OpenAI on Friday appealed to a federal judge in California to dismiss billionaire Elon Musk’s request to block its transition to a for-profit entity. This legal skirmish follows Musk’s lawsuit against OpenAI, its CEO Sam Altman, and others, asserting that they breached foundational agreements by prioritizing profit over public benefit in their AI development efforts. In November, Musk sought a preliminary injunction from U.S. District Judge Yvonne Gonzalez Rogers in Oakland to prevent OpenAI from proceeding with its for-profit conversion.
OpenAI’s defense included a revealing blog post on its website titled “Elon Musk wanted an OpenAI for-profit,” where it released a collection of emails and text messages. These communications suggest that Musk initially supported the idea of OpenAI becoming for-profit but withdrew his support after failing to secure a majority equity stake and control over the company.
“When he didn’t get majority equity and full control, he walked away and told us we would fail,” OpenAI wrote in the blog post. “Now that OpenAI is the leading AI research lab and Elon runs a competing AI company, he’s asking the court to stop us from effectively pursuing our mission.” This narrative was used to argue that Musk’s legal actions might be more about competitive strategy than genuine concern over OpenAI’s direction.
Musk has not only targeted OpenAI but has also expanded his lawsuit to include Microsoft (MSFT), accusing both of conspiring to monopolize the generative AI market and sideline competitors like his own AI venture, xAI. However, OpenAI’s court filing refutes these allegations, describing Musk’s injunction request as being founded on “unsupported allegations” and suggesting that his legal efforts are misdirected; he should be “competing in the marketplace rather than the courtroom,” according to OpenAI’s statement.
OpenAI, initially a nonprofit since its inception in 2014, has become a leading name in generative AI, thanks in part to substantial financial backing from Microsoft, including a $6.6 billion funding round in October that could value the company at $157 billion. Meanwhile, Musk’s xAI has also been active in fundraising, securing about $6 billion in equity financing earlier this month.
The company is currently in the process of restructuring its core business into a for-profit benefit corporation, with the original nonprofit retaining a minority stake. This restructuring aims to balance profit motives with the mission to benefit humanity, a core aspect of OpenAI’s identity. Judge Rogers is set to hear arguments regarding Musk’s injunction on January 14, a decision that could significantly impact the future of AI development and corporate governance in the tech industry.
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