Musk takes legal action against to obstruct OpenAI’s conversion to a for-profit structure

Musk cofounded OpenAI with Altman in 2015

OpenAI argues for-profit relocation needed for capital

Nonprofit to for-profit conversion unusual, expert states

(Adds judge did not choose whether or not to issue the injunction in paragraph 5, OpenAi’s legal representatives’ remark in paragraph 13)

By Anna Tong and Akash Sriram

OAKLAND, Calif., Feb 4 (Reuters) - A federal judge said on Tuesday that parts of Elon Musk’s claim against OpenAI to halt its conversion to a for-profit entity may go to trial, adding that the Tesla CEO will need to appear in court and testify.

“Something is going to trial in this case,” U.S. District Judge Yvonne Gonzalez Rogers in Oakland, California, said early in the court session.

”(Elon Musk will) rest on the stand, present it to a jury, and a jury will decide who is right.” Rogers was considering Musk’s current demand for a preliminary injunction to obstruct OpenAI’s conversion before going to trial, the most recent relocation in an animosity match in between the world’s richest person and OpenAI CEO Sam Altman that is playing out openly in court.

Rogers did not choose whether or not to issue the injunction Tuesday, but at one point recommended that Musk’s legal group had not presented enough proof for her to release the injunction, and showed she might hold an evidentiary hearing, where both sides could provide witnesses and evidence. The last time Rogers supplied a preliminary injunction remained in Epic Games’ case against Apple in May 2021.

Musk cofounded OpenAI with Altman in 2015, valetinowiki.racing but left before the company took off and consequently founded the competing AI startup xAI in 2023. OpenAI is now to shift from a not-for-profit into a for-profit entity, which it says it requires to do to secure the capital needed to develop the finest expert system models. In 2015, Musk filed a claim against OpenAI and Altman, saying that OpenAI ´ s founders initially approached him to money a nonprofit focused on establishing AI to benefit humanity, but that it is now focused on generating income. He later broadened the claim to add federal antitrust and other claims, and in December asked the judge administering over the case to stop OpenAI from transitioning to a for-profit.

In response to Musk ´ s claim, OpenAI has said it will relocate to dismiss Musk ´ s claims which Musk “ought to be competing in the market rather than the courtroom.” The stakes on OpenAI’s corporate shift have now intensified, as OpenAI ´ s last fundraising round of $6.6 billion and a new round of as much as $25 billion under conversation with SoftBank are conditioned on the business reorganizing to get rid of the not-for-profit ´ s control.

During the hearing, OpenAI’s legal representatives said the reason to allow OpenAI to become a for-profit entity is because it would be necessary to facilitate the objective of the nonprofit.

Such a restructuring would be highly unusual, said Rose Chan Loui, executive director of the UCLA Law Center for Philanthropy and Nonprofits. Nonprofit conversions to for-profits have actually historically been for health care organizations like medical facilities, not endeavor capital-backed companies, she said. (Reporting by Anna Tong in Oakland and Akash Sriram in Bengaluru, Editing by Marguerita Choy)