While OpenAI celebrates its court victory against Musk, more challenges lie ahead
OpenAI chief strategy officer Jason Kwon celebrated with a team of lawyers in federal court in Oakland, California on Monday after a nine-judge jury dismissed Elon Musk’s $150 billion lawsuit against the artificial intelligence company in less than two hours.
But Mr. Kwon and OpenAI cannot afford to celebrate for too long.
Although the decision left OpenAI free to pursue its plans for an initial public offering as early as this year, the company still faces a long list of other challenges as it approaches what could be one of the biggest Wall Street debuts in history.
Competing AI companies like Anthropic and Google are rapidly improving their technology, giving OpenAI much more competition than it faced during the first three years of the AI boom. Dozens of other lawsuits accuse OpenAI of everything from copyright infringement to wrongful death. And Mr Musk has already promised to appeal Monday’s decision.
In a lawsuit filed in 2024, Mr. Musk accused OpenAI, its CEO Sam Altman and its president Greg Brockman of violating the AI lab’s founding agreement by prioritizing commercial profit over the public good. Mr. Musk founded OpenAI as a nonprofit in 2015 with Mr. Altman and Mr. Brockman before he left in a power struggle.
After Mr. Musk left, Mr. Altman turned the original nonprofit into a commercial company and began raising billions of dollars from Microsoft. OpenAI is now valued at $730 billion.
Mr Musk sought a court order to reveal another step OpenAI took last year to give the for-profit company more control. On Monday, after less than two hours of deliberation, the jury said he did not file the lawsuit before the statute of limitations expired. In fact, she did not consider his claims and Judge Yvonne Gonzalez Rogers dismissed them after the jury’s decision.
If Mr. Musk succeeds, OpenAI’s plans to go public would be stuck in limbo. But now that its plans can move forward, OpenAI faces significant business challenges.
Although OpenAI has received tens of billions of dollars in funding over the past few years, it remains a long way off. Investors can expect it to bridge the huge gap between how much money is going out the door and how much is being received.
The company’s revenue is growing thanks to the growing popularity of Codex, an OpenAI technology that is particularly good at writing computer code. And the company now has a new source of revenue when it started showing ads in ChatGPT. But the competition is the same.
In November, Google upped the ante when it released a new AI model called Gemini 3, saying that the technology had surpassed OpenAI’s leading technology and was now the best in the world. Anthropic has also started to grab big chunks of the market with its AI technology called Claude.
In just a few months, Anthropic has added thousands of large enterprise customers and more than doubled the revenue it expects this year to $19 billion from $9 billion last year. The fallout from the Department of Defense raised Anthropic’s public profile, and its smartphone app climbed to the top spot in Apple’s App Store.
Anthropic grabbed more headlines when it unveiled a new artificial intelligence system called Claude Mythos, saying the technology was too powerful to share with the general public because hackers could use it to exploit security holes in computer networks at an unusual rate. Anthropic only shared the technology with about 40 organizations so they could use it to patch holes in the shared Internet infrastructure.
OpenAI has released its own technology designed specifically for cybersecurity. And its technology continues to outperform most systems on the market by standard benchmarks. But Google is a formidable rival in the advertising market. And after Anthropic’s sudden rise, OpenAI faces an uphill battle as it tries to sell its technology to enterprises.
In an effort to meet growing demand, Anthropic recently struck a deal with Mr. Musk’s SpaceX to use all of the computing power from the rocket company’s Colossus 1 data center in Memphis.
Google and Anthropic declined to comment on the verdict in the trial.
As OpenAI battles its rivals, it also faces countless court battles.
Book authors, publishers and news organizations are suing OpenAI for copyright infringement, claiming their copyrighted works were illegally used to train its AI systems. Many parents and other groups have sued the company for negligence and wrongful death, alleging that ChatGPT has contributed to various suicides and school shootings.
(The New York Times has sued OpenAI and Microsoft, alleging copyright infringement of news content related to AI systems. Both companies have denied the suit’s claims.)
And despite Monday’s decision, the company still faces a legal challenge from Mr Musk, as he and his lawyers have said they will appeal.
“The judge and jury never really decided the merits of the case, only the technical side of the calendar,” Musk said in a social media post. “There is no doubt to anyone following the case closely that Altman & Brockman did, in fact, enrich themselves by stealing from charity. The only question is WHEN they did it!”
Peter Molk, a University of Florida law professor who specializes in corporate structures, said that while Mr Musk lost in court on Monday, there was still a chance the case could spark anger in the court of public opinion. And that, he said, could attract the attention of prosecutors who approved the company’s new profit structure.
“That could raise some concerns that prosecutors might have reason to reconsider OpenAI’s structure,” he said.
Catherine Bracy, who helps lead a coalition of organizations called EyesOnOpenAI, said people should continue to question the restructuring of OpenAI as profitable. Ms. Bracy, who was in the courtroom for much of the trial, has long complained that California Attorney General Rob Bonta allowed the OpenAI restructuring to move forward.
“In light of mounting evidence of OpenAI’s illegal abdication of its non-profit mission,” she said, Mr. Bonta “must reevaluate his contract with OpenAI, order an independent valuation of the nonprofit’s assets, and compel their transfer to a truly independent charitable entity.”