/ The trade secrets case shaking Silicon Valley.
Liam Ortiz is a tech journalist who covers AI related big tech and breaking news at TheTweaks. Before joining TheTweaks he worked for almost four years in corporate and national tech news in different companies. Few are quick but Liam is quicker, he breaks news before anyone else and that makes her special. His passion is somewhere connected with profession as his hobby is watching documentary movies.
The Apple OpenAI lawsuit may become one of the most interesting cases of 2023. Apple claims that OpenAI operates in a way trying to steal the trade secrets using the targeted hiring process of current and former employees. On their behalf, OpenAI says that there is no reason for this lawsuit to exist at all.
At the moment it is too early to prove or disprove any of the allegations of the parties as the litigation process is in the very beginning and none of the parties was challenged yet. Despite that, the timeliness of the lawsuit made this case really crucial.
The company has been actively developing its hardware division with the participation of the former head of the design department at Apple, Jony Ive. However, the information regarding this division remained secretive with only one bit of footage that was the conversation of Jony Ive and OpenAI CEO Sam Altman about the legacy products including phones and computers. As reported, the first product that comes from the hardware division is the screenless AI mobile speaker which serves as a companion device.
Usually, trade secrets lawsuits are about compensations. This case of Apple does not fall under this category and that is why it is so unique. The existence of this high profile lawsuit itself becomes the strategic tool for the company. Litigation causes the delays of hires, development of products and decision-making process in the company. The observers of the lawsuit think that this could be one of the motivations for Apple.
The case will not have a negative impact on OpenAI as the hardware development process will get delayed, but the problem is that this can affect the ability of the company to work.
As reported, OpenAI has filed to go public already, with some expecting the IPO to happen in 2026-2027. Right now OpenAI is in the phase when it has to prove its potential to the bankers and institutional investors and the hardware division is one of these tools.
Here is the most important aspect of this situation: the company generates its income from the software, but there is something more. If the hardware was the element of the growth story that justified the premium valuation of the company, then this trade secrets lawsuit, that causes many questions regarding the legality and sustainability of the hardware division, can have a serious impact on how the bankers will estimate the value of the offering.
The investors do not value the companies on the basis of revenues at the moment, they value them on the basis of the credibility of the story that is told. The trade secrets lawsuit involving Apple can raise exactly these concerns.
It seems that the lawsuit is not going to be a product story, but rather a valuation one.
Now this question remains open, discussed by industry analysts. OpenAI had its courtroom battle with Elon Musk not long ago and won. However, during this process, there were a lot of embarrassing facts revealed to the public even though the company was the winner of the case. The question is whether OpenAI will be ready for the round two of legal exposure or will absorb the reputational damage and defend the lawsuit in court.
Given how critical hardware development appears to be for OpenAI in the perspective of its future, one should expect that this lawsuit will pass through the early procedural phases rather quickly. Both sides will check each other’s readiness to solve the dispute before moving forward to the discovery stage.
This lawsuit is not about a speaker, it is about control over the next hardware category for AI technology. This lawsuit is the perfect chance for Apple to disrupt OpenAI before its IPO and to cause the company more damage than any court decision could.
For OpenAI it is better to contain this situation and to protect the lawsuit from becoming a topic in the middle of the IPO roadshow even if it would mean spending additional money. For Apple the win is not in the decision, it is in the uncertainty. Watch the IPO filings of the company for the next few months; if hardware will get quietly downplayed as the growth factor, that would be the proof that the lawsuit worked.
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