A judge has narrowed the scope of claims in a lawsuit filed by Elon Musk against OpenAI, stating the company allegedly breached its commitment to operate as a public charity while planning to transition into a for-profit enterprise.
U.S. District Judge Yvonne Gonzalez Rogers in Oakland, California, ruled on Thursday that Musk, the wealthiest individual in the world, can pursue fraud allegations within the legal action he brought against OpenAI last year. The judge also opted not to dismiss Musk’s claim of unjust enrichment against both OpenAI and Microsoft, a key investor in the organization.
However, claims of false advertising and breach of fiduciary duty against OpenAI were dismissed. Musk’s racketeering allegations were also rejected, although the judge permitted him the opportunity to amend this particular claim in a subsequent complaint.
In a statement, a spokesperson for OpenAI referenced a recent social media post suggesting that Musk’s lawsuit represents an unlawful attempt to impede the company’s expansion for the advantage of his competing startup, xAI, established in 2023.
Musk’s attorney expressed approval of the judge’s decision, noting that it recognizes the seriousness of Musk’s allegations which will proceed to trial.
“My client remains dedicated to safeguarding OpenAI’s initial charitable mission and ensuring the safe progression of AI,” said attorney Marc Toberoff in an email.
No immediate response was available from representatives of Microsoft regarding the ruling.
The ongoing legal dispute between Musk and Sam Altman, who collaborated to establish OpenAI a decade ago, coincides with the startup’s negotiations with officials in Delaware and California regarding its restructuring plans. OpenAI is under pressure to finalize the overhaul by the end of 2025. Failing to do so could lead SoftBank Group to reduce its financial commitment to OpenAI from $30 billion to $20 billion, as previously reported by Bloomberg, amid OpenAI’s pursuit of alternative investors.
Judge Gonzalez Rogers had indicated her intention to streamline the lawsuit’s claims when scheduling a trial for March.
Musk contends that the partnership between OpenAI and Microsoft, which formed after his departure from the board in 2018, seeks to monopolize the generative AI sector in a manner detrimental to free market competition. His legal team alleges that Microsoft was aware that OpenAI co-founders Altman and Greg Brockman were engaged in deceptive practices to exploit Musk’s significant contributions and support for their own gain.
While Gonzalez Rogers approved OpenAI and Microsoft’s request to dismiss Musk’s claim of aiding fraud, she ruled that Microsoft must respond to allegations of interference with Musk’s contractual agreement with OpenAI, which purportedly stipulated that the startup’s technology should serve the public interest.
According to the judge, Musk has adequately claimed that Microsoft was aware of the charitable trust and participated in actions that constituted “substantial assistance or encouragement” in breaching the contract.
The case is titled Musk v. Altman, 24-cv-04722, in the U.S. District Court for the Northern District of California (Oakland).
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