The Musk vs OpenAI verdict answered nothing about AI governance
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Less than two hours. That’s how much time the jury took to dismiss the Elon Musk lawsuit against OpenAI. A decisive victory for Sam Altman but for the rest of the world, it seemed like arguably one of the more important questions in tech right now was just left unanswered.
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Seemingly, the breach of charitable trust and unjust enrichment claim that Musk had filed was a little too late which places them beyond the statute of limitations. The jury gave this verdict and Judge Yvonne Gonzalez Rogers adopted it promptly and the case was tossed. OpenAI lawyers celebrated their victory and as for Altman and Brockman, they walk away squeaky clean.
On face value this seems like another court ruling but the trial never actually ended up ruling on whether OpenAI betrayed its founding mission. As Oren Etzioni from GeekWire and founding CEO of the Allen Institute for AI put it plainly, “Can a charity, funded by tax-deductible donations, be converted into a corporation? If your answer is yes, then American charity law is a tax-advantaged staging ground for whichever venture later proves lucrative, and the word “nonprofit” means whatever the founders decide it means once the asset gets valuable enough. If your answer is no, then someone should stop this.”
The governance issue isn’t theoretical either. There exists a precedent. The nonprofit board of OpenAI used its most important privilege in November 2023 when they dismissed the CEO, Sam Altman. However, it was compelled to rescind this action only five days later due to pressure from investors. The board lost all its power the moment it started exercising it. This is not governance. It is the myth of governance.
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OpenAI’s restructuring to a Public Benefit Company saw the nonprofit foundation retain its influence through a share in the for-profit arm. It sounds good until you peek at the fineprint. The nonprofit OpenAI Foundation currently holds a 26% stake in the for-profit OpenAI Group. Basically that means that the nonprofit board has given up almost three quarters of their control over the company to Microsoft, which has invested $13.8 billion in the venture and now holds 27% of its shares. The original mission now has a minority shareholding in its own organisation.
While reviewing OpenAI’s latest IRS disclosure, scholars noticed the company had quietly removed the word “safely” from its mission statement, a change that coincided with its transformation into an increasingly profit-focused business. That one word doing a lot of work.
The ruling on the statute of limitations means that none of this will be litigated. The legal team for Musk says that he will be appealing this, but even if the 9th Circuit rules against the time limitation decision, we’re still years away from getting to the real point of it. In the meantime, the transformation of OpenAI into a Public Benefit Corporation is complete. They have already converted. The issue of whether the transformation should ever have been made is not yet decided anywhere in court. OpenAI won Monday. What nobody won is clarity on how the most powerful AI companies in the world should actually be governed, and who gets to enforce it when they aren’t.
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