Inside today’s Daily Journal…

Editor’s note: Porter turned over the Journal to Tech Frontiers editor Erez Kalir today so Erez could tell the story of the legal battle between Elon Musk and AI giant OpenAI… what he calls the “trial of the century”.

Here’s Erez… 

Behind every great fortune lies a great crime…

Later this month, in a sleepy federal courthouse in Oakland, California, a 12-person jury will decide whether Honoré de Balzac’s 19th-century maxim applies to one of the great fortunes underlying the artificial-intelligence (“AI”) boom.

The fortune in question belongs to OpenAI – the maker of the leading generative-AI platform ChatGPT – a company now reportedly seeking a staggering $850 billion valuation in a planned initial public offering (“IPO”).

Elon Musk – founder of Tesla (TSLA) and SpaceX, and one of OpenAI’s original founders – has asserted in a detailed lawsuit that the OpenAI fortune was built on fraud. And a widely respected federal judge overseeing the case has already ruled that Musk’s claims are credible enough to merit a trial.

What the jury will decide is not merely whether Elon Musk has a sound grievance. It’s whether OpenAI can continue to exist in its present form… and indeed whether the entire AI ecosystem surrounding OpenAI – an ecosystem that encompasses some of the largest, most powerful corporations on Earth, including Nvidia (NVDA), Microsoft (MSFT), Oracle (ORCL), and others – rests on a rotten, fraudulent foundation.

Let me explain.

OpenAI did not begin as a conventional Silicon Valley company.

It launched in 2015 as a non-profit – explicitly dedicated to developing artificial intelligence for the benefit of humanity, unconstrained by the pursuit of profit. That framing mattered. It attracted leading AI talent… proven technology builders… and it also attracted Elon Musk, who contributed tens of millions of dollars in seed capital and lent his credibility to the venture.

The idea was both idealistic and elegant: Build the most powerful technology the world has ever seen… but do so in a structure designed to prevent its capture by private interests.

Then, as OpenAI’s tech approached commercial viability, the structure changed.

First came a hybrid, “capped profit” model, a kind of halfway house between a non-profit and for-profit. Then came a web of affiliated entities. Then deep commercial ties with Microsoft. Then, in a short span, the non-profit became the launchpad for one of the most meteorically valuable private companies in history.

Musk’s claim is straightforward: He alleges that he deliberately backed a non-profit mission – one grounded in openness, safety, and public benefit – only to see that mission… and the valuable intellectual property that it spawned… get permuted into a for-profit enterprise without his consent.

You don’t have to like Elon Musk or approve of the carnival-show antics in some other parts of his life to recognize that this is not a trivial allegation.

And more importantly, the court has already said as much.

OpenAI, represented by some of the leading law firms in America, sought to have the case dismissed before trial. U.S. District Judge Yvonne Gonzalez Rogers – an experienced, respected jurist overseeing the case – declined OpenAI’s motion. In doing so, she determined that Musk’s claims – which include fraud, breach of fiduciary duty, and unjust enrichment – present genuine disputes of material fact that only a jury can resolve.

In plain English: Musk could win.

The headline damages number that Musk has sought – over $150 billion – is sizable enough to give anyone pause.