A federal judge sitting in Oakland has appeared skeptical of granting a preliminary injunction that would bar OpenAI, the nonprofit corporation that ultimately owns the ChatGPT artificial intelligence chatbot, from converting to a for-profit corporation.
U.S. District Judge Yvonne Gonzalez Rogers, clearly well-prepared and fully engaged, on Tuesday heard three hours of legal argument from lawyers representing Elon Musk, who brought the lawsuit, and OpenAI and Microsoft, which Musk alleges have collaborated to pervert OpenAI’s original charitable mission.
According to Musk, OpenAI was founded to develop artificial intelligence for the good of humanity and was to make the technology widely available on an open-source basis so that Google — the leader in the space — would not be able to lock up the technology and use it for private gain.
Musk initially sued in state court in San Francisco in 2024 but voluntarily dismissed the case and later refiled it in federal court. In its current iteration, the complaint asserts 26 claims against a bevy of plaintiffs including Sam Altman, who with Musk was one of OpenAI’s founders, and some 20 subsidiaries of OpenAI that were formed as for-profit companies.
The claims include antitrust and racketeering claims under federal law and many state law claims, including one that says OpenAI and Altman have violated California nonprofit law by transferring charitable assets from the nonprofit to the subsidiaries and allowing Microsoft to obtain control over the assets by way of a multibillion-dollar investment.
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The preliminary injunction motion asks the court to “preserve the status quo” by preventing OpenAI from trying to change its corporate status while the lawsuit proceeds. If that happens, Musk argues that it will be impossible to reverse the action if the conversion is later proven to be unlawful.
Gonzalez Rogers began the hearing by saying that preliminary injunctions are rarely granted and the burden on the party requesting relief was extraordinarily high. She said those general observations are particularly true in an area of intense fluidity such as AI development, which she said, “is changing every day.”
Among the key things that are required for an injunction to be issued at this early stage of the case is that the plaintiff must show a high likelihood — she said almost a “certainty” — of success when the case is ultimately tried. In addition, the plaintiff must show that it will be “irreparably injured” if the injunction isn’t entered.
She grilled Musk’s lawyer — Marc Toberoff of Malibu — on both points and repeatedly suggested that his pleadings and supporting documents did not identify with specificity what relief she could enter that would be manageable. She said that what Musk requested would have her virtually running the company.
Gonzalez Rogers was also clearly troubled by the fact that Musk’s company X.AI Corp. is a competitor to OpenAI. She said, “this country likes competition,” and she would not handicap competition in an area as important and fluid as the development of artificial intelligence.
Toberoff did his best to turn X.AI’s status as a competitor as an asset to his argument. He argued that the antitrust laws are intended to create a level playing field so competition can thrive. He asserted that what has happened at OpenAI since Altman and Microsoft have been in de facto control “stinks” and “something has to be done about it.”
He said X.AI and Musk are just asking for a fair opportunity to compete, something of the highest importance in light of Musk’s allegation that 70 percent of the emerging AI market is controlled by OpenAI and Microsoft.
While Gonzalez Rogers was troubled by injunctive relief at this stage of the case, she was considerably warmer to the claims that Musk asserts in the complaint. The defendants have already moved to throw out the case. That motion has not yet been heard but she served notice that she had carefully reviewed the pleadings and was likely to allow the case to proceed on many of the claims that Musk has asserted.
Gonzalez Rogers appeared particularly interested in the core issue of whether OpenAI as a nonprofit corporation could take charitable contribution (partially paid for by taxpayers because the contributions gave the donors a charitable tax deduction) and use the money to create assets in for-profit subsidiaries. She said it was “mindboggling” to think of a charity with a value of more than $300 billion, as Musk contends.
Gonzalez Rogers is no stranger to big tech litigation. She heard the 2020 antitrust case Epic Games brought against Apple Inc., in which she determined that some of Apple’s conduct was anti-competitive.
She took the preliminary injunction matter under advisement and said she would issue a decision after further study.
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