A federal judge has suggested that key parts of Elon Musk’s lawsuit against OpenAI may proceed to trial, increasing the likelihood of a courtroom showdown between the Tesla and SpaceX CEO and the AI research company he helped co-found.
The case centers on OpenAI’s transition from a nonprofit to a for-profit entity, a move that Musk argues contradicts the organization’s founding principles.
His lawsuit claims that OpenAI’s shift has primarily benefitted Microsoft, which has invested billions into the company and gained exclusive licensing rights to its advanced AI models.
During a hearing in Oakland, California, U.S. District Judge Yvonne Gonzalez Rogers stated, “Something is going to trial in this case.” She made it clear that Musk will be required to testify, emphasizing that a jury will ultimately determine the case’s outcome.
The session also focused on whether Musk’s legal team had presented sufficient evidence for an injunction that would temporarily halt OpenAI’s restructuring before a final ruling.
The judge did not grant the injunction, expressing doubts over whether Musk’s attorneys had met the necessary burden of proof. Instead, she suggested that an evidentiary hearing could be held first, allowing both sides to present additional witness testimony and documentation before deciding which elements of the lawsuit will be heard in court.
Disputes Over OpenAI’s Core Mission
Musk played a key role in the founding of OpenAI in 2015 alongside Sam Altman and other AI researchers, with the organization originally structured as a nonprofit dedicated to ensuring that artificial general intelligence (AGI) would be developed for public benefit rather than private interests.
However, as AI research became more resource-intensive, OpenAI introduced a capped-profit model in 2019 to attract outside investment while maintaining some level of nonprofit oversight.
Musk, who departed OpenAI in 2018, has consistently criticized its transformation, arguing that the shift to a for-profit business model undermines the organization’s founding mission.
His lawsuit alleges that OpenAI has effectively become a subsidiary of Microsoft, which secured exclusive licensing rights to its most advanced AI models, including GPT-based systems.
Additionally, Musk later expanded his lawsuit to include federal antitrust claims, arguing that OpenAI’s restructuring has concentrated control over AI development in a way that stifles competition.
OpenAI Dismisses Musk’s Claims as Baseless
OpenAI has filed to dismiss Musk’s lawsuit, arguing that he has no legal grounds to challenge the company’s restructuring. The company maintains that transitioning to a capped-profit model was the only way to secure the necessary funding to continue AI research at a competitive scale.
OpenAI’s legal team responded to Musk’s lawsuit by stating, “Musk should be competing in the marketplace rather than the courtroom.”
The company also highlighted that Musk himself had previously supported securing external funding. Internal emails between Musk, Altman, and other OpenAI leadership figures suggest that Musk initially advocated for attracting large-scale investment to compete against Google’s DeepMind. However, he later opposed the direction OpenAI took, leading to his departure.
As the legal battle unfolds, OpenAI continues to expand its business. The company recently launched Operator, an AI-driven assistant designed for complex automation tasks, and deep research, a new AI-powered research assistant inside ChatGPT that allows users to conduct structured, multi-step investigations. Google has reacted by making its own Deep Research feature available for Gemini on Android.
OpenAI’s deep research is powered by OpenAI’s most capable reasoning-model, o3, which has not yet been publicly released. However, the company just released o3-Mini as a faster and more affordable reasoning model geared toward science, math, and coding challenges in a response to DeepSeek’s R1 model.
Financial Stakes: OpenAI’s Funding and Microsoft’s Influence
The legal battle between Musk and OpenaI comes at a time when the company is actively securing new investments to sustain its growth. In its most recent funding round, the company raised $6.6 billion, and it is currently in discussions for a $25 billion investment involving SoftBank.
However, these funding agreements are reportedly contingent on OpenAI completing its transition away from nonprofit control, making Musk’s lawsuit a potential obstacle.
Microsoft’s deep financial ties with OpenAI have been at the center of Musk’s criticism. The tech giant has invested billions into OpenAI, gaining privileged access to its AI models and infrastructure.
Microsoft has integrated OpenAI’s technology into its products, including the cloud-based Azure OpenAI Service and AI-driven features in Windows and Office. Musk contends that these arrangements contradict OpenAI’s original mission of providing open access to AI research.
The extent of Microsoft’s influence over OpenAI was previously debated within the company’s leadership, as revealed in the released internal emails. Some executives expressed concern that relying too heavily on Microsoft’s funding could compromise OpenAI’s independence.
However, OpenAI has defended its decision, stating that partnerships with major tech companies allow it to scale its research without sacrificing its core objectives.
The Unusual Nature of OpenAI’s Nonprofit-to-For-Profit Shift
Legal analysts have noted that OpenAI’s transition from a nonprofit to a for-profit model is an uncommon move, particularly in the tech industry. While nonprofit conversions have occurred in healthcare—where hospital systems have transitioned to for-profit ownership—such restructurings are rare in AI research.
Rose Chan Loui, executive director of the UCLA Law Center for Philanthropy and Nonprofits, commented on the case, stating to Reuters, “Nonprofit conversions to for-profits have historically been for health care organizations like hospitals, not venture capital-backed companies.”
She added that OpenAI’s restructuring raises complex questions about how nonprofit organizations can maintain their mission while adapting to financial realities.
Musk’s lawsuit challenges whether OpenAI’s shift is legally and ethically justifiable. If successful, the case could set a precedent for how AI research institutions balance financial sustainability with public-benefit goals.
Since then, Musk has remained vocal about his dissatisfaction with OpenAI’s trajectory. In 2023, he launched his own AI company, xAI, which directly competes with OpenAI. The company has positioned itself as an alternative to OpenAI, focusing on AI models that Musk claims are more transparent and aligned with public interests.
What Comes Next? The Future of the Case
With Judge Rogers indicating that key elements of Musk’s lawsuit will move forward, the legal battle is far from over. If an evidentiary hearing is scheduled, both sides will be required to present further documentation and testimony before the court determines which aspects of the case will go before a jury.
The judge’s remarks suggest that while Musk’s claims may not immediately block OpenAI’s restructuring, they are strong enough to warrant further legal scrutiny. If the case proceeds to trial, Musk’s legal team could gain access to additional internal OpenAI communications through the discovery process, potentially uncovering new details about the company’s internal decision-making.
The broader implications of the case extend beyond OpenAI. As artificial intelligence development accelerates, this lawsuit could influence future AI governance models and how companies balance financial needs with ethical obligations.
The outcome may also shape how major AI firms manage their funding structures, particularly those that began with nonprofit ideals.
Meanwhile, OpenAI remains focused on expanding its business. The company recently resisted efforts to review internal documents related to a copyright lawsuit involving co-founder Ilya Sutskever, as legal challenges continue to mount. At the same time, OpenAI is moving forward with new AI products and partnerships such as a recent deal with SoftBank, underscoring the high stakes involved in its ongoing transformation.