Musk vs Altlman & Taylor Swift Trademarks

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1:17For more than 75 years, Cincinnati Insurance has helped individuals and businesses navigate tough moments with expertise, personal attention, and independent agents who focus on relationships, not transactions. The Cincinnati Insurance Companies. Let them make your bad day better. Find an agent at CINFIN.com. This is Bloomberg Law with June Grosso from Bloomberg Radio. Elon Musk is facing off against Sam Altman at a high-stakes trial that could determine the future of OpenAI. The California trial is the culmination of years of animosity in public feuding over the startup they founded together more than a decade ago, before their relationship soured.

2:10Musk claims that Altman and other leaders at OpenAI enriched themselves by abandoning its altruistic principles and converting it from a full non-profit research organization to a for-profit company. While Altman and OpenAI are accusing Musk of harassment and say the real goal of his lawsuit is to undercut competition with his own startup, XAI. The first witness was Musk himself. He tried to portray the stakes in the case as existential, saying he wanted to prevent a Terminator-like situation and basically repeating a warning he gave years ago. There is some chance that above zero that AI will kill us.

2:54I think it's low, but there's some chance. The stakes in the trial are incredibly high and maybe even existential for open AI because Musk is asking the court to unwind its for-profit conversion that was just completed in October. Joining me is Bloomberg legal reporter Madeline Meckleberg, who's covering the trial. So, Madeline, even before the opening statements in the trial, the judge took Musk and Altman to task for some social media posts. So, just ahead of trial, if you were online on X, You saw a lot of posts coming from Musk and his account talking about, quote, Scam Altman, his nickname that he has for Sam Altman, and seemingly promoting social media posts that included a New Yorker article about Sam Altman and his conduct on the board of OpenAI.

3:50and OpenAI also was posting things on social media. They have a running blog post where they kind of provide updates on the status of the Elon Musk situation, I think is what they call it. And when they got to court first thing on Monday before they talked about anything else with the trial, the judge basically reprimanded both sides and said, you need to, I think she said the words, control your propensity to use social media. And she warned them that it may be making things worse outside the courtroom. And she had Elon Musk come up and stand in front of her as she gave this warning. And he agreed that he would not post anything or at least limit his posting about the case.

4:30The opening statements are the first chance for the parties to tell their story to the jury. Give us the high points of the openings. So we heard opening statements from the three main parties in this case being Elon Musk, OpenAI, and then Microsoft. Elon Musk, I think we've heard his argument by now, but basically he's alleging that Sam Altman and Greg Brockman, essentially, he keeps saying the words, stole a charity. He says that they enriched themselves by converting this nonprofit entity into a for-profit company and in doing so, abandoned the mission that they had at the beginning, which was creating AI for good.

5:13And during opening statements, We heard a lot from them about Sam Altman and Greg Brockman's removal from OpenAI's board in kind of the 2022-23 era and about how there was a lack of trust from them, from people at OpenAI. We saw some email exchanges talking about how much money Elon Musk contributed to the foundation, kind of showing that he was a major party in starting this from the beginning. And then OpenAI's attorneys got up and they tried to paint a different picture, of course, of the situation. They showed emails where Elon Musk was trying to get control of OpenAI when they were discussing forming a for-profit entity back in the day when he was still affiliated with the organization.

5:58and their attorney basically was trying to paint this case as a really simple one where Musk was a disgruntled former employee of OpenAI who was upset that they didn't want to go with his vision of the company. He left, formed a competitor, and now he's turning around trying to undercut OpenAI and harm one of his competitors in the AI space and his former company that he helped found. And then, of course, there's also the Microsoft element of this. They tend to come in after the fact, but they are a key player in the lawsuit. And that's because Musk has accused them of essentially aiding and abetting this theft that he describes of a charity.

