It’s going to be taught in casebooks in the future.”