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Apple recently filed a trade secrets lawsuit against OpenAI<\/a>, 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<\/a> it is \u201cnot aware of any evidence that this complaint has merit.\u201d)<\/p>\n On the latest episode of TechCrunch\u2019s Equity podcast<\/a>, Kirsten Korosec, Sean O\u2019Kane, and I debated whether this lawsuit will cast a shadow over OpenAI\u2019s much-discussed plans to get into the hardware business (starting with a mobile smart speaker<\/a>) and go public<\/a>.<\/p>\n \u201cEven setting aside whether or not the court grants any kind of injunctive relief or any kind of restraining order over what OpenAI is doing, it just naturally can lead to that sort of situation where it\u2019s going to cause some delays in what OpenAI is working on,\u201d Sean suggested. \u201cWhich I\u2019m sure was probably part of the reasoning behind Apple doing this. They don\u2019t do this stuff willy nilly.\u201d<\/p>\n With all those plans on the line, will OpenAI try to settle this as quickly as possible, or did it learn from its recent courtroom victory against Elon Musk<\/a> that it can endure the cost and embarrassment of a trial? Kirsten, at least, predicts the latter.<\/p>\n Keep reading for a preview of our conversation, edited for length and clarity.<\/p>\n Kirsten Korosec:<\/strong> Sean, how do you feel about Sam Altman listening to you with a little device maybe in your pocket?<\/p>\n Sean O\u2019Kane:<\/strong> I\u2019m good. Maybe that\u2019s predictable, but I\u2019m good. No thanks.<\/p>\n We\u2019ll get into it, I\u2019m sure, but this is allegedly the first product that OpenAI has been working on in its hardware division with Jony Ive and company. They\u2019ve been really coy ever since that weird video they put out last year<\/a> of them sitting at that coffee shop or bar in San Francisco and sort of talking very vaguely about hardware and legacy devices, meaning laptops and phones. And so if this is the direction they\u2019re headed in, all power to people who want to have somebody like that always listening to them. This is not going to be for me.<\/p>\n Anthony Ha:<\/strong> Part of what we have to remember about those kinds of devices is also that, depending on how mobile it is, it\u2019s not just listening to you, it\u2019s listening to the people around you. I might be fine with it \u2014 I\u2019m not fine with it, but let\u2019s say I was \u2014 but then if we met up in-person at Disrupt, then suddenly it might be listening to all of us.\u00a0<\/p>\n There\u2019s all kinds of social norms that are going to have to be renegotiated if these things become widespread. I think we should make fun of and criticize people who record other people without consent.<\/p>\n Kirsten:<\/strong> Well, I bring up the device that has been speculated about for a really long time, and we\u2019ll see what it really ends up being once it\u2019s officially introduced, but it\u2019s important in the context of this lawsuit that Apple filed last Friday.\u00a0<\/p>\n It was the biggest news of the week, certainly, and this is a trade secret lawsuit. It has some pretty wild allegations and we should very much emphasize these are allegations that have been filed in a complaint by Apple. But what it is accusing OpenAI of is a pattern of misconduct at the highest levels, specifically directed towards OpenAI employees who used to work at Apple. And in fact they\u2019ve named the chief hardware officer Tang Tan in this lawsuit.<\/p>\n This is all important because Apple is accusing OpenAI of essentially stealing their trade secrets, but in the context of that, this could be then used for a competing hardware product. I\u2019m wondering if maybe we don\u2019t get into whether this lawsuit has merits, because we haven\u2019t gone through full discovery, but what are your initial impressions of the lawsuit aside from the fact that wow, this is going to be entertaining?<\/p>\n Sean: <\/strong>Two things. One, this is a pretty big risk potentially to whatever it is OpenAI is working on. Even setting aside whether or not the court grants any kind of injunctive relief or any kind of restraining order over what OpenAI is doing, it just naturally can lead to that sort of situation where it\u2019s going to cause some delays in what OpenAI is working on, which I\u2019m sure was probably part of the reasoning behind Apple doing this. They don\u2019t do this stuff willy nilly.<\/p>\n The other is that we think that OpenAI is \u2014 we know that they\u2019ve filed confidentially for an IPO. We think it might happen as early as the end of this year, or early next year, if you believe Sam Altman\u2019s cautious language around the IPO. And this just raises a whole bunch of questions around that because, on the one hand, we think their business right now is probably overwhelmingly the software; they\u2019re not really factoring in any hardware business into that picture at the moment.<\/p>\n They\u2019re about to go to the markets and they\u2019re going to be pitching bankers and investors on where they think their addressable market should be, and if they have a big amount of that pegged to a potential hardware division and hardware products, this could be a huge risk to that and changes a lot of the calculus of sort of how the IPO gets priced. So that\u2019s where my head\u2019s at.<\/p>\n Anthony:<\/strong> One [allegation] that I assume that Apple must have pretty solid like numbers on is, they said more than 400 Apple employees now work at OpenAI. Granted, both of them are very large companies with many thousands or tens of thousands of employees. So as a percentage, it\u2019s not necessarily huge. But that seems like a lot of people and a pretty serious talent drain.\u00a0<\/p>\n And the other thing I\u2019m wondering is related to Sean\u2019s point. With the context of the potential IPO, how much damage did OpenAI ultimately take from a marketing and brand perspective from the trial it already went through? That it 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 are they just like, \u201cWe do not want to go through that again\u201d? Or did they take the lesson of, \u201cHey, we went through it and we survived and we\u2019ll be okay if we have to do another trial with Apple\u201d?<\/p>\n Kirsten:<\/strong> I fully predict the latter, by the way.<\/p>\n<\/div>\n When you purchase through links in our articles, we may earn a small commission<\/a>. This doesn\u2019t affect our editorial independence.<\/em><\/p>\n