6:37And so we heard from Microsoft talking about their investments that they made in OpenAI, why they decided to make those investments. And everything we're hearing from them over and over is pretty consistent. Their actions were above board. They have no part in anything that they say may or may not have been happening. And Musk was the first witness? Yes, Musk was the first witness called to the stand. And he spent about three days testifying, answering questions from his own attorneys, and then a little more heated questions from OpenAI's attorneys. So let's talk about the direct testimony first, the easy testimony when your lawyer questions you.

7:12What was the main point he was trying to get across on direct? So I think the main point that Elon Musk was trying to make is, and I keep saying this because he kept saying it on the stand, is it's not okay to steal a charity. We heard him say that over and over again in response to many questions. And it's really interesting across all of the testimony that we've heard so far, everyone kind of describes these early days when Musk was still at OpenAI really similarly. And they all kind of agree that there was discussion about the need for more funding to support their research and the need to maybe pursue some kind of for-profit component.

7:49And Musk said during his testimony that he had no problem with creating a for-profit company to support a nonprofit, but he felt things crossed the line when they decided to convert the nonprofit to a for-profit. And he described this situation as three phases of disillusionment with OpenAI. And it kind of started with him being happy, pleased with the mission. Then he started to get concerned that they were moving in a direction that he didn't agree with. This was around 2017, 2018, when he did ultimately leave the board. And then he said phase three kind of started in around 22, when he was convinced that they did, in fact, steal a charity.

8:30And so we heard from him a lot about that, about his support of OpenAI. He says it wouldn't have existed without him. And in the beginning, he came up with the name, he brought his guidance, his leadership, his vision, and most importantly, his money. He was trying to portray the stakes of the case as existential, saying several times that AI could, quote, kill us all if it's not developed safely. And the judge eventually told him to stop repeating that phrase. That's right. So this idea of AI safety is a big one. That's another part of Musk's case and his argument for why he's so concerned about this decision to turn OpenAI into a for-profit company.

9:10And he said that we need somebody responsible, leading AI. There's all these private companies whose interests are motivated by profit and investors. And that's why he wanted a nonprofit in this space. And they had an expert that they called to testify for Musk's case, who was going to talk about the threats of AI. And that includes this existential threat that Musk describes of AI someday being smarter than humans and leading to our demise, essentially. And the judge did reprimand them and say, you know, this case is not about AI safety. I don't want to hear about this anymore because Musk kept saying he was trying to prevent a Terminator situation, talking about the movie franchise.

9:55She said, that's not what this case is about. It's not about AI safety. And so that expert's testimony was cut quite short, I think, as a result of that. And we have not heard that line from Musk since then. If Musk testified to being so concerned about for-profit AI companies, was he questioned about starting his own AI company, AIX, where there have been many complaints about its Grok chat box for having harmful and sexualized images? That was a big subject of his cross-examination. And that's, okay, if you were so worried about this, why did you start another for-profit? Why didn't you start a nonprofit when you decided to start XAI?

10:37And I don't think we got a super clear answer from Musk on that decision. He kept saying, you know, as I've said, I have no problem with a for-profit. The problem is if you have a nonprofit and turn it into a for-profit. But, you know, that's of course getting at the details of this case, but not entirely answering this question of why he decided to do that versus starting a nonprofit. And I think at one point he said, why would I do that? I already started a nonprofit and it was OpenAI and they stole it. And so I think Musk's own company is a really key part of the OpenAI case because exactly as you said, he's still a player in this space.

11:14He's pursuing something that he said and acknowledged during testimony that it is a safety risk, But it also puts him at a competitor level with OpenAI. And so it adds this whole other component to the case. Musk has testified many times. But on cross, it seems like he's not following the basic rules of being cross-examined, that he's always trying to take over and one-up the lawyer who's questioning him. For example, here. So he's on the stand and he accused OpenAI's attorney of asking a leading question. and the judge asked Musk to repeat four words after her. I'm not a lawyer. That's right.

