Tesla CEO Elon Musk and OpenAI are locked in a heated courtroom battle over the artificial intelligence company's shift from a nonprofit to a for-profit entity.
The case, which began Tuesday in a US federal court in the Northern District of California, has drawn significant attention due to its implications for the AI industry.
Musk, who co-founded OpenAI in 2015 alongside CEO Sam Altman, left the company before its rapid growth and later launched his own AI startup, xAI, in 2023. Now, he is fighting to stop OpenAI from transitioning into a for-profit business.
Musk's lawsuit alleges that OpenAI was originally established as a nonprofit to develop AI for the benefit of humanity, but that it has since shifted its focus to financial gains. In December, he requested that the court intervene to block the conversion.
OpenAI has strongly opposed Musk's claims, arguing that the transition is necessary to secure the funding required for AI advancements.
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Judge Criticizes Musk's $45M Investment
The company has also moved to dismiss the lawsuit, stating that Musk should focus on competition in the market rather than legal disputes.
According to USA Today, OpenAI's recent fundraising round of $6.6 billion and a new round of up to $25 billion from investors like SoftBank are reportedly contingent on this restructuring.
During Tuesday's hearing, US District Judge Yvonne Gonzalez Rogers questioned the extent of Musk's claims, calling it a "stretch" to argue that he would suffer irreparable harm if OpenAI proceeds with its transition.
However, she acknowledged concerns about OpenAI's relationship with Microsoft, particularly regarding its board members. The judge raised issues about Microsoft's Deanna Templeton, who was a non-voting observer on OpenAI's board, questioning whether she had relayed inside information to Microsoft.
Musk's legal team also named Reid Hoffman, a former OpenAI board member and current Microsoft board member, as a defendant. Judge Gonzalez Rogers indicated that the case could proceed to trial as early as 2027, but no final decision has been made on Musk's request for an injunction.
Musk has invested approximately $45 million into OpenAI but had no written contract regarding his contributions, AP News said.
The judge questioned why he made such a significant financial investment based only on trust, stating, "That is just a lot of money on a handshake."
Emails revealed in court indicate that Musk once sought to become OpenAI's CEO but was opposed by other co-founders, who feared his control would be too great.
These emails suggest Musk was initially supportive of OpenAI pursuing a for-profit model to secure funding for AI development.
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