Elon Musk lost a court bid asking a judge to temporarily block ChatGPT creator OpenAI and its backer Microsoft (MSFT) from carrying out plans to turn the artificial intelligence charity into a for-profit business.
But the billionaire at the same time scored a major win.
In an order denying Musk’s immediate request, California federal district court Judge Yvonne Gonzalez Rogers offered to hear Musk’s core claim against OpenAI on an expedited schedule that would set the trial for this fall.
“Given the public interest at stake and potential for harm … the Court is prepared to expedite trial to the fall of 2025,” she wrote in an order issued Tuesday.
Musk has asked for an injunction to stop OpenAI, its co-founder Sam Altman, and its largest investor, Microsoft, from completing plans for OpenAI to convert from a nonprofit to a for-profit enterprise — and from transferring any material assets owned by OpenAI or its subsidiaries, including intellectual property.
Elon Musk and Sam Altman speak onstage together at a San Francisco event in 2015. (Michael Kovac/Getty Images for Vanity Fair) ·Michael Kovac via Getty Images
Musk and Altman originally co-founded OpenAI in 2015 as a nonprofit, but Musk separated himself from the AI firm over disagreements regarding how to move forward with the venture and eventually started a competing AI company called xAI.
Musk’s lawsuit seeking to prevent OpenAI’s conversion to a for-profit enterprise centers around Musk’s initial $45 million donation to fund the startup, which he claims was contingent on OpenAI remaining a nonprofit organization.
Altman claims Musk wanted to merge OpenAI into his for-profit electric vehicle company, Tesla (TSLA), so that Tesla could provide it with additional funding.
Altman and Microsoft have called Musk’s allegations “false” and claimed he has no legal basis for blocking OpenAI’s for-profit conversion.
Musk’s lawyer, Marc Toberoff, said during a February hearing that allowing OpenAI to continue pursuing for-profit status would cause “irreparable harm” to Musk, xAI, investors, and the public.
“I don’t think you’ve given me a record for the relief you are requesting,” Gonzalez Rogers said during that February hearing, noting that the injunction Musk requested was rarely granted.
But she agreed that Musk’s complaint raised disputable questions about the terms of his relationship with OpenAI. His lawyers have claimed his donations were conditioned on Altman’s commitments to operate OpenAI as a nonprofit.
“I don’t know what happened, but I certainly am not throwing something out on a motion to dismiss when it is plausible that what Mr. Musk is saying is true,” Gonzalez Rogers said. “We’ll find out. He’ll sit on the stand. He’ll present it to a jury. A jury will decide who’s right.”
Microsoft CEO Satya Nadella, right, speaks as OpenAI CEO Sam Altman looks on during a 2023 event in San Francisco. (Justin Sullivan/Getty Images) ·Justin Sullivan via Getty Images
“It is absolutely plausible that there was an oral contract,” the judge said.
Musk’s injunction request also asked the judge to block the defendants from employing interlocking directors who could share competitively sensitive information and from any agreements with OpenAI’s investors to invest in OpenAI’s competitors, including Musk’s company xAI.
Musk and a group of investors have since offered to purchase OpenAI for $97 billion. Gonzalez Rogers said in her ruling Tuesday that the offer cut against Musk’s claim that OpenAI’s conversion to a for-profit business would cause Musk irreparable harm.
Musk has also named LinkedIn founder Reid Hoffman and Microsoft executive Dee Templeton as defendants, claiming they illegally served as directors of both OpenAI and Microsoft at a time when the two companies were competing in the AI market.
Hoffman has since resigned from the nonprofit’s board. Templeton is a nonvoting observer.
According to Musk, Altman breached laws against unfair competition by communicating a “fund no competitors” edict to OpenAI’s current and prospective investors and by orchestrating Hoffman’s and Templeton’s interlocking board positions. These are claims that OpenAI and Altman lawyer Sarah Eddy denied.
“I have significant concerns with Microsoft having put two members or two people on the board,” Gonzales Rogers said. “Whether or not they were voting — they were still information-sharing.”
Gonzalez Rogers was skeptical of Musk’s claim that investors were swayed, even if there was an edict, as well as Altman’s claim that such a restriction never existed.
Musk’s lawyers told the judge the alleged restriction was intended to block xAI and other rival firms from accessing a small pool of capital earmarked for artificial intelligence and, in turn, further entrench Microsoft’s dominant AI market share.
As of October 2024, Microsoft had poured $13.75 billion into OpenAI. Musk’s lawyer said xAI had raised $11 billion after Altman’s alleged mandate, prompting a note of skepticism from the judge.
The full case, the judge said, is not expected to be ready for trial until 2027 or 2028.
Alexis Keenan is a legal reporter for Yahoo Finance. Follow Alexis on X @alexiskweed.
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