TMTPOST -- Recent reports indicated the partnership between OpenAI and its largest shareholder and investor Microsoft Corporation is now on the brink of collapse amid the ChatGPT maker’s for-profit shift.
Credit：China Daily
OpenAI’s negotiations to secure Microsoft’s blessing for the restructuring of its for-shift unit have been so difficult that in recent weeks, executives for the artificial intelligence (AI) startup have considered suing over Microsoft’s anticompetitive behavior during their partnership, the Wall Street Journal reported on Monday, citing people familiar with the matter. The accusation, if materialized, could involve seeking a federal review of the ties between the two, and a public campaign over the matter, per the report.
The possible accusation could lead to OpenAI’s breakup with its six-year-old partner, ending one of the most successful partnership in the tech industry. OpenAI on December 27 announced its plans to transition its for-profit arm into a public benefit corporation (PBC) and hold its shares, while remaining its status of non-profit entity. The ChatGPT-developer since then has negotiated with Microsoft to complete the transition to PBC, key to its ability to raise more money and go public, but months of talks failed to produce agreement.
It was reported that part of major hurdles lie on the terms of OpenAI’s $3 billion takeover of the coding startup Windsurf. Microsoft now has access to all of OpenAI’s intelligence property (IP) under their agreement, and OpenAI doesn’t want its top shareholder to have access to Windsurf’s IP, the report noted. In addition, Microsoft is reportedly asking for a larger stake in the new PBC than OpenAi is willing to give.
OpenAI seeks offering an around 33% stake in the new PBC in exchange for Microsoft’s foregoing its right to future profits, The Information cited people with knowledge of talks on Monday. OpenAI reportedly wants to exempt acquisition of Windsurf from the existing agreement that grant Microsoft access to OpenAI’s IP, and modify exisiting clauses that gives Microsoft exclusive rights to host OpenAI models in its cloud.
OpenAI was also reported to tell investors that it hopes get out of its exclusive cloud contract with Microsoft, which makes the software titan the only cloud provider that offers OpenAI models for sale through an application programming interface (API). Microsoft hasn’t agreed OpenAI’s proposal and is looking for other concessions from the startup, such as extending the length of time in which it has the right to use OpenAI’s IP. The current deal allows Microsoft to use OpenAI’s IP throughout 2030, acccording to the report.
As of last October, Microsoft has invested $13.75 billion in OpenAI since 2019, including its share of the startup’s $6.6 billion fundraising in October. Such massive investment entitles Microsoft to a percentage of OpenAI’s profits.
The Wall Street Journal last year reported OpenAI has had agreed its profit distribution would go through four phases. At the first phase, OpenAI shall use its first $194 million in profits to pay back its first investors, and at the second phase, it shall split its next $17.3 billion in profits between its first invesors and Microsoft, with Microsoft receiving 75% of profits until it has recouped its $13 billion investment. At the third phase, OpenAI pay 49% of its profits to Microsoft until a predetermined cap is reached, and at the last phase, it will retain all profits once Microsoft has reached its predetermined return cap.
