What the jury will actually decide in the case of Elon Musk vs. Sam Altman | Tech Crunch
Overview
Nine California jurors are now deliberating over the future of Open AI, the world-leading artificial intelligence lab.
While the trial exploring Elon Musk’s case against Open AI’s other cofounders and Microsoft has covered territory ranging from the breakup of the founders in 2018 to Altman’s firing and rehiring in 2023, the jurors will be considering a set of fairly narrow questions.
Details
Breach of charitable trust — essentially, did Open AI and cofounders Sam Altman and Greg Brockman violate a specific agreement with Musk to use his donations to Open AI for a specific, charitable purpose and not general use by the non-profit?
Unjust enrichment — did the defendants use Musk’s donations to enrich themselves through Open AI’s for-profit arm, instead of for charitable purposes?
Aiding and abetting breach of charitable trust — Did Microsoft, through its interactions with Open AI, know that Musk had specific conditions on its donations, and play a significant role in causing harm to Musk?
Open AI has also made three arguments in its defense that the jury will weigh:
Statute of limitations — a legal deadline by which a lawsuit must be filed. Here, if Open AI can prove that any harms to Musk happened before August 5, 2021 for the first count; August 5, 2022 for the second count; and November 14, 2021 for the first count, then his claims will be moot.
Unreasonable delay — Musk, by filing his lawsuit in 2024, delayed his claim in a way that made his request for damages unreasonable.
Unclean hands — a legal doctrine holding that Musk’s conduct related to his claims against Open AI was unconscionable and renders them invalid.
If Musk wins out, it could mean the end of Open AI as a for-profit company, but it’s not entirely clear what will result. Next week, the judge will begin a set of new hearings where lawyers from both sides will debate what the consequences of a verdict in favor of the plaintiffs might be. That process could be rendered moot by a negative verdict, however.
Musk’s attorneys say the defendants clearly understood that Musk wanted to support a non-profit that would ensure the benefits of AI to the world, and prevent it from being controlled by any one organization. In particular, they say a $10 billion investment from Microsoft in 2023 into Open AI’s for-profit affiliate—the first to happen after the statute of limitations—was the event that turned Musk’s concern into conviction.
That deal, Musk’s lawyers say, was different from previous investments and led to Open AI’s investors being enriched by the company’s commercial products, at the expense of the charitable mission of AI safety that Musk promoted.
Open AI’s attorneys have asked every witness to describe specific restrictions put on Musk’s donations, and none have, including his financial adviser Jared Birchall, his chief of staff Sam Teller, or his special adviser Shivon Zilis. They say everyone involved agreed that private fundraising would be required to achieve its goals, and note that Musk himself attempted to launch an Open AI-affiliated for-profit he would personally control, and later to merge Open AI into his company Tesla. They also note the organization’s other donors haven’t said their charitable trust was violated.
Importantly, a forensic accountant hired by Open AI testified that all of Musk's donations had been used by Open AI well before the key date of August 5, 2021. That is evidence that Musk's donations were already used for their purpose well before he brought his lawsuit, invalidating any charitable trust that may have existed.
Mainly, they insist that the for-profit affiliate that conducts most of Open AI's actual activity continues to fulfill the organization's mission, and has generated nearly $200 billion in equity value to support the non-profit foundation. Notably, Sam Altman argued that providing Chat GPT for free helps fulfill the mission of sharing the benefits of AI with the world.
The plaintiffs point to the multibillion-dollar valuations of stakes held by Open AI founders like Brockman and Ilya Sutskever, as well as Microsoft itself, as a sign that Musk's donations were ultimately used for personal benefit, as opposed to supporting the mission of the charity. They argue that the work at Open AI's for-profit was commercially focused, while the foundation itself was left essentially dormant, without full-time employees, and, ultimately, not even in control of the for-profit.
Open AI says all of Musk's contributions were used by the foundation by 2020, and that equity distributions came well after he left the organization in 2018. Even beforehand, evidence shows the key players agreed that being able to compensate researchers with stock was key to developing AGI, the hypothetical form of AI capable of performing any intellectual task a human can. Open AI executives maintain that the for-profit's work meaningfully advanced the foundation's mission, including safety activities. They say the non-profit board continues to control the for-profit, and instituted new governance controls following "the blip," when Altman was fired by Open AI's non-profit board in 2023 for lack of candor and then rehired just days later.
Musk's case focused on the events of the blip, when Microsoft CEO Satya Nadella, whose company depended on Open AI's tech, was personally involved with helping to bring Altman back and creating a new board to govern Open AI. They note that Microsoft executives wondered if their commercial agreement might conflict with the non-profit's goals, and suggest that Microsoft's commercial priorities led Open AI away from its mission. They've focused attention on a clause in Microsoft's agreement with Open AI that gave Microsoft veto rights over major corporate decisions at Open AI.
Microsoft's witnesses have insisted that the company's executives didn't know of any specific conditions on Musk's donations despite extensive due diligence, and never vetoed any decision by Open AI. They note that the company's investments and compute power allowed Open AI to achieve its biggest triumphs.
Musk has suggested that his skepticism of his cofounders grew over time, until in the fall of 2022 he finally decided they had betrayed him when he found out about Microsoft's plans for a new $10 billion investment that took place in 2023. He wouldn't file his lawsuit until mid-2024.
Open AI's attorneys argue that the terms of that deal were spelled out in a term sheet for a previous fundraising round in 2018, which Musk received and his advisers reviewed, but Musk said he didn't read in detail. They also note numerous blog posts and other communications from over the years that show Musk could have known what Open AI was doing well before he brought them to court, including tweets where Musk criticized the company years before the suit. Zilis, Musk's adviser, even voted to approve these transactions as a member of the Open AI board.
Ultimately, the Open AI attorneys emphasize that Musk's formal role in the organization ended in 2018 and his last donations took place in 2020.
Open AI's attorneys say the real reason that Musk filed his suit was he realized that he was wrong about Open AI, after its launch of Chat GPT revolutionized the business of artificial intelligence. They argue that Open AI has operated under its current structure since its first Microsoft investment in 2018, and that forcing the organization to restructure eight years later is unreasonable.
There is evidence that Musk was planning his own competing AI efforts while he was still the chair of Open AI, and hired Open AI employees to work on AI at Tesla. Open AI's attorneys argue that these efforts undermined Open AI at a time when it was using Musk's donations to pursue its mission. They noted that Zilis, the mother of three of Musk's children, didn't disclose her personal relationship to other Open AI board members for years. And they argue that Musk withheld his donations in 2017 in an effort to win control of a planned for-profit affiliate of Open AI. Finally, "Mr. Musk abandoned Open AI for dead in 2018," Bill Savitt, Open AI's lead attorney, told the jury.
Key Takeaways
- Nine California jurors are now deliberating over the future of Open AI, the world-leading artificial intelligence lab
- While the trial exploring Elon Musk’s case against Open AI’s other cofounders and Microsoft has covered territory ranging from the breakup of the founders in 2018 to Altman’s firing and rehiring in 2023, the jurors will be considering a set of fairly narrow questions
- Breach of charitable trust — essentially, did Open AI and cofounders Sam Altman and Greg Brockman violate a specific agreement with Musk to use his donations to Open AI for a specific, charitable purpose and not general use by the non-profit
- Unjust enrichment — did the defendants use Musk’s donations to enrich themselves through Open AI’s for-profit arm, instead of for charitable purposes
- Aiding and abetting breach of charitable trust — Did Microsoft, through its interactions with Open AI, know that Musk had specific conditions on its donations, and play a significant role in causing harm to Musk
