Apple recently filed a trade secrets lawsuit against OpenAI, alleging fraud aimed at forcing current and former Apple employees to share confidential information. (In response, OpenAI said it was “not aware of any evidence that this complaint has merit.”)
On the latest episode of TechCrunch’s Equity podcast, Kirsten Korosec, Sean O’Kane and I discussed whether this lawsuit will cast a shadow on OpenAI’s much-discussed plans to enter the hardware business (starting with mobile smart speakers) and go public.
“Regardless of whether or not a court grants some kind of injunction or some kind of restraining order against what OpenAI is doing, it’s certainly possible that we could end up in a situation that causes some kind of delay in what OpenAI is doing,” Sean suggested. “I’m sure that was probably part of the reason behind Apple doing something like this. They don’t do things like this blindly.”
With all these plans in jeopardy, will OpenAI try to solve this problem as soon as possible, or will it learn from its recent court victory against Elon Musk that it can endure the expense and embarrassment of court? At least Kirsten predicts the latter.
Continue reading for a preview of the conversation, edited for length and clarity.
Kirsten Kolosek: Sean, what do you think about Sam Altman listening to you on a little device in his pocket?
Sean O’Kane: All right. This may be as expected, but I’m fine with it. no thanks.
We’ll talk more about it, but this is said to be the first product that OpenAI has been working on with Jony Ive and others in the hardware department. They’ve gotten really coy since last year when they released a strange video of them sitting in a coffee shop or bar in San Francisco talking very vaguely about hardware and legacy devices: laptops and cell phones. And if this is the direction they’re headed, all the power to those who want someone like that to always listen to them. This doesn’t apply to me.
Anthony Ha: One of the things you have to remember about these types of devices, depending on how mobile they are, is that they don’t just listen to you, they also listen to the people around you. I might be okay with that — I’m not okay, but let’s just say I was — but if we met in person at Disrupt, suddenly it might make all of us heard.
If this becomes widespread, there are all sorts of social norms that will need to be renegotiated. I think we need to ridicule and criticize people who record others without their consent.
Kirsten: Well, I brought up this device that has been speculated for a really long time. We’ll see how that actually plays out once it’s officially introduced, but it’s important in the context of this lawsuit filed by Apple last Friday.
Admittedly, this was the biggest news of the week, but it’s a trade secret lawsuit. This contains some pretty outlandish claims, and it must be very emphasized that these are claims filed by Apple in its complaint. But what the company is accusing OpenAI of is a pattern of misconduct at the highest levels, specifically directed at OpenAI employees who worked at Apple. And in fact, they named Chief Hardware Officer Tan Tan in this lawsuit.
This all matters because Apple is accusing OpenAI of essentially stealing its trade secrets, which in that context could be used for competing hardware products. Since we haven’t had full discovery, I’m guessing we’re probably not going to get into whether this case has merit or not, but other than the fact that, wow, this looks interesting, what are your first impressions about this case?
Sean: There are two things. The first is that this is potentially a huge risk for whatever OpenAI is working on. Regardless of whether or not a court grants some kind of injunction or some kind of restraining order against what OpenAI is doing, there could certainly be situations that would cause delays in what OpenAI is working on, and I’m sure that was probably part of the reason behind Apple taking this action. They don’t do things like this recklessly.
The other thing is that we think OpenAI is. We know they secretly filed for an IPO. If Sam Altman’s cautious statements regarding the IPO are to be believed, we think it could happen as early as the end of this year or early next year. And this just raises a lot of questions about that. Because, on the one hand, we think their current business is probably overwhelmingly software. At this point, we’re not factoring the hardware business into this picture.
They’re going to go to market and they’re going to pitch to bankers and investors where they think the market should be for them to address. And if that large amount is locked into a potential hardware division or hardware product, this could be a big risk for it and would change a lot of how IPO pricing is calculated. So my head is there.
Anthony: One of the (claims) that I’m guessing Apple must have pretty solid numbers on is that there are currently over 400 Apple employees working at OpenAI. Indeed, both are very large companies with thousands or tens of thousands of employees. Therefore, the percentage is not necessarily large. But it looks like a pretty serious talent drain with a lot of people.
Another thing I’m curious about is related to Sean’s point. Given the possibility of an IPO, how much damage did OpenAI ultimately suffer from a marketing and branding standpoint from the trials it had already gone through? It basically looked like it won, but the testimonials came out with a lot of not terrible, but in some ways embarrassing, dirty laundry. To what extent do they think, “I don’t want to feel like that again”? Or did they learn the lesson of, “Oh, we went through that and survived, and we’ll be okay if we have to go to court with Apple again.”
Kirsten: By the way, I totally expect the latter.
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