11:55And that exchange actually went on. She said, you're not a lawyer, are you? And he says, no, I'm not a lawyer. And she says, you didn't take any classes on evidentiary law, did you? And he said, well, actually, I took law 101. And she said, OK, well, still, OK, you're not a lawyer. Stop. Definitely fair to characterize him that way. I think obviously on direct exam, he has a lot more freedom to tell his side of the story. But on cross, he became visibly irritated with the attorney for OpenAI. He kept telling him his questions weren't fair. And lawyers love to say, answer the question that I'm asking you.

12:30You're not answering my question. It's a yes or no. It's a simple question. And Musk replied often that your questions aren't simple. They need context. They need explanation. And so it was a pretty interesting cross-exam where you have this lawyer trying to get something out of him. And Musk is resisting kind of at every turn. Talk about being a lawyer. At one point, he said this case will become case law and become precedent to looting every charity in America. OK, stay with me, Madeline. Coming up next on the Bloomberg Law Show, we'll continue this conversation about the OpenAI trial. There was one question that seemed easy to give a yes or no answer to, but Musk resisted.

13:10Did he invest $1 billion in open AI. I'm June Grosso, and you're listening to Bloomberg. What if you could have more wins, more support, more sound effects? At LPL Financial, we like the sound of that because LPL offers more. Advisors, what if you could have more ways to help your clients? Ready to invest? What if you could find an advisor that really understands you? When it comes to your finances, your business, your future, at LPL, We ask, what if you could? Paid advertisement. Investing involves risk, including potential loss of principal. LPL Financial LLC. Member FINRA SIPC. Get the news you need in just 15 minutes.

13:50Start your day with Bloomberg Daybreak, the podcast with a global view on the stories that matter. I'm Nathan Hager. And I'm Karen Moscow. Join us each morning for curated stories on current events, politics, business, and foreign relations. Plus one conversation on the day's biggest developments, all in just 15 minutes. Subscribe to Bloomberg Daybreak for a precise, thoughtful take on the stories that matter. Listen to Bloomberg Daybreak each morning on Apple, Spotify, or anywhere you listen. The high-stakes trial in California that could determine the future of OpenAI is in its second week. Elon Musk is facing off against Sam Altman, claiming that OpenAI betrayed its altruistic mission in pursuit of profit.

14:34The highlight of the testimony so far was the three days Musk was on the stand. On cross-examination, Musk had several heated exchanges with William Savitt, the attorney who represents OpenAI, and became visibly irritated as Savitt questioned whether he had backed off his financial commitment to the startup in the early years. I've been talking to Bloomberg legal reporter Madeline Meckleberg. So as we discussed, Madeleine, Musk resisted answering yes or no to questions. And at one point, Savitt questioned him, quote, at the end of it, you didn't contribute a billion dollars to open AI, did you?

15:15Savitt wanted a yes or no answer, which Musk would not give until the judge intervened and told Musk to answer the question, which he still didn't give a yes or no answer to. Explain the importance of this point. Right. So his financial commitments to OpenAI are a big part of this case because obviously he's trying to say that he donated this money under certain circumstances and they've now violated that mission that he thought this money was going to fund. But yes, we saw during the course of trial a few different statements that Musk has made publicly about how much money he's given to OpenAI.

15:53When they first launched in 2015, they did so with a commitment from him that he would eventually donate as much as a billion dollars. And then he left the board in 2018. And then later we saw a post from him on X in 2023, where he said that he donated$100 million to OpenAI, which is obviously a big drop down from one billion. But through questioning from the attorney, he revealed that he had given$38 million in total to OpenAI before he departed. And so an even bigger drop down from the$1 billion that he had pledged to commit in the early days. And that money was through quarterly donations that he was making, but also rent that he was paying on an office building for OpenAI.

