Elon Musk to OpenAI: The lawsuit is still on
Even though OpenAI walked back its decision to convert to a traditional for-profit, Elon Musk is going ahead with his lawsuit against the company.
"Nothing in today’s announcement changes the fact that OpenAI will still be developing closed-source AI for the benefit of Altman, his investors, and Microsoft," said Musk's lawyer Marc Toberoff in a statement to Reuters on Monday. Toberoff said OpenAI's decision to remain governed by a nonprofit entity "obscures critical details about the supposed 'non-profit control' arrangement."
OpenAI plans to transition its for-profit LLC to a Public Benefit Corporation (PBC) that will be governed by the overarching nonprofit and will make the nonprofit a shareholder of the PBC. Toberoff described the new arrangement as a "sharply reduced ownership stake the non-profit will receive in Altman’s for-profit enterprise."
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The ChatGPT maker's decision last year to restructure as a for-profit company prompted Musk, who was an early funder in OpenAI's nascent days, to sue the company for breach of contract. He alleged the company deceived him by promising the company's mission was entirely altruistic. More recently, Musk unsuccessfully offered to buy OpenAI for $97.4 billion, which OpenAI rejected, calling it a "sham bid," and accusing Musk of trying to take down a competitor. Musk owns xAI, which makes the Grok AI chatbot.
OpenAI's decision to remain a capped for-profit was a major reversal for the company, which is currently valued at $300 billion. In a blog post explaining the announcement, OpenAI's board chairman Bret Taylor said the decision was made "after hearing from civic leaders and engaging in constructive dialogue with the offices of the Attorney General of Delaware and the Attorney General of California." Last month, former OpenAI staffers and leaders of the AI community sent an open letter to California and Delaware attorneys general urging them to stop OpenAI's restructuring, citing societal safety concerns.
OpenAI may have alleviated the signatories' concerns, but Musk's lawsuit is still going forward. "The founding mission remains betrayed," Toberoff told Bloomberg.
Cecily is a tech reporter at Mashable who covers AI, Apple, and emerging tech trends. Before getting her master's degree at Columbia Journalism School, she spent several years working with startups and social impact businesses for Unreasonable Group and B Lab. Before that, she co-founded a startup consulting business for emerging entrepreneurial hubs in South America, Europe, and Asia. You can find her on X at @cecily_mauran.
