Elon Musk could lose his case against OpenAI — and still get what he wants

So, what’s a guy got to do to become a billionaire around here? Greg Brockman scribbled the question in his diary, recently unsealed as trial evidence, just two years after co-founding OpenAI as a charity in 2015: “Financially, what will take me to $1B?” For Brockman, now OpenAI’s president, the answer was a yearslong restructuring saga in which OpenAI metamorphosed from a nonprofit research lab into a corporate behemoth on the verge of a massive public offering. Elon Musk, another co-founder who left OpenAI in 2018, is suing OpenAI, CEO Sam Altman, and executives like Brockman for this transformation, alleging that he was misled about the company’s profit motives when he donated tens of millions of dollars to it in its early days. Brockman testified on Monday that he was eventually awarded a slice of OpenAI for the “blood, sweat, and tears” — but, notably, not money — he poured into building OpenAI. His portion of the behemoth is now valued at about $30 billion on paper. (Disclosure: Vox Media is one of several publishers that have signed partnership agreements with OpenAI. Our reporting remains editorially independent.) Musk — who is himself known to be an unreliable narrator at times — will have an uphill battle when it comes to proving his case, legal experts say, especially if he wants a judge to reverse OpenAI’s for-profit restructuring. But the mega-billionaire vs. multibillionaire courtroom cage match might actually be beside the point. If the evidence Musk presents in trial is damning enough to convince a couple of attorneys general to take a second look at the deals they struck with OpenAI to finalize its for-profit transformation last fall, then he might not need to win his case at all. Musk could lose in court tomorrow, and potentially still get what he mostly seems to want: a hobbled OpenAI, more beholden to its nonprofit roots, just as it’s looking to go public. Last October, California and Delaware attorneys general made a deal to allow OpenAI to turn its for-profit arm into a public benefit corporation, paving the way for a highly rumored IPO. OpenAI is based in California, but incorporated its for-profit arm in Delaware, as do most large corporations. It would be very unusual, perhaps unprecedented, for a federal judge to usurp that regulatory decision by forcing OpenAI to unwind its corporate reconfiguration, as Musk has requested in court. What’s more likely, legal experts say, is that new evidence, such as Brockman’s diary, or possibly even public outcry that arises from the case, convinces the attorneys general to revisit or amend their original decision to let OpenAI go corporate in the first place. On Wednesday, a coalition of over 60 civil society organizations called EyesOnOpenAI sent a letter to California Attorney General Rob Bonta calling on him to do just that. “In an ideal world, the plaintiff in this case would be the people of California” rather than “one billionaire who decided to pick his petty beef with this other billionaire he doesn’t like,” said Catherine Bracy, CEO of the nonprofit TechEquity and co-leader of EyesOnOpenAI, who believes the government should be holding OpenAI accountable for what she views as a breach of charitable trust. “I’d be pretty comfortable betting on Musk losing,” said Samuel D. Brunson, a nonprofit legal scholar at Loyola University Chicago School of Law, but “I’d be more comfortable betting on the attorneys general” revisiting their agreements with OpenAI, “I still don’t know if that’s a winning bet,” he hedged, but at the very least, it’s well “within the realm of possibility.” OpenAI was founded in 2015 with the tax-deductible mission of building AI “unconstrained by a need to generate financial return.” But building AI has become much more expensive than it was then, and without a for-profit arm, OpenAI almost certainly couldn’t build the kind of tools it does today, such as ChatGPT. Musk always knew this about OpenAI’s growth trajectory, Brockman and CEO Sam Altman have argued, and his suit is just bitter grapes. He’s jealous, they say, of how much better OpenAI’s AI models are to his own efforts. If OpenAI is Nancy Kerrigan, the implicit argument goes, then Musk’s xAI is Tonya Harding, eager to break her talented competitor’s knee. But Musk has tried to paint OpenAI as the villain that stole a charity, and himself as a singular voice for nonprofit integrity, a pure-hearted soldier set on ensuring the OpenAI Foundation gets its fair due. (As a Ringer piece on the suit put it: “Elon Musk takes the stand for…humanity?”) OpenAI compensated its nonprofit arm with a 26 percent stake worth over $200 billion in the newly formed corporation, which is a lot, but notably less than what it awarded employee-investors like Brockman and its partner Microsoft when it went corporate. Musk is asking the court for $150 billion in restitution for his donations. He has vowed to donate any damages to the OpenAI Foundation, which is already one of the world’s wealthiest charities. He could well have a case on this financial front, which “is about Musk personally, and the harm that he might have suffered,” said Peter Molk, a professor at the University of Florida Levin College of Law. “This isn’t money that he needs personally,” but it would also hobble an opponent at a key moment in the race for AI dominance. but it does certainly give the company a black eye.” But Musk’s other legal requests — which include court orders that remove Altman from power and outright undo OpenAI’s for-profit restructuring — are bigger legal swings, in part because they explicitly touch on questions that have already been settled in the company’s negotiations with the government. A win on these grounds “would be disruptive in a way that courts are hesitant to be disruptive,” said Brunson, the Loyola legal scholar. Even if Musk doesn’t win his case, he’ll have managed to air out a lot of OpenAI’s dirty laundry in the process. “By the end of this week, you and Sam will be the most hated men in America,” Musk texted Brockman just before the trial began. “If you insist, so it will be.” That may be hyperbole, but Musk’s lawsuit certainly is intensifying the storm of criticism that has been swirling since OpenAI’s restructuring deal was approved last October. And it could be enough to convince the attorneys general to reconsider at least some of its terms. “I would be surprised if the AG knew the extent to which OpenAI never did a valuation” of the OpenAI foundation’s worth, said Bracy of TechEquity. “I would be surprised if he knew the extent to which the conflicts of interest were embedded up and down the company. I would be surprised if he knew about how Greg Brockman was musing about how he could become a billionaire.” She has no expectation that the attorney general will attempt to force OpenAI to somehow crawl back into its nonprofit skin. Instead, “at this point, I would like to see the nonprofit fairly compensated for the assets,” — which Bracy, like Musk, thinks could be worth significantly more than the 26 percent stake OpenAI assigned to it — alongside “some independent governance of those assets,” she said. With the exception of one member, the OpenAI Foundation’s board of directors is currently identical to that of the for-profit entity, with its membership at least partially orchestrated by Microsoft CEO Satya Nadella, according to court documents. Both of those asks seem plausible, legal experts told me, especially if the evidence that’s come up in trial so far was not available to the attorneys general. In theory, “it would have to be some awfully damning stuff to get the AG to open this back up again,” said Molk, but they are also elected officials, “so they can’t just ignore a wave of public outcry.” So far, there’s no smoking gun — or undeniable evidence that OpenAI outright lied to the government when it negotiated its restructuring deal — at least not yet. But the revelations that Brockman quietly held tens…