A federal judge in California rejected Elon Musk's attempt to stop OpenAI from becoming a for-profit company, as per court filing on Tuesday. The court ruled that the plaintiffs did not provide enough evidence to justify their request for urgent action.
U.S. District Judge Yvonne Gonzalez Rogers offered to hold a trial in her California courtroom later this year, "given the public interest at stake and potential for harm if a conversion contrary to law occurred," AP News reported.
Musk vs. OpenAI: Legal Battle Over Profit Shift and Antitrust Claims
OpenAI, which Musk co-founded with Sam Altman and others, was founded as a nonprofit AI research lab in 2015 but has been developing commercial products in recent years, including its popular ChatGPT chatbot.
The company is still managed by a nonprofit parent organization but has faced challenges in its efforts to become a for-profit business, partly due to opposition from Musk, who has become a major rival of Sam Altman.
In November, lawyers representing Musk, his AI startup xAI, and former OpenAI board member Shivon Zilis requested a court order to block OpenAI's for-profit activities. This request escalated the legal dispute, which began in March 2024 when Musk sued OpenAI for breaching its contract and failing in its responsibilities.
The lawsuit was initially filed in a state court but was later withdrawn and refiled in a federal court. Musk also expanded the case by accusing OpenAI and Microsoft of violating antitrust laws. He claimed OpenAI pressured investors to avoid funding competing companies, including xAI.
Clash Over For-Profit Transition
Musk has criticized OpenAI's shift to a for-profit model on social media, calling it a scam and labeling the company as harmful. In response, OpenAI stated in December that Musk had supported and helped create a for-profit structure for the company back in 2017.
OpenAI also announced in December that by 2025, it plans to transition into a public benefit corporation. This change would allow it to manage commercial activities more freely, reducing some nonprofit restrictions and enabling it to operate like a fast-growing startup.
Musk's $97.4 Billion Bid for OpenAI Rejected by Altman
Last month, an investor group led by Musk offered $97.4 billion to take control of OpenAI. The offer was directed at the nonprofit organization that oversees the company.
Following the bid, Musk's attorney, Marc Toberoff, stated that OpenAI should return to being an open-source, safety-focused organization. Altman rejected the offer, saying that Musk's move was simply an attempt to slow down a competitor.
A few days later, Musk stated in a court filing that he would drop his takeover attempt if OpenAI halted its transition into a for-profit company.
