What the jury will really decide in the case of Elon Musk against Sam Altman

Nine California jurors are deliberating on the future of OpenAI, the world’s leading artificial intelligence laboratory.

While the trial exploring Elon Musk’s case against the other co-founders of OpenAI and Microsoft has covered territories ranging from the breakup from founders in 2018 to Altman’s fire and rehire In 2023, jurors will consider a fairly limited set of questions.

• Breach of Charitable Trust: Essentially, did OpenAI and its co-founders Sam Altman and Greg Brockman breach a specific agreement with Musk to use their donations to OpenAI for a specific charitable purpose and not for general use by the nonprofit?
• Unjust enrichment: Did the defendants use Musk’s donations to enrich themselves through OpenAI’s for-profit arm, rather than for charitable purposes?
• Aiding and abetting breach of charitable trust: Did Microsoft know, through its interactions with OpenAI, that Musk had specific conditions on his donations and played a significant role in causing harm to Musk?

OpenAI has also put forward three arguments in its defense that the jury will evaluate:

• Statute of Limitations: Legal deadline to file a lawsuit. Here, if OpenAI can prove that any harm to Musk occurred before August 5, 2021 for the first count; August 5, 2022 for the second count; and November 14, 2021 for the first charge, then his claims will be moot.
• Unreasonable delay: Musk, by filing his lawsuit in 2024, delayed his claim in a way that made his request for damages unreasonable.
• Dirty Hands: A legal doctrine that holds that Musk’s conduct related to his claims against OpenAI was unconscionable and invalidates them.

If Musk wins, it could mean the end of OpenAI as a for-profit company, but it’s not entirely clear what will result. Next week, the judge will begin a series of new hearings where lawyers for both sides will debate what the consequences of a verdict in favor of the plaintiffs could be. However, that process could become irrelevant if a negative verdict were given.

Breach of charitable trust

Musk’s lawyers say the defendants clearly understood that Musk wanted to support a nonprofit that would ensure the benefits of AI for the world and prevent it from being controlled by a single organization. In particular, they say that a $10 billion investment by Microsoft in 2023 in OpenAI’s for-profit subsidiary (the first to occur after the statute of limitations) was the event that turned Musk’s concern into conviction.

That deal, Musk’s lawyers say, was different from previous investments and led to OpenAI investors getting rich off the company’s commercial products, at the expense of the charitable AI safety mission that Musk promoted.

OpenAI’s lawyers have asked all witnesses to describe the specific restrictions placed on Musk’s donations, and none have done so, including his financial advisor Jared Birchall, his chief of staff Sam Teller or his special advisor Shivon Zilis. They say everyone involved agreed that private fundraising would be necessary to achieve their goals, and they note that Musk himself attempted to launch an OpenAI-affiliated for-profit organization that he would personally control, and then merge OpenAI with his company Tesla. They also note that the organization’s other donors have not said their charitable trust was violated.

Importantly, a forensic accountant hired by OpenAI testified that OpenAI had used all of Musk’s donations long before the key date of August 5, 2021. This is proof that Musk’s donations were already used for their purpose long before he filed his lawsuit, invalidating any charitable trust that may have existed.

Mainly, they insist that the for-profit subsidiary that carries out most of OpenAI’s actual activity continues to fulfill the organization’s mission and has generated nearly $200 billion in equity value to support the nonprofit foundation. In particular, Sam Altman argued that providing ChatGPT for free helps fulfill the mission of sharing the benefits of AI with the world.

Unjust enrichment

The plaintiffs point to the multibillion-dollar valuations of the holdings of OpenAI founders like Brockman and Ilya Sutskever, as well as Microsoft itself, as a sign that Musk’s donations were ultimately used for personal benefit, rather than supporting the charity’s mission. They argue that work on OpenAI’s for-profit organization became commercially focused, while the foundation itself became essentially dormant, without full-time employees and ultimately not even in control of the for-profit organization.

OpenAI says that all of Musk’s contributions were used by the foundation in 2020, and that equity distributions occurred long after he left the organization in 2018. Even earlier, evidence shows that key players agreed that being able to compensate researchers with equity was key to developing AGI, the hypothetical form of AI capable of performing any intellectual task that a human can perform. OpenAI executives maintain that the for-profit organization’s work significantly advanced the foundation’s mission, including security activities. They say the nonprofit board continues to monitor for-profit organizations and instituted new governance controls after “the issue,” when Altman was fired by OpenAI’s nonprofit board in 2023 for lack of candor and then rehired just days later.

Aiding and abetting

Musk’s case centered on the events of the issue, when Microsoft CEO Satya Nadella, whose company depended on OpenAI’s technology, was personally involved in helping bring Altman back and creating a new board to govern OpenAI. They note that Microsoft executives questioned whether their business deal could conflict with the nonprofit’s goals and suggest that Microsoft’s business priorities moved OpenAI away from its mission. They have focused attention on a clause in Microsoft’s agreement with OpenAI that gave Microsoft veto rights over important corporate decisions at OpenAI.

Microsoft witnesses have insisted that company executives were unaware of any specific conditions regarding Musk’s donations despite extensive due diligence, and they never vetoed any OpenAI decisions. They point out that the company’s investments and computing power allowed OpenAI to achieve its greatest triumphs.

statute of limitations

Musk has suggested that his skepticism toward his co-founders grew over time, until in the fall of 2022 he finally decided that they had betrayed him when he learned of Microsoft’s plans for a new $10 billion investment that would take place in 2023. He would not file his lawsuit until mid-2024.

OpenAI’s lawyers argue that the terms of that deal were detailed in a term sheet for a previous fundraising round in 2018, which Musk received and his advisers reviewed, but Musk said he did not read in detail. They also point to numerous blog posts and other communications over the years that show Musk could have known what OpenAI was doing long before taking them to court, including tweets in which Musk criticized the company years before the lawsuit. Zilis, Musk’s advisor, even voted to approve these transactions as a member of OpenAI’s board of directors.

Ultimately, OpenAI lawyers highlight that Musk’s formal role in the organization ended in 2018 and his last donations occurred in 2020.

Unreasonable delay

OpenAI’s lawyers say the real reason Musk filed his lawsuit was that he realized he was wrong about OpenAI, after the launch of ChatGPT revolutionized the artificial intelligence business. They argue that OpenAI has operated under its current structure since its first investment in Microsoft in 2018, and that forcing the organization to restructure eight years later is unreasonable.

dirty hands

There is evidence that Musk was planning his own competitive AI efforts when he was still president of OpenAI and hired OpenAI employees to work on AI at Tesla. OpenAI’s lawyers argue that these efforts undermined OpenAI at a time when it was using donations from Musk to carry out its mission. They noted that Zilis, the mother of three of Musk’s children, did not disclose her personal relationship with other members of OpenAI’s board of directors for years. And they argue that Musk withheld his donations in 2017 in an effort to gain control of a planned for-profit subsidiary of OpenAI. Ultimately, “Mr. Musk left OpenAI for dead in 2018,” Bill Savitt, OpenAI’s lead attorney, told jurors.