How OpenAI stands to lose billions of dollars in major Apple lawsuit
Apple's new lawsuit against OpenAI could be incredibly damaging for the company, as it could not only threaten the AI giant's significant hardware investment, but also jeopardize the Initial Public Offering (IPO) that was planned for the near future.
The lawsuit, launched officially by Apple last week, sees the tech giant allege that OpenAI – the makers of ChatGPT – poached their workers in a bid to steal industry hardware secrets in the making of its own competing device.
We've heard plenty of conceptualization surrounding OpenAI's prospective handheld device, with claims that it could revolutionize what people use on a daily basis, potentially replacing the smartphone as we know it.
Sam Altman even brought legendary ex-Apple designed Jony Ive on board, although he had left the company seven years ago of his own volition, way before OpenAI had even considered the possibility of its own gadget.
What does Apple claim in the lawsuit?
As reported by The Guardian, an email from an Apple spokesperson outlines how "recently, significant evidence has emerged suggesting individuals employed by OpenAI wrongfully took Apple's secret and confidential information regarding our unreleased technologies, processes and products."
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The official legal complaint notes that "OpenAI's nascent hardware business now rests on the shakiest of foundations, rotten to its core by its illegal reliance on misappropriated trade secrets."
One of the key figures named in Apple's claims is Tang Yew Tan, the company's former vice-president who is now OpenAI's chief hardware officer. The iPhone manufacturer not only claims that he shared seemingly confidential information about Apple's suppliers, but also encouraged those interviewing for jobs at OpenAI to share information themselves.
The complaint calls these 'show and tell sessions', noting that another former Apple employee, Chang Liu, downloaded "dozens of Apple's confidential hardware-related files."
OpenAI has seemingly denied these claims in an official response to the legal filings, with spokesperson Drew Pusateri illustrating: "We have no interest in other companies' trade secrets. We remain focused on building innovative technology that empowers people everywhere."
How could this damage OpenAI?
Regardless of whether Apple's allegations are successful in court or proven to be true, this lawsuit threatens significant damage to OpenAI that could not only derail its hardware project, but put the company's entire future in jeopardy.
OpenAI's acquisition of Products – the company co-founded by Ive and Tan – for $6.4 billion could face a significant roadblock as Apple seeks a preliminary injunction, potentially delaying or even blocking fully any plans for the company to release its new piece of hardware.
In the most extreme scenario this would completely destroy a side of the business that OpenAI has plunged billions of dollars into, and has likely centered its future planning for its software business around, making this a significant crossroads for the company.
Additionally, it has been discussed at length that OpenAI's IPO is likely just around the corner and the company itself confirmed that news last month.
Uncertainty surrounding the Apple-driven lawsuit – which itself will likely take years to conclude considering its scale – will put the IPO in doubt as investors won't have the confidence needed for the move to succeed.
Additionally, this will also impact the private valuation of the company, especially as any impact on the hardware side would cost investors a lot of money.
Finally there are the ramifications of losing the lawsuit altogether to consider, which would open the door for Apple to claim both damages and a share of potential profits related to the use of its trade secrets, alongside the cost of a legal battle that stretches years against one of the world's most valuable and cash-rich companies.