Musk takes legal action against to block OpenAI's conversion to a for-profit structure

Musk cofounded OpenAI with Altman in 2015

OpenAI argues for-profit relocation required for capital

Nonprofit to for-profit conversion uncommon, specialist states

(Adds judge did not choose whether or not to issue the injunction in paragraph 5, OpenAi's attorneys' remark in paragraph 13)

By Anna Tong and Akash Sriram

OAKLAND, oke.zone Calif., Feb 4 (Reuters) - A federal judge said on Tuesday that parts of Elon Musk's claim against OpenAI to halt its conversion to a for-profit entity may go to trial, adding that the Tesla CEO will have to appear in court and affirm.

"Something is going to trial in this case," U.S. District Judge Yvonne Gonzalez Rogers in Oakland, California, said early in the court session.

"(Elon Musk will) rest on the stand, present it to a jury, and a jury will choose who is right." Rogers was thinking about Musk's recent ask for a preliminary injunction to obstruct OpenAI's conversion before going to trial, the most recent move in a grudge match between the world's richest person and OpenAI CEO Sam Altman that is playing out openly in court.

Rogers did not decide whether or not to release the injunction Tuesday, but at one point recommended that Musk's legal group had not presented enough proof for her to issue the injunction, and showed she might hold an evidentiary hearing, where both sides could present witnesses and proof. The last time Rogers supplied an initial injunction remained in Epic Games' case against Apple in May 2021.

Musk cofounded OpenAI with Altman in 2015, however left before the company took off and subsequently founded the completing AI startup xAI in 2023. OpenAI is now attempting to shift from a nonprofit into a for-profit entity, which it says it requires to do to secure the capital required to develop the very best artificial intelligence models. Last year, Musk submitted a claim against OpenAI and Altman, stating that OpenAI ´ s creators originally approached him to fund a not-for-profit focused on developing AI to benefit humankind, however that it is now focused on generating income. He later on expanded the claim to add federal antitrust and other claims, and in December asked the judge commanding the case to stop OpenAI from transitioning to a for-profit.

In response to Musk ´ s claim, OpenAI has said it will move to dismiss Musk ´ s claims and that Musk "need to be completing in the marketplace instead of the courtroom." The stakes on OpenAI's corporate transition have actually now escalated, as OpenAI ´ s last fundraising round of $6.6 billion and a new round of as much as $25 billion under discussion with SoftBank are conditioned on the business reorganizing to remove the nonprofit ´ s manage.

During the hearing, OpenAI's legal representatives said the reason to allow OpenAI to become a for-profit entity is due to the fact that it would be needed to assist in the mission of the nonprofit.

Such a restructuring would be extremely uncommon, said Loui, executive director of the UCLA Law Center for Philanthropy and Nonprofits. Nonprofit conversions to for-profits have actually traditionally been for healthcare companies like health centers, not venture capital-backed companies, she said. (Reporting by Anna Tong in Oakland and Akash Sriram in Bengaluru, Editing by Marguerita Choy)