Elon Musk suffers legal blow over OpenAI

Musk, an early OpenAI investor, is in a legal offensive against the ChatGPT maker and CEO Sam Altman.

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A federal judge has denied Elon Musk's request for a court order to block OpenAI from transitioning into a for-profit company. However, she signaled a willingness to expedite a trial over Musk's legal battle with the ChatGPT maker and its CEO, Sam Altman.

U.S. District Judge Yvonne Gonzalez Rogers ruled late Tuesday that Musk had "not demonstrated likelihood of success on the merits" in his motion for a preliminary injunction.

Despite rejecting his request, she noted the significance of the case and proposed holding a trial in her California courtroom as soon as this fall, given "the public interest at stake and potential for harm if a conversion contrary to law occurred."

Why It Matters

The fight between Musk and OpenAI is more than a personal dispute—it underscores the intense competition in the rapidly evolving artificial intelligence industry. OpenAI and Musk's xAI are both key players in the AI arms race.

While AI innovation promises groundbreaking advancements with widespread societal benefits, experts caution that its unchecked progress poses existential risks. Governments and corporations alike are grappling with how to regulate AI without stifling its development.

Meanwhile, the Trump administration has launched the "Stargate" initiative, a $500 billion investment in AI infrastructure, including data centers across the U.S. OpenAI is among the firms participating in the project.

Musk, a close ally of President Donald Trump, heads the newly established Department of Government Efficiency (DOGE), tasked with identifying and eliminating wasteful federal spending.

File photos of Elon Musk and OpenAI CEO Sam Altman. File photos of Elon Musk and OpenAI CEO Sam Altman. Kyodo via AP ImagesWhat to Know

Musk, an early OpenAI backer, has been engaged in a legal showdown with the company and Altman for over a year, alleging a breach of contract and the betrayal of OpenAI's founding nonprofit mission.

Last year, Musk escalated his case, adding new claims and defendants—including Microsoft—and requesting a court order to halt OpenAI's plans to transition into a for-profit enterprise.

He also named his own AI startup, xAI, as a plaintiff, arguing that OpenAI's actions were anti-competitive.

More recently, Musk and a group of investors made an unsolicited $97.4 billion bid for a controlling stake in OpenAI's nonprofit arm—a move that, according to Gonzalez Rogers, undermined his claim of "irreparable harm."

Musk contends that OpenAI is violating the terms of his initial contributions. His attorney has stated that Musk invested approximately $45 million in OpenAI between its founding and 2018.

OpenAI, for its part, welcomed the court's ruling.

During a recent hearing, Gonzalez Rogers dismissed Musk's "irreparable harm" argument and characterized the dispute as "billionaires vs. billionaires."

She also questioned why Musk would invest tens of millions in OpenAI without a written contract, to which his attorney responded that Musk and Altman had a relationship "built on trust."

The rift traces back to a 2017 power struggle at OpenAI that resulted in Altman ascending to the CEO role.

Internal emails reveal that Musk had sought the top position himself, but was rebuffed by co-founders who feared he would wield excessive influence as both CEO and a major investor.

Musk has long voiced concerns about AI's potential risks to humanity, and his frustrations over OpenAI's direction ultimately led him to cut ties with the company in 2018.

Altman has remained OpenAI's CEO, aside from a brief period in 2023 when he was ousted and reinstated within days following board upheaval.

What People Are Saying

A statement from OpenAI said: "This has always been about competition. Elon's own emails show that he wanted to merge a for-profit OpenAI into Tesla. That would have been great for his personal benefit, but not for our mission or U.S. interests."

Elon Musk's attorney, Marc Toberoff, said in a statement: "We look forward to a jury confirming that Altman accepted Musk's charitable contributions knowing full well they had to be used for the public's benefit rather than his own enrichment."

Sam Altman told Bloomberg in February after Musk made a bid for OpenAI: "I wish he would just compete by building a better product, but I think there's been a lot of tactics. Many, many lawsuits, all sorts of other crazy stuff, now this, and we'll try to just put our head down and keep working."

Elon Musk posted on his X platform in January: "OpenAI was funded as an open source, nonprofit, but has become a closed source, profit-maximizer."

What Happens Next

Musk's legal team appears poised to accept Gonzalez Rogers' offer for a trial in California later this year—unless the lawsuit is withdrawn beforehand. Either way, the battle over OpenAI's future and the broader AI industry's trajectory is far from over.

This article includes reporting by The Associated Press.

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