After hearing three weeks of testimony, it took a jury two hours to find Elon Musk waited too long before suing OpenAI over its transition from a nonprofit to a for-profit business.
Musk claims OpenAI CEO Sam Altman lied to him when accepting a $38 million donation to the organization to pursue its mission of creating artificial intelligence (AI) that “benefitted humanity.” Following the jury’s verdict, a federal judge dismissed Musk’s claims seeking $150 billion in damages.
The jury concluded that Musk filed his 2024 lawsuit in the U.S. District Court for the Northern District of California after the statute of limitations for his two claims against OpenAI had expired. His first claim was that Altman and OpenAI President Greg Brockman breached the charitable trust Musk created through his donation by breaking a promise to keep OpenAI’s nonprofit status. In his second claim, Musk contended Altman and Brockman enriched themselves unjustly at his expense. In addition to seeking $150 billion in damages, Musk asked that Altman and Brockman be removed from their positions with the AI company.
The trial attracted national media attention because it directly pitted Musk and Altman — two of the tech world’s best-known billionaires — against each other. They both helped co-found OpenAI in 2015 as a nonprofit AI startup with the goal of developing AI agents for the benefit of humanity. Musk left the organization in 2018. OpenAI released the ChatGPT chatbot in 2022, and the company is now valued in the hundreds of billions of dollars. Many recent reports indicate that OpenAI is working with investment banks to prepare for an initial public offering (IPO) in the near future.
Musk announced on X that he plans to appeal the decision because the court ruled on a “calendar technicality” and not the merits of the case. He claimed the appeal was necessary because the district court decision created a “precedent to loot charities is incredibly destructive to charitable giving in America.”
When Did Musk Know?
Musk claimed he did not learn OpenAI was no longer operating as a nonprofit until 2022, when the organization was preparing to accept $10 billion from Microsoft. In his testimony, Musk said that when he heard about the Microsoft investment, he realized it would not be making such a large one unless it expected a substantial financial return. At that point, Musk said he came to the conclusion that OpenAI was operating as a for-profit business with a $20 billion valuation.
The timing of Musk’s realization was a key factor in the jury’s decision because the statute of limitations on his claim for breach of charitable trust was three years, and the limitations period on his unjust enrichment claim was two years. Musk contended that he discovered Altman and Brockman broke their promise regarding the organization’s nonprofit status in 2022 and filed suit in 2024, which would have been within the limitations periods for both claims. During the trial, OpenAI offered evidence that Musk knew of the nonprofit’s status change by 2021.
The jury concluded that Musk was aware of the fact OpenAI was no longer a nonprofit organization before 2021. It did not address whether Musk had been misled.
OpenAI Claimed Musk Knew of For-Profit Activities
Even if the jury had found that Musk filed his claims within the limitations period, they may still have rejected them. Evidence presented at trial showed that shortly after founding the organization, Musk and other co-founders sought to create a for-profit subsidiary of OpenAI that would raise capital to fund its operations. During discussions about the creation of the subsidiary in 2017, Musk proposed merging OpenAI with Tesla. At trial, OpenAI’s attorneys suggested that the discussions showed Musk was aware of Altman’s plans to transition to a for-profit entity.
Additionally, in 2019, OpenAI created a subsidiary that allowed investors and employees to receive a capped return on their investment in the organization. At that time, Microsoft invested $1 billion in OpenAI. OpenAI claimed Musk should have known OpenAI was transitioning to a for-profit entity at that time. However, during his testimony, Musk contended that returns on the investments were capped, which would not have violated the organization’s goal of remaining a non-profit entity. Because of that, he said there was no reason for him to file suit at that time.
Microsoft secured an exclusive license to OpenAI’s language model in 2020. In response, Musk posted on X that the license arrangement seemed to be “the opposite of open.” OpenAI’s lawyers asked Musk why he did not sue at that time. Musk claimed Altman had reassured him that OpenAI would remain a nonprofit.
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