Musk vs. Altman: Tech CEOs head to court Monday over fate of OpenAI

Analysts say Altman and Musk tussled over who would lead the company, and Musk lost. He left OpenAI's board in 2018; the company cited potential future conflicts with Tesla. In 2023, Musk launched his own AI company, called xAI.

In the lawsuit that kicks off on Monday, Musk contends that Altman and others running OpenAI broke the law when the company morphed into a for-profit concern. (Technically, the for-profit company, established in 2019, is a subsidiary of the non-profit OpenAI Foundation, but it eclipses the charity.)

"The perfidy and deceit are of Shakespearean proportions," Musk's lawyers wrote in a court filing, adding that Altman had been engaged in a "long con."

OpenAI contends that Musk was well aware that the company needed to become a for-profit, and was part of discussions about it.

Now, Musk is asking for billions of dollars made by the for-profit business to be "disgorged" from Altman and others — equity and money that was made on the back of what Musk argues was an illegal corporate conversion. Musk wants the court to order those gains to be returned to the part of OpenAI that's still not-for-profit.

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Musk's filings also indicate that he will seek an order "unwinding the for-profit conversion… [and] restoring OpenAI to the role of a bona fide public charity."

He is also seeking the ouster of Altman from OpenAI's for-profit leadership and non-profit board.

Musk was the biggest individual financial backer of OpenAI early on, contributing more than $44 million to the startup, according to court documents. Analysts say that money was crucial in getting the operation off the ground.

OpenAI's profile has soared since ChatGPT went live four years after Musk left. In court documents, OpenAI says it has nearly 1 billion weekly active users and is worth $852 billion.

OpenAI recently closed a $122 billion funding round and The Wall Street Journal reported that it is planning an initial public offering, potentially later this year.

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The company declined to comment on reports of stock listing plans, and lawyers for OpenAI and Musk declined to comment about the lawsuit.

Analysts say the case is layered. "I think there's a fundamental question about the extent to which corporations can change, can adjust to circumstances, can reinvent themselves," said Jill Fisch, a professor of business law at the University of Pennsylvania Law School.

"I think it's reasonable to ask the question: When you invest in something that says, look, we're going to be run in a certain socially responsible way, and whoever's running the company decides, no, that's not working, we've got to pivot, are there limits on their ability to do that?" she asked.

"This is part business case and part ego," said Alex Kantrowitz, a tech observer and host of the Big Technology podcast. He points out that Musk is asking the court to restore gains to the charity, not to himself. "For Elon, pride matters more than money here," said Kantrowitz.

If Musk wins and the court agrees with his proposed remedies, it would radically alter the structure of one of the top AI companies in the world — and Platformer's Newton says that could affect the artificial intelligence industry writ large.

"My understanding is that the thrust of it is to try to stop OpenAI in its tracks," he said. "Prevent them from developing future models and essentially knock one player out of the A.I. race."

The case is being tried in the United States District Court for the Northern District of California in Oakland, with Judge Yvonne Gonzalez Rogers presiding.

Jury selection takes place on Monday, and opening arguments are expected to begin on Tuesday. Both Musk and Altman are expected to testify.