16:37And this is, you know, this is an important issue because it gets at this question of how much Musk was really involved in open AI, how much stake he had in this. And then, of course, there's this attempt to impeach a witness and show that, you know, he's sometimes says things that don't turn out to be true. On the whole, how do you think his testimony went? How did he come across? He's an interesting character. And, you know, there were a lot of fireworks, like we're saying. But at the end of the day, I think the person we saw on the stand was Elon Musk. Like there weren't necessarily any surprises in how he was presenting himself.

17:13As you say, he's testified before. He speaks publicly a lot. We kind of get a stream of consciousness from him on his social media. So I don't think there's anything, you know, it wasn't like, oh my gosh, I can't believe he said that. But I will say they definitely really were grilling him on cross-exam. And I don't know that he totally helped his case. I think it's really early to tell, but I think he made a few key concessions, including talking about the difference in financial commitments that he made. He said at one point that there was no paperwork that he signed outlining the terms and conditions of his donation to OpenAI.

17:50I think that was an important point. And so I think it maybe didn't go as smoothly as he would have wanted it to go. But that being said, at the same time, he also had plenty of time to make his own case. And I think jurors definitely understood where he was coming from in this, too. So I know during jury selection, his connection to Trump and his position at Doge came up, which some people held against him. Did any of that come up during his testimony? No. So they tried, but the judge said, we're not going to go there. There's some kind of pretrial agreement limiting certain subjects that could be asked because obviously this case has such huge characters and such hop on issues that there's so much ground they could really cover.

18:34And she's trying to keep it very narrow to the issues at hand. And at one point, Musk was testifying about a meeting that he had with President Obama when he was still in office about AI safety. And so the lawyers for OpenAI were saying, OK, like he's opened the door to like talking about his government advocacy. we want to ask him about his relationship with the Trump administration. And the judge said that was a no-go. So we didn't get into that on the stand. An experienced judge. And she seems to really be keeping control of her courtroom. And she's not letting anything slide. That's honestly kind of an understatement.

19:10She runs a tight ship. And that means that sometimes when the jury's not in the room, the lawyers are getting a little snappiness from her. she really has no patience for nonsense I think and like we'll cut people off and just say I'm not interested in hearing about that argument like let's move on to something else and I think she's got a really packed calendar and we hear that from her a lot in some of the pre-trial hearings and so I think it's really important to her that this case stick on schedule and get done and I think kind of like I was saying there's a lot of potential pitfalls here and a lot of avenues where this case could turn and become about something else.

19:50And so we're really seeing her working hard to kind of keep them on track, keep them focused on this issue. And she's a really important part of this case because we talked about last time I was on here with you that the jury decision is going to be advisory. And so at the end of the day, Yvonne Gonzalez Rogers, who's the judge, she's going to get the final say on who wins and what the damages should So it's really important for her to get what she needs out of the testimony as well. It's been said that this trial is an existential threat to the company. Explain why, what Musk is asking for if he wins.

20:26A lot. He's asking for as much as$134 billion. And we say that because his request is based on kind of OpenAI's valuation right now, which is always fluctuating. But he's pledged to not keep that money. He wants to donate that money back to the OpenAI Foundation, which is the nonprofit arm of OpenAI that still exists today. And then in addition to that, he's asking for Sam Altman and Greg Brockman to be removed from their leadership positions at the company. And he wants a court order unwinding this for-profit conversion that OpenAI kind of spent the last year working towards. And so these are huge things that any one of them being allowed to happen could totally shake open AI and kind of put them on a path to an uncertain future at this point.

21:12But it really remains to be seen how seriously the judge is considering all of those options. She's bifurcated this trial. So the jury is just hearing arguments on liability. And then once they go to deliberate on that, the judge is going to hear arguments from the lawyers on these damages. So if she decides to rule in Musk's favor, then she's going to have to decide what is the appropriate remedy here, because some of these are pretty extreme. Very extreme. And is OpenAI looking to go public this year? OpenAI is definitely eyeing a public offering at this point, and it could be one of the largest in history.

