Musk’s Lawsuit Against OpenAI Dismissed Over Statute of Limitations, OpenAI IPO Obstacles Cleared?

TradingKey - On May 18 local time, a nine-person jury in a federal court in Oakland, California, after less than two hours of deliberation, unanimously ruled that Elon Musk's lawsuit against OpenAI and Sam Altman should be dismissed in its entirety because the statute of limitations had expired, eliminating the need for a substantive trial on the core dispute of whether OpenAI departed from its non-profit mission.

The three-week trial, which external observers had viewed as a landmark case for the future direction of the AI industry, came to a sudden halt due to procedural issues. According to details disclosed during the trial, Musk had long been aware of the facts surrounding the organization's commercial transformation but delayed filing the lawsuit until 2024, which exceeded the three-year statute of limitations prescribed by U.S. law.

U.S. District Judge Yvonne Gonzalez Rogers stated upon adopting the jury's verdict that "the existing evidence fully supports this ruling."

During the trial, Musk alleged that when he co-founded OpenAI with Altman and others in 2015, the parties agreed that it would be a non-profit organization with a mission to "benefit all of humanity," for which he invested $38 million in seed capital. However, after establishing a for-profit business unit in 2019, OpenAI gradually became dependent on commercial capital from entities like Microsoft.

In the lawsuit, he presented several aggressive demands: requiring OpenAI to return to its non-profit status, removing Altman and Brockman from their positions, and injecting the entire $150 billion in damages into OpenAI's charitable accounts.

William Savitt, legal counsel for OpenAI, stated after the trial that the jury's verdict proved the lawsuit was a "deliberate act of sabotage by a hypocrite against a competitor." Microsoft also welcomed the ruling, stating it will continue to deepen its partnership with OpenAI.

Musk subsequently confirmed via a statement that he would appeal to the U.S. Ninth Circuit Court of Appeals, although he did not specify the grounds for the appeal.

Courtroom confrontation

Elon Musk and Sam Altman have presented diametrically opposed narratives regarding the origins and evolution of OpenAI, as their years of long-standing grievances were laid bare before the public.

Musk's legal team characterized Altman as a calculating "two-faced leader," repeatedly citing his 2023 ousting and swift reinstatement by OpenAI's board to argue that "even his own people cannot trust him," thereby questioning the motives and legitimacy of the company's commercial pivot under his leadership.

OpenAI's lawyers, in turn, portrayed Musk as a jealous competitor with a "frustrated desire for power," noting he left the company in 2018 after failing to gain absolute control. They argued that his 2023 launch of xAI directly targeted OpenAI's market position and that the lawsuit is merely a commercial tactic.

Altman and co-founder Greg Brockman also publicly criticized Musk's management style in court, stating that he views the world through an extreme "black and white" lens and suffers from volatile mood swings, easily losing control when events do not meet his expectations.

Brockman went further by bluntly dismissing Musk's AI credentials: "He does understand rockets and is proficient in electric vehicle technology, but he didn't understand AI in the past, and I don't think he understands it now."

Litigation maneuvering continues

However, this procedural defeat does not end the legal tug-of-war between Musk and OpenAI.

In a subsequent phase of the same lawsuit, Musk added two additional allegations: first, that the deep partnership between OpenAI and Microsoft has created a market monopoly, squeezing the survival space for other AI companies; and second, that OpenAI used its influence to lobby investors to refuse funding for competitors, including his own xAI.

In response, presiding Judge Yvonne Gonzalez Rogers admitted during post-hearing communications with lawyers from both sides that "it is currently difficult to determine whether these claims have sufficient legal basis," while noting that "the artificial intelligence sector itself is highly competitive."

Notably, Musk's xAI has filed a separate independent lawsuit against OpenAI over trade secret infringement and antitrust issues, which has not yet entered the substantive trial phase. The federal court has decided to divide the series of disputes into multiple phases to proceed sequentially. Following Monday's ruling, the judge plans to convene a meeting with lawyers from both sides to further clarify the pace and focus of subsequent proceedings.

Furthermore, Musk has suffered a string of setbacks on the legal battlefield over the past year. In August last year, Tesla was ordered to pay $243 million over a fatal crash, and in March this year, he lost a lawsuit brought by Twitter investors, potentially facing $2.6 billion in damages. This latest legal loss against OpenAI undoubtedly compounds the legal woes of the tech titan.

How the Ruling Affects Two Major IPOs

This ruling holds critical implications for both Sam Altman and Elon Musk, as the two tech leaders are simultaneously advancing the public listing processes for their respective companies.

Musk is making intensive preparations for SpaceX's initial public offering. Following its strategic integration with xAI in February, the company's valuation has reached $1.25 trillion. After filing a confidential IPO application in April, market expectations are widespread that its prospectus could be made public this week. Separate reports indicate that SpaceX plans to list on the Nasdaq on June 12 under the ticker "SPCX," aiming to raise between $70 billion and $75 billion.

Losing a lawsuit on the eve of an IPO is not good news for Musk.

For OpenAI, however, this legal victory directly clears the most critical legal hurdle in its listing process.

In late March, OpenAI completed a $122 billion funding round at a valuation exceeding $850 billion, setting a new record for a single transaction in Silicon Valley's private market. The ChatGPT developer is accelerating model iterations and expanding consumer-side applications while actively competing for customers with Anthropic, a leading player in enterprise-grade AI.

Wedbush Securities analyst Dan Ives noted that the ruling effectively eliminates major compliance risks in OpenAI's potential listing process, stating, "While Altman's personal public image came under some pressure during the trial, this remains a landmark victory for the company's overall capital strategy."