Apple recently filed a trade secrets lawsuit against OpenAI, accusing the AI company of a pattern of misconduct aimed at convincing current and former Apple employees to share confidential information. (In response, OpenAI said it was “not aware of any evidence that this complaint is justified.”)
In the latest episode of TechCrunch’s Equity podcast, Kirsten Korosek, Sean O’Kane, and I discussed whether this lawsuit will cast a pall over OpenAI’s much-discussed plans to get into the hardware space (starting with a portable smart speaker) and announce it.
“Even putting aside whether or not the court grants any kind of injunctive relief or any kind of restraining order on what OpenAI is doing or not, that would naturally lead to this kind of situation where that would cause some delay in what OpenAI is working on,” Shawn suggested. “And I’m sure that was probably part of the reason why Apple did it. They don’t do these things willy-nilly.”
With all these plans on the line, will OpenAI try to settle this as quickly as possible, or has it learned from its recent courtroom victory against Elon Musk that it can afford the cost and embarrassment of a trial? Kirsten predicts, at least, the latter possibility.
Keep reading for a preview of our conversation, which has been edited for length and clarity.
Kirsten Korosek: Sean, how do you feel about Sam Altman listening to you with a little device maybe in your pocket?
Sean O’Kane: I’m fine. Maybe this is predictable, but I’m good. No thank you.
I’m sure we’ll get to that, but this is allegedly the first product that OpenAI is working on in the hardware division with Jony Ive and his partners. They’ve been really shy ever since That weird video they posted last year Of them sitting in that café or bar in San Francisco and talking very vaguely about old gadgets and appliances, i.e. laptops and phones. So, if this is the direction they’re headed, all power to the people who want to have someone like that always listening to them. This wouldn’t be for me.
Anthony Ha: Part of what to remember about these types of devices as well is that, depending on how mobile they are, they’re not just listening to you, they’re listening to the people around you. I might be okay with that — I’m not okay with it, but let’s say I was — but then if we met in person at Disrupt, he might suddenly listen to all of us.
There are all kinds of social norms that will have to be renegotiated if this stuff becomes widespread. I think we should mock and criticize people who record other people without their consent.
Kirsten: Well, you’ve brought up a device that’s been speculated about for a really long time, and we’ll see what it ends up being once it’s officially introduced, but it’s important in the context of this lawsuit that Apple filed last Friday.
This was definitely the biggest news of the week, and this is a trade secrets lawsuit. It has some pretty wild allegations and we must strongly stress that these allegations were made in a complaint by Apple. But what OpenAI is accused of is a pattern of misconduct at the highest levels, directed specifically toward OpenAI employees who used to work at Apple. In fact, they named the chief agency official, Tang Tan, in this lawsuit.
This is all important because Apple accuses OpenAI of essentially stealing its trade secrets, but in the context of that, this could then be used for a competing hardware product. I’m wondering if maybe we don’t address whether this lawsuit has merit, because we haven’t gone through full discovery, but what were your initial impressions of the lawsuit aside from the fact that this is going to be entertaining?
Shawn: Two things. First, this represents a very significant risk to everything OpenAI is working on. Even putting aside whether or not the court grants any kind of injunctive relief or any kind of restraining order on what OpenAI is doing or not, that would naturally lead to this kind of situation where that would cause some delay in what OpenAI is working on, which I’m sure was probably part of the reason why Apple did that. They do not do these things willy-nilly.
The other is that we believe that OpenAI — we know that they filed secretly to go public. We think that 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 raises a whole set of questions about that because, on the one hand, we think that their business now is probably mostly software; They’re not really factoring any hardware business into that picture right now.
They’re about to go to market and they’ll be trying to convince bankers and investors where they think the addressable market should be, and if they have a significant amount of that tied up in the hardware division and potential hardware products, that could be a big risk to that and change a lot of the calculus of how to price an IPO. This is where my head is at.
Anthony: one [allegation] I think Apple must have very strong numbers, as they said more than 400 Apple employees are now working at OpenAI. Granted, both are very large companies with several thousand or tens of thousands of employees. So as a percentage, it’s not necessarily huge. But there seems to be too many people and a serious drain on talent.
The other thing I wonder about is Sean’s point of view. In the context of a potential IPO, how much damage will OpenAI ultimately suffer from a marketing and branding perspective from the experience it has already had? It looked like he basically won, but there was a lot of not-so-awful but kind of embarrassing dirty laundry that came out in the testimony. To what extent do they say, “We don’t want to go through this again”? Or have they learned the lesson: “We’ve been through it and we’ve survived it and we’ll be OK if we have to do another try with Apple”?
Kirsten: By the way, I fully expect the latter.
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