What the jury will actually decide in the case of Elon Musk vs. Sam Altman

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

The trial examining Elon Musk’s case against Microsoft, along with OpenAI’s other co-founders, has covered a wide range of ground, from the founder’s breakup in 2018 to Altman’s firing and rehiring in 2023, but jurors will consider a fairly narrow set of questions.

• Breach of Charitable Trust – Essentially, did OpenAI and its co-founders Sam Altman and Greg Brockman breach their specific agreement with Musk to use donations to OpenAI for specific charitable purposes rather than for the non-profit’s general use?
• Ill-gotten Enrichment – Did the defendants use Musk’s donations to enrich themselves through OpenAI’s for-profit division rather than for charitable purposes?
• Encouraging and abetting a breach of charitable trust — Did Microsoft, through its interactions with OpenAI, play a significant role in harming Musk, knowing that he had specific conditions for donations?

OpenAI also defended three claims for the jury to consider.

• Statute of Limitations — The legal deadline for filing a lawsuit. Here, if OpenAI can first establish that the harm to Musk occurred before August 5, 2021; The second count will be on August 5, 2022. His claims will likely be disputed when the first inquiry takes place on November 14, 2021.
• Unreasonable Delay — By filing in 2024, Musk delayed filing his claim in a way that makes his request for damages unreasonable.
• Unclean Hands – A legal doctrine that holds that Musk’s actions related to the claims against OpenAI were unconscionable and invalid.

If Musk wins, it could mean the end of OpenAI as a for-profit company, but it’s not entirely clear what the outcome will be. Next week, the judge will begin a new series of hearings where attorneys for both sides will debate the consequences of a ruling in favor of the plaintiffs. However, a negative ruling could derail the process.

breach of charitable trust

Musk’s lawyers said the defendants clearly understood that Musk wanted to support nonprofits that ensure the benefits of AI to the world and prevent it from being controlled by any one organization. In particular, the incident in which Microsoft invested $10 billion in an Open AI for-profit affiliate in 2023 (the first to occur after the statute of limitations) is said to have turned Musk’s concerns into confidence.

Musk’s lawyers say the deal differed from previous investments and resulted in OpenAI’s investors enriching themselves on the company’s commercial products at the expense of the charitable mission of AI safety promoted by Musk.

OpenAI’s lawyers asked every witness to explain the specific restrictions on Musk’s donations, but none, including his financial adviser Jared Birchall, his chief of staff Sam Teller or his special adviser Shivon Zilis, could. They note that everyone involved agreed that private fundraising was needed to achieve the goal, and that Musk himself attempted to launch an OpenAI-affiliated for-profit business that he would personally control and later merge OpenAI into his company Tesla. They also note that other donors to the organization did not say their charitable trust had been violated.

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

Primarily, they argue that the for-profit affiliates that carry out most of OpenAI’s actual activities have generated nearly $200 billion in equity value to continue to fulfill the organization’s mission and support its nonprofit foundation. In particular, Sam Altman argued that making ChatGPT free helps achieve its mission of sharing the benefits of AI with the world.

Unjust enrichment

The plaintiffs point to the multibillion-dollar valuation of stakes held by OpenAI founders like Brockman and Ilya Sutskever and Microsoft itself as signs that Musk’s donations were ultimately used for personal gain rather than supporting the charity’s mission. They argue that while OpenAI’s for-profit work was commercially focused, the foundation itself was left essentially dormant, without full-time staff and ultimately unable to even control its for-profit operations.

OpenAI says all of Musk’s donations have been used by the foundation through 2020, with the stake distribution taking place long after he left the organization in 2018. Previous findings show that key players agree that being able to reward researchers with stocks is key to developing AGI, a virtual form of AI that can perform all the intellectual tasks a human can do. OpenAI executives argue that their for-profit work meaningfully advances the foundation’s mission, including its safety efforts. They say the nonprofit’s board continues to control the for-profit and has introduced new governance controls after a “seizure” in which Altman was fired by the OpenAI nonprofit board in 2023 for lack of candor and then rehired just days later.

aid and aid

Musk’s case focused on an incident in which Microsoft CEO Satya Nadella, whose company relies on OpenAI technology, personally helped bring back Altman and create a new board to govern OpenAI. They said Microsoft executives wondered whether commercial arrangements might conflict with the nonprofit’s goals, and suggested that Microsoft’s commercial priorities led OpenAI away from its mission. They focused their attention on a provision in Microsoft’s contract with OpenAI that gave Microsoft veto power over key corporate decisions for OpenAI.

Microsoft’s witnesses claimed that despite extensive due diligence, company executives were unaware of the specific terms of Musk’s donation and never vetoed any of OpenAI’s decisions. They point out that the company’s investments and computing power allowed OpenAI to score its biggest wins.

Statute of limitations

Musk suggested that he grew more skeptical of his co-founders over time, and finally decided in the fall of 2022 that they had betrayed him when he learned that Microsoft was planning to invest $10 billion in new investments in 2023. Musk won’t file the lawsuit until mid-2024.

OpenAI’s lawyers claim the terms of the deal were set out in a term sheet from a previous fundraising round in 2018 that Musk received and reviewed by his advisers, but Musk said he did not read it closely. They also note numerous blog posts and other communications that show Musk may well have known what OpenAI was doing before it went to court, including tweets in which he criticized the company years before the lawsuit was filed. Zilis, an advisor to Musk, also voted to approve the deal as a member of OpenAI’s board of directors.

Ultimately, OpenAI lawyers emphasize that Musk’s formal role within the organization ended in 2018 and that his last donation was made in 2020.

unreasonable delay

OpenAI’s lawyers say the real reason Musk filed the lawsuit is because he realized he was wrong about OpenAI, whose launch of ChatGPT revolutionized the artificial intelligence business. OpenAI has been operating with its current structure since Microsoft’s first investment in 2018, and it is argued that it is unreasonable to force a reorganization eight years later.

unclean hands

There is evidence that Musk was planning competing AI efforts while still serving as Chairman of OpenAI, and that he 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 Gillis, the mother of Musk’s three children, did not disclose her personal relationships to other OpenAI board members for years. And they allege that Musk withheld the donation in 2017 as part of an effort to gain control of a planned for-profit affiliate of OpenAI. Finally, OpenAI’s lead attorney, Bill Savitt, told the jury: “Mr. Musk abandoned OpenAI in 2018.”