Musk's lawsuit against OpenAI may go to trial in part, judge says

By Anna Tong and Akash Sriram

OAKLAND, Calif. (Reuters) -A federal judge said on Tuesday that parts of Elon Musk's lawsuit against OpenAI to halt its conversion to a for-profit entity might go to trial, adding that the Tesla CEO will have to appear in court and testify.

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

"(Elon Musk will) sit on the stand, present it to a jury, and a jury will decide who is right."

Rogers was considering Musk's recent request for a preliminary injunction to block OpenAI's conversion before going to trial, the latest move in a grudge match between the world's richest person and OpenAI CEO Sam Altman that is playing out publicly in court.

Rogers did not decide whether or not to issue the injunction Tuesday, but at one point suggested that Musk's legal team had not presented enough evidence for her to issue the injunction, and indicated she might hold an evidentiary hearing, where both sides could present witnesses and evidence.

The last time Rogers provided a preliminary injunction was in Epic Games' case against Apple in May 2021.

Musk cofounded OpenAI with Altman in 2015, but left before the company took off and subsequently founded the competing AI startup xAI in 2023.

OpenAI is now trying to transition from a nonprofit into a for-profit entity, which it says it needs to do to secure the capital required to develop the best artificial intelligence models.

Last year, Musk filed a lawsuit against OpenAI and Altman, saying that OpenAI’s founders originally approached him to fund a nonprofit focused on developing AI to benefit humanity, but that it is now focused on making money. 

He later expanded the lawsuit 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 response to Musk’s lawsuit, OpenAI has said it will move to dismiss Musk’s claims and that Musk “should be competing in the marketplace rather than the courtroom.”

The stakes on OpenAI's corporate transition have now escalated, 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 restructuring to remove the nonprofit’s control.

During the hearing, OpenAI's lawyers said the reason to allow OpenAI to become a for-profit entity is because it would be necessary to facilitate the mission of the nonprofit.

Such a restructuring would be highly unusual, 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 hospitals, not venture capital-backed companies, she said.

(Reporting by Anna Tong in Oakland and Akash Sriram in Bengaluru,Editing by Marguerita Choy)