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

Musk cofounded OpenAI with Altman in 2015

OpenAI argues for-profit move required for capital

Nonprofit to for-profit conversion unusual, expert says

(Adds judge did not choose whether to provide the injunction in paragraph 5, OpenAi’s lawyers’ 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 stop its conversion to a for-profit entity may go to trial, adding that the Tesla CEO will need to appear in court and affirm.

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

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

Rogers did not decide whether to release the injunction Tuesday, however at one point recommended that Musk’s legal group had not presented adequate evidence for her to release the injunction, and indicated she may hold an evidentiary hearing, utahsyardsale.com where both sides could provide witnesses and proof. The last time Rogers provided a preliminary injunction remained in Epic Games’ case against Apple in May 2021.

Musk cofounded OpenAI with Altman in 2015, however left before the business took off and consequently founded the contending AI startup xAI in 2023. OpenAI is now attempting to shift from a nonprofit into a for-profit entity, which it states it needs to do to secure the capital required to develop the very best artificial intelligence designs. Last year, Musk submitted a claim against OpenAI and Altman, saying that OpenAI ´ s founders originally approached him to fund a not-for-profit focused on developing AI to benefit humankind, but that it is now concentrated on making cash. He later on expanded the claim to add federal antitrust and other claims, and in December asked the judge presiding over the case to stop OpenAI from transitioning to a for-profit.

In action to Musk ´ s claim, OpenAI has said it will transfer to dismiss Musk ´ s claims and that Musk “should be completing in the marketplace instead of the courtroom.” The stakes on OpenAI’s corporate transition have actually now intensified, as OpenAI ´ s last fundraising round of $6.6 billion and a new round of up to $25 billion under discussion with SoftBank are conditioned on the company reorganizing to get rid of the nonprofit ´ s control.

During the hearing, OpenAI’s legal representatives said the factor to permit OpenAI to become a for-profit entity is due to the fact that it would be necessary to assist in the objective of the nonprofit.

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