MONDAY BEGINS the long-awaited trial of Elon Musk’s lawsuit against Sam Altman and OpenAI, the company they founded together that developed the artificial intelligence platform ChatGPT. The case is being heard in federal court in Oakland and is slated to last roughly four weeks.
The issues to be tried are only a portion of the claims Musk asserted in his August 2024 lawsuit, but U.S. District Court Judge Yvonne Gonzalez Rogers, the presiding judge, accelerated them for early trial because she believes there is an important public interest in their swift resolution.
The claims are based on Musk’s contention that when Musk and Altman formed OpenAI, they agreed to charter it as a nonprofit corporation with the mission of developing artificial general intelligence or AGI for the benefit of humanity, not for commercial profits. The company was also supposed to open source its technology, so all the world could benefit from the awesome power of the expected technology.
A common description of AGI is a machine intelligence that can out-think nearly all humans in nearly all human endeavors. The breadth of such an intelligence is the key — that is the “general” in AGI — and its attainment is expected to be a watershed event. Regular artificial intelligence, sometimes called “narrow AI,” can become proficient at tasks in a single domain — autonomous vehicles for example — but is not good in other domains.
AGI will be good, so it is said, at everything.
Musk claims that Altman has ignored the charter and has run OpenAI as a profit-making venture, using its charitable assets (including $38 million donated by Musk) to enrich himself and others, thereby violating the law that governs nonprofit companies.
Musk asserts a claim for breach of charitable trust as well as claims for fraud. He has also sued Microsoft on the grounds that it aided and abetted Altman in his breach of the charitable trust.
Conduct of the trial
Gonzalez Rogers is known among lawyers for running a tight ship and she has locked in the contours of the trial.
Monday is set aside for jury selection. Opening statements and witness testimony will begin Tuesday. She will hold court Monday through Thursday for four weeks. She uses a timekeeping system to keep the case moving. She has allotted Musk and OpenAI 22 hours apiece to present their cases, including all witnesses as well as the opening and closing statements by their lawyers. Microsoft gets five.
The judge has “bifurcated” the case, so the matter will be heard in two phases. The first will be focused on whether Musk has proven that the defendants are liable on the claims that he is asserting and, if so, were they were brought before the statute of limitations ran.
If Musk is successful in the liability phase, the judge will proceed to hear testimony about damages.
Damages have become a hot issue of contention. Musk is asserting a claim for “disgorgement” of the wrongful gains he contends that OpenAI and Microsoft obtained from his charitable contributions. Disgorgement is the legal term for being required to give back something that was wrongfully obtained.
Musk argues that the wrongful gains are not what just what he contributed, but also what was created with those contributions. His economics expert calculated that the gains were up to $109 billion for OpenAI and $25 billion for Microsoft.
OpenAI tried to strike that expert, but Gonzalez Rogers said she would let him testify.
Shortly before trial, Musk told the court that he was not trying to obtain those monies for himself. He said they should be directed to the “OpenAI charity,” though how that might work hasn’t been spelled out.
Musk also said he would ask for an injunction and other “equitable” remedies that would oust Altman and restore OpenAI’s original mission and operation. The remedies he proposes could upend a “recapitalization” of the company that was approved by the attorneys general of California and Delaware.
Altman’s responses
Altman views Musk as a disgruntled investor who is jealous of OpenAI’s success and is suing in the hope of hobbling OpenAI’s pursuit of AGI. He points out that Musk has his own AI company (xAI) and it is a competitor of OpenAI. They will attack Musk’s claims as unsupported and asserted for an ulterior purpose.
OpenAI’s lawyers believe that Musk also has vulnerability on the statute of limitations.
Statutes of limitations are rules that bar old and stale claims. They serve the purpose of encouraging lawsuits to be brought when witnesses are available and memories fresh, but do so by the blunderbuss approach of barring any claims brought after the limitations period has run. The claims that Musk asserts have limitation periods of two, three or four years, depending on which claim. The longest period — four years — applies to the breach of charitable trust claim.
Musk brought the lawsuit on Aug. 5, 2024, which means that if his claims occurred before Aug. 5, 2020, they are potentially barred by the limitations.
However, calculating the limitations period is not so cut-and-dried. Generally, a limitations period does not start running until the plaintiff knew (or should have known) that the claim existed. The idea is that if the plaintiff doesn’t know that they have a claim, it isn’t fair for the clock to start running against them.
The issue has serious potential to affect Musk’s case, because many of the key events took place outside of even the four-year limitations period, and even more took place outside of the two- and three-year limitations that apply to his other claims.
Altman’s team will argue that those events gave Musk a clear signal about what was happening and he either knew or should have known that he could have brought a lawsuit. Instead, they will argue, he slept on his rights. If the jury agrees, Musk’s charitable trust claim — along with the others that have even shorter limitations — could be dismissed for being filed too late.
Musk will say that his charitable donations continued until Sept. 14, 2020, five weeks after the Aug. 5, 2020 limitations date. He will argue that if he really knew the charitable trust was being abused at that point, he would have stopped giving OpenAI money. But he didn’t.
The trial will be conducted by teams of lawyers from several of the most well-known law firms in the country and will feature testimony from Musk and Altman as well as many other well-known tech personalities.