Elon Musk fails to block OpenAI restructuring plans in court fight

US District Judge Yvonne Gonzalez Rogers denied Musk's request for an injunction that would immediately pause the ChatGPT maker's transformation from a nonprofit to public benefit for-profit company

By Malathi Nayak

 

Elon Musk’s bid in court to block Sam Altman from restructuring OpenAI will be expedited for a trial in the fall of this year, a judge said.

 

US District Judge Yvonne Gonzalez Rogers on Tuesday denied Musk’s request for an injunction that would immediately pause the ChatGPT maker’s transformation from a nonprofit to a more conventional, public benefit for-profit company while Musk’s lawsuit against the startup plays out.

 

But Rogers wrote in her order that she wants to resolve Musk’s claims quickly. Given “the public interest at stake and potential for harm if a conversion contrary to law occurred,” Rogers said, she will hold an expedited trial solely on the “core” claim that OpenAI’s conversion plan is unlawful and “potentially the interrelated contract-based claims.”

 

The timing is significant because OpenAI is already in talks to win approvals for its conversion from officials in Delaware and California, a process that’s expected to be complex.

 

Tuesday’s ruling comes shortly after OpenAI rebuffed an unsolicited $97.4 billion takeover offer from the world’s richest person. Altman called the proposal an attempt to slow down the company as it competes with Musk’s own startup, xAI.

 

A lawyer for Musk and representatives of OpenAI didn’t immediately respond to requests for comment.

 

In the court fight he launched last year, Musk has accused OpenAI of forsaking its promises to him when he and Altman worked together to launch the company in 2015. He claims the startup abandoned its founding purpose as a charity when it accepted billions of dollars in backing from Microsoft Corp. starting in 2019, the year after he left OpenAI’s board.

 

Rogers had said at a Feb. 4 hearing she was not inclined to issue an injunction in a case pitting “billionaires versus billionaires.” But when she said she would likely let Musk take OpenAI to trial, lawyers told her the earliest a trial could happen would be late 2026 or 2027.

 

Microsoft’s $13 billion investment in OpenAI has raised concerns from the US Federal Trade Commission that the tech giant could extend its dominance in cloud computing into the booming AI market. The Japanese investment firm SoftBank Group Corp., however, is in talks to invest tens of billions of dollars in OpenAI, a move that would potentially eclipse all other stakes and make it the startup’s biggest backer. OpenAI is currently in talks with investors to garner a valuation of $300 billion, Bloomberg has reported.