Musk and Altman head to trial in feud over future of OpenAI

[AUSTIN, TEXAS] Elon Musk and Sam Altman will face off this week in a trial that could determine the future of OpenAI.

The high-profile showdown between the artificial intelligence titans is the culmination of years of animosity and public feuding.

This was over the startup that the pair founded together more than a decade ago, before their relationship soured and they became rivals. 

Musk alleged Altman and other leaders at OpenAI enriched themselves by abandoning its altruistic principles and converting to a for-profit company, with billions of dollars in support from Microsoft.

The company and Altman have accused Musk of harassment and said that the real goal of the lawsuit was to undercut competition with his own startup that he co-founded in 2023, xAI.

The world’s richest person is seeking as much as US$134 billion in damages from OpenAI and Microsoft, all of which he pledged in April to give to its charitable arm, and not to himself or any of his companies.

Musk is also asking the court to remove Altman and president Greg Brockman from their leadership positions.

But the biggest threat to OpenAI is that Musk is seeking to restore the startup’s status as a full non-profit research organisation, by unwinding the for-profit restructuring that was completed in October.

Altman pitched the conversion as critical to securing the vast amount of funding OpenAI needs to fulfil its mission of creating artificial general intelligence that will benefit humanity.

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Critical moment

Such a shakeup to its C-suite or core structure could destabilise the company during a critical moment, as it is eyeing a much-anticipated public offering that could be one of the largest in history. The startup was last valued at US$852 billion in March. 

The brief, failed ouster of Altman in 2023 almost collapsed the ChatGPT-maker, with investors pressing the board to bring back Altman, and employees pledging to quit en masse if the CEO was not reinstated.

Another disruption of that magnitude could stymie the company, leaving an opening for rivals to gain ground including xAI, the maker of the Grok chatbot that was recently acquired by SpaceX as Musk’s rocket ship company plans an initial public offering.

Microsoft also has a lot on the line, as the restructuring of OpenAI gave the software giant a 27 per cent stake in the startup.

Resurgent competition

Regardless of the outcome, the two years the legal fight has been playing out and the three-week trial amount to a lengthy distraction for OpenAI and its staff, at a time when it faces resurgent competition. 

The trial will resurface years-old drama over the actions of the company’s leaders.

It will assess whether they have adhered to their mission, which is to benefit the public in the startup’s rapid expansion to become one of the world’s most valuable and powerful companies leading the global AI boom.

“The stakes are really big for OpenAI, almost existential,” said Dorothy Lund, a law professor at Columbia University and co-host of the Beyond Unprecedented podcast. “Musk is asking for stuff and any one of the things he’s asking for could be the end of (it).”

Jury selection is scheduled for Monday (Apr 27), and opening arguments and testimony are expected to start on Tuesday.

The case has been divided into two phases: The first will focus on the veracity of Musk’s allegations about the defendants – OpenAI, Altman, Brockman and Microsoft. The second will determine an appropriate remedy if the jury and judge find in Musk’s favour.

The trial will revisit the founding years of OpenAI and Musk’s departure in 2018, which he has said was due to disagreements about the company’s development.

Microsoft will be defending itself against Musk’s claims that it aided the abandonment of OpenAI’s mission when it invested US$13 billion in the startup starting in 2019.

OpenAI’s argument

OpenAI has argued that Musk’s claims are unfair because he was initially on-board for a for-profit pivot, and at one point pitched having Tesla absorb the startup as part of a conversion.

OpenAI countersued Musk a year ago, accusing him of weaponising legal claims, social media posts and news stories to try to sabotage the startup’s success. Those claims are still pending but will not be part of the trial.

Microsoft, meanwhile, has argued that its investment in OpenAI was critical to funding the development of cutting-edge technology. It has rejected Musk’s allegation that it “aided and abetted” a betrayal of the startup’s founding mission.

Musk’s complaint in November 2024 listed 26 claims, but several were dismissed, others were abandoned and some were put on hold until after the trial.

With Musk dropping two fraud allegations last week, the claims the jury will consider are breach of charitable trust and unjust enrichment.

Both Musk and Altman are expected to testify during the first phase of the proceedings.

Musk is a relative veteran of courtroom clashes, earning himself the nickname “Teflon Elon” because he usually prevails in trials. This will be Altman’s first trial, though he has testified publicly in Congress.

Possible witnesses

Other possible witnesses include: Brockman, Microsoft CEO Satya Nadella, Musk’s long-time business manager Jared Birchall, former OpenAI chief scientist Ilya Sutskever.

It also includes several current and former employees and board members of OpenAI, such as Shivon Zilis, who has four children with Musk.

The witnesses are likely to be questioned thoroughly over their private communications about OpenAI, Musk and the company’s future. 

Hundreds of pages of evidence have already been made public, including text messages between Musk and Zilis about how he viewed his relationship with OpenAI, and emails between Musk, Altman, Brockman and Sutskever in the early days of the startup.

US District Judge Yvonne Gonzalez Rogers has said that some character evidence will be off-limits during the trial. OpenAI had sought to question Musk about his alleged use of ketamine, an anaesthetic drug that can have hallucinogenic properties. 

But the district judge said that there was not enough evidence about ketamine’s mind-altering effects to suggest it might have affected Musk’s negotiations with OpenAI.

Burning Man

Lawyers for OpenAI will be allowed to ask Musk about his attendance at Burning Man, an annual festival in the Nevada desert where drug use is common. OpenAI’s attorneys said “a lot of significant communications” between Musk and OpenAI happened while he was at the festival.

The district judge has also restricted what Musk can present to explain his motives for suing – including that he will not keep any damages that may be awarded at the trial’s conclusion.

The jury will issue an “advisory verdict” at the conclusion of testimony. A final ruling on Musk’s claims – and any remedies – will be issued by the district judge, using the jury’s findings as a guidepost. 

“We ascertain a 60 per cent chance Musk wins at trial. Musk’s case is vulnerable later on appeal,” said Matthew Schettenhelm, Litigation analyst, and Tamlin Bason, Industry analyst, at Bloomberg Intelligence.

Even if Musk loses, the trial could still pay off for him because it will put all sorts of closely guarded information about how OpenAI operates in the public realm, and “some of that can be useful for his own private endeavours in this AI race”, said Columbia University’s Lund.

“In a way, just the fact that this thing is going to trial is already a big win for Musk in this information-forcing aspect.” BLOOMBERG