Musk’s OpenAI lawsuit clears path to trial, putting Microsoft in the spotlight

A federal judge has signalled that Elon Musk’s lawsuit challenging OpenAI’s transformation from a nonprofit to a for-profit entity will proceed to trial, adding legal uncertainty for enterprise customers that have built AI strategies around the ChatGPT maker’s technology.

US District Judge Yvonne Gonzalez Rogers said during a Wednesday hearing in Oakland, California, that there was “plenty of evidence” for a jury to consider Musk’s allegations that OpenAI violated its founding mission, according to Reuters.

“This case is going to trial,” Judge Gonzalez Rogers said at the hearing, Reuters reported. The judge indicated she would issue a written order addressing OpenAI’s motion to dismiss the case, but stopped short of a formal ruling.

The lawsuit alleges OpenAI co-founders Sam Altman and Greg Brockman fraudulently induced Musk to help establish and fund the organization in 2015 under the premise that it would remain a nonprofit dedicated to developing AI for humanity’s benefit, only to later pursue for-profit restructuring through a partnership with Microsoft.

Microsoft’s role under scrutiny

Microsoft, which has invested more than $13 billion in OpenAI since 2019, is also named as a defendant. The judge said she needs to determine whether to dismiss unjust enrichment allegations against Microsoft, which has accumulated a $135 billion stake in OpenAI and holds licensing rights to its technology, the report added.

A Microsoft attorney argued at the hearing that there was no evidence the company “aided and abetted” OpenAI, according to the report.

The case raises questions about vendor governance stability for enterprises that have integrated OpenAI’s models into business-critical applications through Microsoft’s Azure cloud platform or direct partnerships with OpenAI.

Vendor stability concerns for AI customers

The case comes as enterprises accelerate AI deployment, with global enterprise technology spending reaching $4.9 trillion last year, driven by AI investments.

The legal proceedings could affect enterprise confidence in OpenAI’s governance stability as companies evaluate long-term AI vendor relationships. OpenAI’s technology powers Microsoft’s Copilot products, which enterprises have integrated across Office applications and Azure cloud services.

The trial schedule remains unclear. Judge Gonzalez Rogers said she needs to determine trial logistics but did not set a specific date, the report added.

Governance structure at the center of the dispute

Musk, who co-founded OpenAI in 2015 and contributed approximately $38 million — roughly 60% of its early funding — left the organization in 2018 following disagreements over its direction, Reuters reported. He filed the lawsuit in August 2024.

OpenAI was founded as a nonprofit research organization with a mission to ensure artificial general intelligence benefits all of humanity. In 2019, the company transitioned to a “capped profit” structure, creating a for-profit subsidiary while the nonprofit parent retained control.

OpenAI is now pursuing further restructuring into a public benefit corporation.to become a public benefit corporation, which would significantly reduce the nonprofit’s oversight role. The restructuring is critical to OpenAI’s ability to raise additional capital and compete in the expensive AI development race. The company has said the nonprofit arm would remain and be well-resourced through the transition.

The lawsuit contends OpenAI abandoned its founding charter through these structural changes. Judge Gonzalez Rogers cited evidence, including a 2017 diary entry by OpenAI co-founder Greg Brockman in which he wrote, “We’ve been thinking that maybe we should just flip to a for-profit,” according to court documents referenced by Reuters.

Parties respond to the court decision

In a statement following the hearing, OpenAI called the lawsuit baseless, the report added. “Mr Musk’s lawsuit continues to be baseless and a part of his ongoing pattern of harassment, and we look forward to demonstrating this at trial,” the company said.

OpenAI attorneys requested that Judge Gonzalez Rogers enter judgment against Musk, arguing he had not shown a sufficient factual basis for fraud and breach of contract allegations. The company also contended Musk failed to bring his claims in a timely manner.

OpenAI has also filed counterclaims alleging Musk’s actions, including an unsolicited $97 billion takeover bid earlier this year, were designed to disrupt its business operations to benefit his competing venture. xAI and OpenAI did not respond to a request from ComputerWorld for comment.Musk’s OpenAI lawsuit clears path to trial, putting Microsoft in the spotlight – ComputerworldRead More