OpenAI engineer’s ‘LOL’ moment set stage for legal light with Apple
Mark Gurman
When iPhone engineer Chang Liu resigned for a job at OpenAI’s nascent hardware division, Apple Inc. says he left with years of experience.
According to a lawsuit filed Friday, Liu parted with three things: a company-issued MacBook he never returned, a close relationship with an Apple employee who continued to share internal company information, and, most importantly, knowledge of a software bug that gave him continued access to internal file servers.
“LOL, I found out I can reach [network storage]Liu wrote to former Apple colleague Alyssa Peng: Apple alleges that she later used this access to download presentations, hardware designs, manufacturing details, and testing procedures while working at OpenAI.
When Liu discovered the error, Peng stepped in to help, according to the lawsuit. “I’m ready,” he replied, eventually helping to obtain more information via his own laptop. A few months later, in April, Peng left for OpenAI’s growing hardware division.
He joins more than 400 former Apple employees who are taking advantage of the opportunity to work on next-generation devices designed to replace the two-decade-old iPhone, with salaries and stock options that dwarf Apple’s less glamorous pay packages.
The episode is one of many in which Apple says it demonstrated a “systematic effort to obtain, retain and use” confidential information to help OpenAI replicate its decades-long work to create the world’s most successful consumer electronics business.
The 40-page lawsuit alleges that OpenAI encouraged potential employees currently working at Apple to review confidential materials before interviews and brazenly bring hardware components and prototypes to so-called show-and-tell sessions at OpenAI offices.
In response to the lawsuit, OpenAI said it has “no interest in other companies’ trade secrets.”
“We continue to focus on building innovative technologies that empower people everywhere,” said a spokesperson for the San Francisco-based company.
The lawsuit follows months of escalating tensions between Apple and its OpenAI partners, who have become increasingly rivals. Both companies are leaning into the emerging AI device market, a category poised to reinvent the way consumers use technology.
At the center of the rift is Tang Tan, a former Apple executive who oversaw the design of iPhones, smartwatches and many other products. He told his bosses in late 2023 that he was leaving for a new job; this opportunity eventually became the head of hardware role at OpenAI.
There was little sign at the time that his departure would result in a courtroom fight. In a rare move, Apple let him stay until February 2024, allowing him to manage a transition that requires a revamp of its hardware division.
But behind the scenes, Tan had begun working on an ambitious new hardware initiative with former Apple head of design Jony Ive and OpenAI Chief Executive Officer Sam Altman. Their goal was to create a new category of AI devices that could one day challenge the iPhone.
Tan and Ive helped found io Products, a startup that OpenAI acquired last year for $6.5 billion. They teamed up on the venture with Evans Hankey, Ive’s successor as Apple’s industrial design chief, and Scott Cannon, a former manufacturing manager who left the tech giant in 2010.
Apple was immediately alarmed by OpenAI’s recruiting effort, which involved poaching senior hardware and design leaders and pillaging many teams in engineering organizations.
The practice continued until June, when OpenAI fooled Apple’s smart glasses chief. Executive Paul Meade was quickly shown the door to Apple and not given the opportunity to stay through the transition period, according to people with knowledge of the matter.
To Apple, the talent hunt appeared to be an attempt to recreate the iPhone maker’s product development machine within OpenAI. “OpenAI’s nascent hardware business is now built on the weakest of foundations and is rotten to the core due to its illicit reliance on misappropriated trade secrets,” Apple said in a statement Friday. he said.
Throughout his 25-year career at Apple, Tan was famous for taking risks and “flying too close to the sun,” according to someone who worked with him. “Tang is known for moving fast, playing fast and breaking things up,” said the person, who requested anonymity when discussing his former colleagues.
He made his name pioneering the design of the first Mac laptops and iPods before taking on the product design function of the original iPhone. Tan led the entire iPhone design team until 2011 and then led the Apple Watch design effort. He was a top executive at Apple when he left.
OpenAI, meanwhile, had devoted billions of dollars to its hardware efforts and was racing toward an initial public offering. However, the startup had little to show for it other than concepts and early prototypes when io was acquired, according to people familiar with the matter. At the time, it was said that the company was still trying to agree on a compelling product strategy.
OpenAI is currently working on an AI-powered smartphone replacement, but its first product could be something simpler, sources said. The company has explored a variety of concepts, from headphones to smart glasses to AI-powered speakers. Apple, on the other hand, is developing a new line of home devices, camera-equipped AirPods, glasses and other wearable products.
Apple said it tried to resolve the dispute by contacting the AI company in February before filing the lawsuit. He said he conveyed his concern to OpenAI that confidential Apple information had gotten there and asked the company to both investigate the issue and prevent this incident. Apple claims the initiative never responded.
Key OpenAI employees named in the lawsuit, including Tan, did not respond to requests for comment.
The case also highlights Tan’s strained relationship with his former boss and Apple’s new CEO, John Ternus. Most of those joining OpenAI at Apple came from Ternus’ hardware engineering division, and some designers had backed Tan against Ternus for the top hardware job in 2021.
Tan, who is cited as directing Apple’s efforts to obtain confidential information, allegedly used interviews with potential employees as sessions to gather information about future Apple products.
In one example, Apple said an employee learned about a project just hours before meeting Tan for a job interview. “Later in the interview, Mr. Tan asked for more information about the same Apple project. This became an established pattern,” according to the lawsuit.
Once employees sign on to work at OpenAI, they are encouraged to send information from their Apple devices to their personal email accounts before resigning, which will then be used in the AI startup, the iPhone maker claims. According to the complaint, OpenAI distributes “a checklist that Tang put together” that helps new employees evade detection by Apple’s security teams.
Apple also claims Tan went so far as to ask potential hires to bring prototypes to job interviews. This includes batteries, logic boards and other components, the complaint states.
At least one Apple employee who applied for OpenAI was concerned about the practice, saying he was “surprised that people were bringing unreleased hardware” to job interviews. He said he “didn’t know we could get these from the office.” In most cases they failed to do so.
Bloomberg.
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