Musk’s Suit Over OpenAI’s for-Profit Switch Headed to Trial

Elon Musk’s suit against OpenAI has reportedly been cleared to proceed to court.

The multi-billionaire convinced a judge Wednesday (Jan. 7) to permit a jury trial on his claim that the AI startup had violated its mission with its switch to a for-profit organization, per Reuters.

Musk was one of OpenAI’s co-founders, but left the startup in 2018. Among his companies now is xAI, a competing artificial intelligence (AI) firm.

According to the report, U.S. District Judge Yvonne Gonzalez Rogers found that there was “plenty of evidence” to show OpenAI’s leaders made assurances they would uphold the company’s nonprofit structure.

In addition, the judge found that there were enough facts in dispute to let the jury weigh them at trial in March, instead of deciding them herself, the report added. Gonzalez Rogers was also due to issue a written order following the hearing to address OpenAI’s request to have Musk’s suit thrown out.

Attorneys for OpenAI at the hearing asked the judge to enter judgment against Musk, arguing that he had not demonstrated enough of a factual basis to support his allegations, which include fraud and breach of contract, Reuters added.

The report also includes a statement from OpenAI, issued after the hearing: “Mr Musk’s lawsuit continues to be baseless and a part of his ongoing pattern of harassment, and we look forward to demonstrating this at trial.”

Musk’s suit seeks unspecified monetary damages from what he calls OpenAI’s “ill-gotten gains,” arguing that he kicked in $38 million to the company’s early funding, based on a pledge that the startup would keep its nonprofit status.

OpenAI announced in October that it had completed its restructuring, turning its for-profit arm into a public benefit corporation. The new arrangement gives longtime partner/benefactor Microsoft a 27% stake — worth around $135 billion — in that business.

“What began as an investment in a research organization has grown into one of the most successful partnerships in our industry,” OpenAI wrote on its blog.

“As we enter the next phase of this partnership, we’ve signed a new definitive agreement that builds on our foundation, strengthens our partnership, and sets the stage for long-term success for both organizations.”

Meanwhile, xAI announced this week it had raised $20 billion in a Series E funding round to accelerate its progress in building advanced AI. The new financing exceeded the $15 billion the company targeted in the round.

For all PYMNTS AI coverage, subscribe to the daily AI Newsletter.