Apple recently filed a trade secret lawsuit against OpenAI, accusing the AI company of a pattern of misconduct aimed at getting current and former Apple employees to share confidential information. (In response, OpenAI said it is “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 over OpenAI’s much-discussed plans to enter the hardware industry (starting with a mobile smart speaker) and go public.
“Even whether or not the court grants any kind of injunction or any kind of restraining order on what OpenAI is doing, of course it could lead to a situation where it’s going to cause some delays in what OpenAI is working on,” Sean suggested. “Which I’m sure was probably part of the reasoning behind Apple doing this. They don’t do this on purpose.”
With all these plans underway, will OpenAI try to settle this as quickly as possible, or has it learned from its recent court victory against Elon Musk that it can afford the cost and embarrassment of a lawsuit? Kirsten, at least, predicts the latter.
Read on for a preview of our conversation, edited for length and clarity.
Kirsten Korosec: Sean, how do you feel about Sam Altman listening to you with a little device maybe in your pocket?
Sean O’Kane: I’m good. Maybe this is predictable, but I’m good. No thank you.
We’ll get to it, I’m sure, but this is reportedly the first product that OpenAI is working on in its hardware division with Jony Ive and company. They have been very welcoming ever since this weird video they posted last year of those sitting in that coffee shop or bar in San Francisco talking very vaguely about hardware and legacy devices, i.e. laptops and phones. And so if that’s the direction they’re headed, all the power to the people who want to have someone like him always listen to them. This is not going to be about me.
Anthony Ha: Part of what we have to remember about these kinds of devices is also that, depending on how mobile it is, it’s not just listening to you, it’s also listening to the people around you. I might be fine with it — I’m not doing well, but let’s just say I was — but if we met in person at Disrupt, suddenly he might be listening to all of us.
There are all kinds of social norms that will have to be renegotiated if these things become widespread. I think we should mock and criticize people who record other people without consent.
Kirsten: Well, I mention the device that has been speculated about for a long time and we’ll see what it really turns out to be once it’s officially unveiled, but it’s important in the context of this lawsuit that Apple filed last Friday.
It was the biggest news of the week, for sure, and this is a trade secret lawsuit. It has some pretty wild claims, and we should very much emphasize that these are claims that have been filed in a complaint by Apple. But what he accuses OpenAI of is a pattern of misconduct at the highest levels, specifically targeting OpenAI employees who worked at Apple. And they’ve actually named hardware chief Tang Tan in that lawsuit.
All of this is important because Apple accuses OpenAI of essentially stealing their trade secrets, but in the context, this could then be used for a competing hardware product. I’m wondering if we’re not getting into whether this lawsuit has merit because we haven’t had full discovery, but what are your initial impressions of the lawsuit other than wow, this is going to be fun?
Sean: Two things. First, this is a very big risk for whatever OpenAI is working on. Even if the court does or doesn’t grant any kind of injunction or any kind of restraining order on what OpenAI is doing, of course it could lead to a situation where it’s going to cause some delays in what OpenAI is working on, which I’m sure was probably part of the reasoning behind Apple doing it. They don’t do this on purpose.
The other is that we believe that OpenAI is — we know that they’ve filed confidentially for an IPO. We think it could happen as early as the end of this year, or early next year if you believe Sam Altman’s cautious language about the IPO. And that just raises a bunch of questions around that because, on the one hand, we think their business right now is probably very much software. They don’t really consider any hardware business in this picture right now.
They’re going to go to the markets and they’re going to pitch to bankers and investors about where they think their addressable market should be, and if they have a big part of that tied to a potential hardware segment and hardware products, that could be a huge risk for that and change the calculus of how the IPO is priced a lot. So there’s my head.
Anthony: A [allegation] that I guess Apple must have pretty solid numbers, they said that more than 400 Apple employees are now working on OpenAI. Of course, both are very large companies with many thousands or tens of thousands of employees. So as a percentage, it’s not necessarily huge. But that seems like a lot of people and a pretty serious talent drain.
And the other thing I’m wondering is related to Sean’s point. In the context of the potential IPO, how much damage has OpenAI ultimately done in terms of marketing and branding from the test it has already passed? Which seemed to basically win, but there was a lot of not-terrible-but-kind-of-embarrassing dirty laundry that came out in the testimony. To what extent is it just like, “We don’t want to go through that again”? Or did they learn the lesson: “Hey, we made it and survived and will be fine if we have to do another test with Apple”?
Kirsten: I fully foresee the latter, by the way.
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