Judge rejects Elon Musk's bid to block OpenAI becoming for-profit business

US District Court Judge Yvonne Gonzalez Rogers ruled that Musk and his xAI startup failed to prove an injunction against OpenAI was necessary as the case heads to trial

By AFP

Published: Mar 5, 2025 12:58:52 PM IST

Updated: Mar 5, 2025 02:41:38 PM IST

Judge rejects Elon Musk's bid to block OpenAI becoming for-profit business Image: Saul Loeb / AFP

A US judge on Tuesday denied Elon Musk's request to prevent OpenAI from becoming a forprofit business in a loss for the Tesla tycoon amid his feud with Sam Altman.

US District Court Judge Yvonne Gonzalez Rogers ruled that Musk and his xAI startup failed to prove an injunction against OpenAI was necessary as the case heads to trial.

Musk sued in California federal court to stop OpenAI from transitioning from a nonprofit to a for-profit business, arguing the startup violated antitrust law and betrayed his trust in their mission as a co-founder of OpenAI.

The judge wrote that, while Musk did not prove the need for an injunction, she is prepared to expedite a trial on that claim later this year.

The ruling leaves OpenAI free to continue its transition from nonprofit to for-profit enterprise.

Musk's injunction bid argued that OpenAI's co-founders, including chief executive Altman, "took advantage of Musk's altruism in order to lure him into funding the venture," according to court documents.

Musk contended in filings that it was clear his backing of OpenAI was contingent on it remaining a nonprofit, offering a few email exchanges to support the claim.

"Whether Musk's emails and social media posts constitute a writing sufficient to constitute an actual contract or charitable trust between the parties is debatable," the judge said in her ruling.

Also read: Elon Musk plans to build a supercomputer using NVIDIA's semiconductor chips

OpenAI's board chairman in February rejected a Musk-led offer to buy the valuable artificial intelligence company for $97.4 billion.

"OpenAI is not for sale, and the board has unanimously rejected Mr. Musk's latest attempt to disrupt his competition," OpenAI Board Chair Bret Taylor said in a statement posted by the company on Musk-owned X, formerly Twitter.

OpenAI currently operates in a hybrid structure, as a nonprofit with a money-making subsidiary.

The change to a for-profit model—one that Altman considers crucial for the company's development—has exacerbated ongoing tensions with Musk.

Musk and Altman were among the 11-person team that founded OpenAI in 2015, with the former providing initial funding of $45 million.

Three years later, Musk departed the company, with OpenAI citing "a potential future conflict for Elon... as Tesla continues to become more focused on AI."

Musk established his own artificial intelligence company, dubbed xAI, in early 2023 after OpenAI ignited global fervor over the technology.

The massive cost of designing, training, and deploying AI models has compelled OpenAI to seek a new corporate structure that would give investors equity and provide more stable governance.