Apple has filed a trade secrets lawsuit against OpenAI, accusing the company of a systematic effort to steal confidential information by poaching current and former Apple staff. The complaint specifically names chief hardware officer Tang Tan. OpenAI has stated it is not aware of any evidence that this complaint has merit.
Legal trouble and hardware ambitions
On the latest episode of TechCrunch’s Equity podcast, Kirsten Korosec, Sean O’Kane, and I discussed whether this legal action will impact OpenAI’s plans to enter the hardware market and go public. The company is reportedly working on a mobile smart speaker as its first product.
Sean O’Kane noted that regardless of whether a court grants injunctive relief or restraining orders, the situation naturally causes delays. He suggested this delay might have been part of Apple’s reasoning for filing the suit, adding that the tech giant does not act without purpose.
OpenAI recently won a high-profile trial against Elon Musk, though the process involved embarrassing testimony. Kirsten Korosec predicts OpenAI will endure the cost and embarrassment of a trial with Apple rather than seeking a quick settlement.
Privacy concerns with new devices
Sam Altman is reportedly considering a small device that could listen to users in their pockets. This is allegedly the first product OpenAI is developing with Jony Ive and his team.
The company has been vague about the project since a video last year showed them discussing hardware and legacy devices like laptops and phones. While some might welcome constant listening, the implications are wider.
Anthony Ha pointed out that mobile devices do not just listen to the user but also to people around them. He noted that social norms would need renegotiation if such devices become widespread, suggesting we should criticise those who record others without consent.
Impact on IPO valuation
OpenAI has filed confidentially for an initial public offering, with a potential launch expected by the end of this year or early next year. Sam Altman has used cautious language regarding the timing.
Currently, the business is overwhelmingly software-focused. However, if investors believe a large portion of the addressable market depends on a potential hardware division, the lawsuit poses a significant risk.
Bankers and investors will need to recalibrate their pricing models if the hardware plans face legal uncertainty. This could change the entire calculus of how the IPO is priced.
The talent drain
Apple alleges that more than 400 of its employees now work at OpenAI. While both companies have tens of thousands of staff, this represents a serious talent drain.
Anthony Ha questioned whether OpenAI would avoid another trial after the previous one. He noted that while they won the case, the dirty laundry aired during the testimony was not entirely positive.
“They don’t do this stuff willy nilly,” Sean O’Kane said regarding Apple’s strategy.