21:50I think the last valuation we have for them is$852 billion, which is, you know, a mind-boggling number. So that also is adding to the pressure here and the stakes, making them so much higher. OpenAI's Greg Brockman was the next big witness to testify. Tell us what he said. That's right. Greg Brockman, who is the president of OpenAI currently and was one of these original co-founders with Elon Musk. His testimony covered a lot of ground, a lot of similar ground to Elon Musk's testimony, of course, where we heard him talk about these early days at the startup and kind of the dissolution of their relationship, essentially.

22:30I think one thing that we heard from him yesterday that was very interesting was him talking about kind of early concerns that he, Sam Altman and Ilya Setzkever had with Musk, Ilya Setzkever being one of the engineers at OpenAI and one of the founders as well. And he told this anecdote about how Musk was shown a really early model of chat GPT or the language model that would become chat GPT. And he said Musk was very dismissive of it. He called it stupid and said it's something kids on the Internet could do a better job making. And to Greg Brockman, he said that made him feel like someone like Musk shouldn't be in charge of this endeavor because he lacks the ability to dream a little and see kind of the potential of this technology, which at that stage in the 2015, 2016 time is really essential.

23:21And so he had a kind of a zinger in court. He was saying, you know, he knows rockets. He knows electric cars. He did not and I believe does not know AI. And that was a major concern. So we heard him really go hard on Musk as we expected him to. But how did he hold up on Cross? Did Musk's attorneys score any points? One of the things that they really were focusing on was the amount of money that he has made from his involvement with OpenAI. Because we heard that he invested zero dollars in creating the for-profit company. He did not donate anything to OpenAI in the early days. And now his stake in the startup is worth almost$30 billion, he testified.

24:04I think that was new information to us on the stand. And so he had an interesting back and forth with Elon Musk's attorney about how he had made so much money, given that he had not put anything in. And there's a key journal entry that we heard from Brockman, from a journal that he has maintained about his professional and personal life. And there's one entry in 2017 where he was kind of considering what steps OpenAI should take. And he wrote in his entry, financially, what will take me to$1 billion? And that's a line that Musk's attorneys have really seized on because their whole case is arguing that these guys sought to enrich themselves by turning this nonprofit into a for-profit company.

24:46And they're saying this line shows that that's what he was focused on. His motivations were personal finance and enrichment. And so they were asking him about that line. And Brockman told them that, you know, I was feeling like we were in a fork in the road. It wasn't about making myself richer. I was trying to decide if we should go with this vision Elon Musk had presented or this other vision that we had been considering. And my thought was, if I can reach a billion dollars, I'll feel like I'm good. It's not going to matter which path I'm choosing. And so, of course, Elon Musk's attorneys really seized on that response.

25:20And he said, you know, over and over, so you're good with a billion dollars. Why didn't you take the$29 billion that you have now over that and donate it back to the nonprofit if you're so good with a billion dollars? And so there was a lot of back and forth fighting about this amount and whether he should have, you know, not have such a big stake in this for profit now and kind of this one billion dollar goal that he had for himself. So I don't know that that went great for Brockman while he was on the stand. Definitely a lot of interesting new details. I think another new detail that he revealed while he was testifying is that OpenAI plans to spend$50 billion on compute needs this year, which is a huge jump up from where they were in 2017 when they were spending about$30 billion on computing needs.

26:10So we also got insights from him about kind of the scale and how much this enterprise has really grown since those early days. I was going to ask you if there were any very incriminating kind of mic drop pieces of evidence, but that certainly seems like one. Thanks, Madeline. We'll check back with you to see how the trial's progressing. That's Bloomberg legal reporter Madeline Mecklenburg. Coming up next on the Bloomberg Law Show, Taylor Swift makes a rather novel legal move to protect her voice and image. I'm June Grosso, and you're listening to Bloomberg. On June 10th, Bloomberg Invest is back in Hong Kong.

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