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

Nine California juries are now debating the future of OpenAI, the world’s leading artificial intelligence lab.

While the trial investigating Elon Musk’s case against other co-founders of OpenAI and Microsoft has covered territory from the founders’ dissolution in 2018 to Altman’s firing and rehiring in 2023, jurors will consider a number of fairly narrow questions.

• Breach of charitable trust — essentially, did OpenAI and co-founders Sam Altman and Greg Brockman violate a specific agreement with Musk to use his donations to OpenAI for a specific, charitable purpose rather than 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 charity?
• Aiding and abetting a breach of charitable trust — Did Microsoft, through its interactions with OpenAI, know that Musk had certain conditions on its donations and was instrumental in harming Musk?

OpenAI also made three arguments in its defense that the jury would weigh:

• Statute of limitations — a statutory period within which an action must be brought. 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 count, 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.
• Unclean hands — a legal doctrine that holds that Musk’s conduct related to his claims against OpenAI was unconscionable and renders them invalid.

If Musk wins, it could mean the end of OpenAI as a for-profit company, but it’s not entirely clear what will come of it. Next week, the judge will begin a series of new hearings where lawyers from both sides will discuss what the consequences of a verdict in favor of the plaintiffs might be. However, this process could be challenged by a negative verdict.

Breach of charitable trust

Musk’s lawyers say the defendants clearly understood that Musk wanted to support a nonprofit that would bring the benefits of artificial intelligence to the world and prevent it from being controlled by any organization. Specifically, they say a $10 billion investment by Microsoft in 2023 in its for-profit subsidiary OpenAI — the first to happen 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’s investors being enriched by the company’s commercial products, at the expense of the philanthropic AI security mission that Musk has promoted.

OpenAI’s lawyers asked each witness to describe specific restrictions on Musk’s donations, and none did, including financial adviser Jared Birchall, chief of staff Sam Teller or special counsel Siobhan Gillis. They say everyone involved agreed that private fundraising would be required to achieve his goals, and note that Musk himself tried to start an OpenAI-related for-profit that he would personally control and later merge OpenAI into his Tesla company. They also note that the organization’s other donors have not said their charitable trust was breached.

Importantly, a forensic accountant hired by OpenAI testified that all of Musk’s donations had been used by OpenAI well before the August 5, 2021 deadline. This is evidence that Musk’s donations had already been used for their intended purpose long before he filed his lawsuit, voiding any charitable trust that may have existed.

Most importantly, they insist that the for-profit subsidiary that conducts most of OpenAI’s actual business 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 held by OpenAI founders like Brockman and Ilya Sutskever, as well as Microsoft itself, as evidence that Musk’s donations were ultimately used for personal gain, as opposed to supporting the charity’s mission. They argue that the work at OpenAI’s for-profit was commercially focused, while the foundation itself remained essentially dormant, with no full-time employees and, ultimately, not even control of the profit.

OpenAI says all of Musk’s contributions were used by the foundation through 2020, and that stock distributions came long after he left the organization in 2018. Even beforehand, evidence suggests that key players agreed that being able to compensate researchers with stock was key to developing AGI, the hypothetical form of artificial intelligence capable of performing any human intellect. OpenAI executives argue that the nonprofit’s work has substantially advanced the foundation’s mission, including security activities. They say the nonprofit board continues to control the for-profit and instituted new governance controls after “the blip,” when Altman was fired from OpenAI’s nonprofit board in 2023 for lack of candor and then rehired a few days later.

Support and synergy

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

Microsoft witnesses insisted that company executives were unaware of specific terms of Musk’s donations despite extensive due diligence and never vetoed any OpenAI decision. They note that the company’s investments and computing power have allowed OpenAI to achieve its greatest triumphs.

Limitation

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

OpenAI’s lawyers say the terms of that deal were spelled out in a term sheet for a previous fundraising round in 2018, which Musk received and his advisers reviewed, but Musk said he didn’t read in detail. They also note numerous blog posts and other communications over the years that show Musk could have known what OpenAI was doing long before he took them to court, including tweets where Musk criticized the company years before the lawsuit. Zillis, an adviser to Musk, even voted to approve these transactions as a member of OpenAI’s board of directors.

Finally, OpenAI’s lawyers point out that Musk’s official role with the organization ended in 2018 and his last donations were made 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 release of ChatGPT that revolutionized the AI ​​business. They argue that OpenAI has been operating in its current structure since its first investment by Microsoft in 2018, and that forcing the organization to restructure eight years later is illogical.

Unclean hands

There are indications that Musk was planning his own competing AI efforts while still the chairman 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 Musk’s donations to pursue its mission. They noted that Zilis, the mother of three of Musk’s children, did not disclose her personal relationship with other OpenAI board members for years. And they argue that Musk hid his donations in 2017 in an effort to gain control of a planned for-profit subsidiary of OpenAI. Finally, “Mr. Musk left OpenAI for dead in 2018,” Bill Savitt, OpenAI’s lead attorney, told jurors.