The simmering legal conflict between OpenAI and its co-founder Elon Musk boiled over on April 9, as the AI company filed a countersuit in San Francisco federal court. OpenAI, along with CEO Sam Altman and other defendants named in Musk’s original suit, accuses the billionaire of pursuing “further unlawful and unfair action.” The filing targets what OpenAI characterized as a “fake takeover bid” and other moves allegedly designed to harm the company for Musk’s own competitive and personal advantage, prompting the lab to ask the court to step in and stop him.
Musk’s lawyer, Marc Toberoff, maintained the seriousness of Musk’s prior $97.4 billion takeover offer, suggesting OpenAI failed its obligations by not genuinely considering it and adding, “Had OpenAI’s board genuinely considered [Musk’s bid for the company’s nonprofit earlier this year] as they were obligated to do, they would have seen how serious it was. It’s telling that having to pay fair market value for OpenAI’s assets allegedly ‘interferes’ with their business plans.”
OpenAI, however, framed Musk’s actions differently in a public statement posted on X: “Elon’s nonstop actions against us are just bad-faith tactics to slow down OpenAI and seize control of the leading AI innovations for his personal benefit. Today, we counter-sued to stop him.”
The countersuit seeks not only an injunction against Musk but also aims to hold him “responsible for the damage he has already caused.” The specific legal claims include breach of contract and breach of fiduciary duty, stemming from Musk’s tenure as a co-founder and board member. Fiduciary duty refers to the legal obligation of one party to act in the best interest of another, an obligation OpenAI suggests Musk violated.
Musk’s ‘Fake Takeover Bid’ and Prior Knowledge Claims
The countersuit prominently features Musk’s unsolicited $97.4 billion bid from earlier this year, an offer OpenAI’s board unanimously rejected in February, viewing it as a pressure tactic. Following the rejection, OpenAI’s board was already contemplating governance defenses against such acquisition attempts. The legal filing goes further, explicitly labeling the bid “fake” and part of a pattern of disruption.
This legal action follows Musk’s original lawsuit filed earlier, which centered on the claim that OpenAI betrayed its founding non-profit mission by pursuing a “capped-profit” structure and partnering closely with Microsoft. OpenAI, in its countersuit filing, pushes back strongly, calling Musk’s narrative “contrived” and based on a “revisionist history,” according to Bloomberg Law. This aligns with arguments made from OpenAI where the company publicly asserted that Musk was not only aware of the plans for a for-profit arm but had supported them, directly challenging the core premise of his initial legal challenge.
Restructuring Stakes and Financial Entanglements
The fight unfolds as OpenAI navigates a critical corporate restructuring into a Public Benefit Corporation (PBC), a hybrid structure legally required to balance profit with a stated public mission. This transition is tied directly to the massive $40 billion funding round led by SoftBank, which recently valued OpenAI at $300 billion.
The deal contains a significant condition: OpenAI must finalize the PBC structure by the end of 2025 to access the full funding amount. Failure could cut the capital infusion in half. The deal also includes a hefty $20 billion redemption clause aimed at providing liquidity for early investors and employees, adding substantial financial pressure to complete the restructuring smoothly. This context highlights why OpenAI might perceive Musk’s legal challenges as particularly damaging, potentially jeopardizing billions in funding tied to the very corporate structure Musk opposes.
Musk’s legal efforts to derail this transition have so far stumbled. His request for a preliminary injunction to block the PBC shift was denied by a judge in March, who found no legal grounds to halt it, even as Musk’s broader case was allowed to proceed.
Legal Path Forward Amid Operational Shifts
Despite the injunction denial, Musk’s original lawsuit remains active. Both parties have agreed to put the case on a faster track, anticipating a trial later in 2025. OpenAI’s countersuit now complicates this timeline, adding new claims and demands to the legal docket. While Musk’s side focuses on the alleged abandonment of the original mission, OpenAI’s countersuit paints a picture of a former insider attempting to disrupt a competitor through legal means and pressure tactics.
The backdrop includes Musk’s own competitive efforts with xAI, which launched its Grok 3 model in February, directly challenging OpenAI’s technology, and recently took over his social network in a $113B Merger. OpenAI is also undergoing significant internal evolution, marked by leadership shuffles announced in March—placing COO Brad Lightcap over business operations—and strategic moves to diversify its computational infrastructure beyond Microsoft Azure, notably through an $11.9 billion deal with CoreWeave announced in March. These operational shifts form part of the complex environment OpenAI claims Musk’s actions threaten.
