Elon Musk’s chances of winning his second lawsuit against OpenAI look bleak, but legally nothing is completely hopeless.
The entrepreneur has said that the non-profit organization he founded cannot legally become a corporation without violating the purpose for which it was founded nine years ago: developing the world’s first artificial general intelligence (AGI) for the benefit of humanity.
Musk wants to force his former creation to triple its $44.6 million payout over five years and force all research findings behind its GPT-4 neural network to open source.
The latter would also coincidentally serve the interests of its xAI research lab, which is a direct competitor to OpenAI.
However, US law has not been kind to private litigants like Musk, who seek redress against nonprofit charities to which they have made tax-deductible donations. Attempts to ask for a refund or a different use of the funds are usually frowned upon.
“All of those cases fail,” Brian Quinn, a professor of corporate law at Boston College Law School, told Fortune. “There is little legal basis for these types of claims. Once the money is delivered, that’s it.’
Throwing legal spaghetti at the wall
While nonprofits need to be mindful of how they treat donors, if they want the checks to keep coming, they don’t have shareholders with financial interests that can be harmed.
Legally speaking, the responsibility for prosecuting cases on behalf of the public rests with the authorities, usually a state’s attorney general.
“If you give to a charity, you don’t have much recourse to sue them later. US legislation is not very favorable to donors in that sense,” said Luís Calderón Gómez, tax law specialist and assistant professor at Yeshiva University’s Cardozo Law School. luck.
He believes Musk’s chances may improve because his team has changed its legal strategy, increasing the number of alleged violations from just four to 14, although the core of the matter has not changed.
Blaming everything on OpenAI fraud and racketeering to false advertising and unjust enrichment it might be the legal equivalent of throwing spaghetti at the wall in the hope that one of the accusations will somehow stick.
However, Calderón Gómez believes that his case is not entirely without merit, as the courts may not take kindly to OpenAI shedding its non-profit shell.
Musk alleges that there is a “Foundation Agreement” with CEO Sam Altman that expressly forbids such an event. However, he failed to produce it, arguing that it was reflected instead non-profit December 2015 certificate of incorporation enough to prove his point.
OpenAI moves to dismiss Musk lawsuit
“If he had that (the Founding Agreement), he would have a very strong case,” says Calderón Gómez. He believes Musk would be better off implementing his deals less as a donor and more as a founder who has signed a binding document.
The burden of proof, however, is on Musk, and proving that OpenAI intended to defraud at its inception will be challenging in the absence of clear evidence.
Listing no less than 82 separate legal precedents to support its argument, lawyers for the Altman company argued Wednesday that Musk had no leg up.
“What’s new is that the body of the ‘Foundation Agreement’ (now in lowercase and relegated to the back of the complaint) is littered with allegations of fraud, racketeering, and false advertising,” OpenAI’s lawyers wrote unrebuttingly. “But Musk provides no factual or legal scaffolding to support his claims.”
OpenAI’s legal team moved to dismiss the lawsuit entirely this week, saying Musk’s second attempt to take the ChatGPT creator to court was couched in even more hysterical language to distract from its lack of substance.
Musk’s legal team at Toberoff & Associates did not respond to a request for comment luck for comments
OpenAI among the most valuable private companies
OpenAI has been increasingly honest about it it is intended to be a regular non-profit corporationtelling staff that will probably happen next year.
todaythe company has no profit to distribute, and in fact continues to lose money due to the exorbitant costs of training and refining its models—at last count, $5 billion in red ink it is expected for this year.
In addition, a top level output string they have happened in the last six months, let alone CEO Sam Altman as one of three founding members.
That hasn’t stopped investors from falling over themselves to buy shares in its operating company, which is controlled by the nonprofit. Despite limited profits, its newly raised capital was valued at $157 billion, making OpenAI one of the most valuable privately held companies in the world.
Musk opposes his creation
Musk, who left the board in 2018 and stopped donating entirely two years later, has meanwhile been forced to watch success from the sidelines, a success he could no longer claim as his own.
At first he still seemed like a proud parent. Days after launching ChatGPT in late 2022, he used his social media platform to draw attention to the invention and more. he punished New York Times for not covering it twice.
In the months that followed, however, his tone changed dramatically as OpenAI grabbed the headlines and sparked an explosion of interest in AI.
Once it became clear, ChatGPT would soon be the fastest growing application in historyMusk began Speak out publicly against Altman’s investigative outfitsaying that he had become the complete opposite of what he wanted.
By May 2023, it was clear he had an ax to grind.
“I’m the reason OpenAI exists”
In that month, Musk told CNBC it effectively ended donating to a charity to “save Amazon jungle, and instead they became a timber company, and they cut down the forest and sold it for money.’
At a time when Musk was frustrated investors weren’t rewarding Tesla’s stock price for its AI efforts. He thought the audience needed to know Tesla He was also on the cusp of his ChatGPT moment once he was able to drive his Tesla without human supervisionHe classified the feat as “baby AGI.”
Musk wasn’t about to let OpenAI take all the credit two years after cashing in on his last donation. “I’m the reason OpenAI exists,” he said in the interview. By then Musk had revealed plans to launch his own ChatGPT competitor, xAI, an idea that would eventually become a reality in July.
The emails reveal that Musk wanted to take control
In February of this year, Musk finally sued the company, claiming it had broken its promise to remain non-profit.
Soon after, OpenAI did the proofs Showing that Musk was well aware of this possibility in late 2017, he accepted it and broke with the organization after failing to run as CEO or join Tesla.
“Elon wanted majority equity, initial board control and CEO status,” the company said, sharing emails exchanged at the time. “We couldn’t agree on non-profit terms with Elon because we felt it was against the mission for any one person to have complete control of OpenAI. He then proposed merging OpenAI with Tesla.
A day before OpenAI’s scheduled trial on its first motion to dismiss, the law firm Irell & Manella, which represented Musk at the time, informed the California Superior Court that it was withdrawing the case — without providing an explanation.
Musk filed the second lawsuit in August, but nothing OpenAI has seen has changed his mind since then. “Elon’s recycled complaint has no merit and his previous emails continue to speak for themselves,” OpenAI told Fortune in a statement.
Courts will probably not approve of a legal fishing expedition
Quinn of Boston College Law School says the Amazon rainforest analogy is not misleading, as long as Altman wasn’t actively buying chainsaws at the time. Musk’s conversion to a lumber company several years after he was out of the house may be a morally questionable decision, but it’s not illegal.
Barring a minor miracle, Quinn expects Musk’s case to be thrown out at the first opportunity. Musk can reload because he has an unlimited ability to maintain funding lawsuits, but in the end, a judge would punish him.
“If there is no factual basis for the allegations, the court will not open the door to say” anyone who wants to sue someone else, come here, put some words on paper, we will impose unnecessary costs on them. defendants to go on a fishing expedition only to pull out some harmful stuff,” Quinn says. “Courts are generally reluctant to allow plaintiffs to bring lawsuits for good reason.”
A potential lawsuit in California has been seen as having better options
Musk, however, can take heart knowing that at least one consumer advocacy group shares his frustration, even if it’s not for personal reasons.
The nonpartisan Washington, D.C.-based Public Citizen has filed a complaint against Altman’s company with California Attorney General Rob Bonta over the nonprofit’s conversion.
Co-chairman Robert Weissman wrote to the state AG that “OpenAI should be emphasized as a reserve for humanity rather than a for-profit reserve. right to any OpenAI inventions “Artificial general intelligence”.
In addition, Public Citizen wants OpenAI to pay the equivalent of the value taken out of the nonprofit and delivered to shareholders to provide a new independent foundation for AI security.
That alone should cost the nonprofit tens of millions of dollars, something that may serve as some consolation to Musk.
upon arrival luckBonta’s office would not say whether that resulted in any enforcement action. “To protect the integrity of our investigations, we cannot comment on, nor confirm or deny, a potential or ongoing investigation,” he said.
Yeshiva University’s Calderón Gómez believes a state-initiated case would have a much better chance of success than Musk’s private lawsuit.
“If I was in the California AG’s office, I would probably sue,” he says. “There are enough facts here to make me believe that this has not been operating as a non-profit for a short period of time.”
