The legal sector weighs in on the OpenAI Microsoft furore, as the tech giant emerges stronger than ever

Have you seen the Netflix movie where the board of a startup that has turned the world on its head with generative AI technology sacks a founder, and then a fellow co-founder dramatically quits, and then the pair are snapped up in hours by the startup’s main investor?

Of course, the movie doesn’t exist (yet) but the past few days have seen a flood of dramatic headlines and commentary after OpenAI sacked co-founder Sam Altman, leading to the departure of fellow co-founder Greg Brockman, and Microsoft – described variously by people in the legal sector as either a great rescuer or a greedy investor – hired them.

The OpenAI debacle started on Friday (17 November), when the board announced that it no longer had confidence in Altman’s ability to lead the San Francisco-headquartered company. On Saturday, co-founder Greg Brockman quit, having commented on X that he and Altman were “shocked and saddened by what the board did today.”

To cut an already not very long story short, today (20 November) OpenAI announced that former Twitch chief Emmett Shear will succeed Altman. But that hire has been overshadowed by the announcement from Microsoft’s CEO Satya Nadella that “Sam Altman and Greg Brockman, together with colleagues, will be joining Microsoft to lead a new advanced AI research team.”

While no-one can be 100% sure of the motives behind the hire, the end result is that it keeps Altman and Brockman’s talent within the fold, aka not at Google or Amazon. As to whether Microsoft is a rescuer or aggressor, opinions in the legal sector are mixed.

Commenting on the post from Nadella on LinkedIn, Mike Walker, chief technology officer at Peppermint Technology said: “To think all of this noise/craziness happened over the last few days within the board at OpenAI highlights the fears and concerns that need to be managed and good to see Satya and team have taken swift and proactive action to retain talent and to ensure solid future path for all.”

Not so convinced is Daniel van Binsbergen, founder of legal marketplace Lexoo, who said on LinkedIn: “Microsoft’s hiring of Sam Altman and Greg Brockman feels a bit icky. As the biggest investor in OpenAI (they own 49%), it looks like a pretty brutal conflict of interest.”  

He continues: “Microsoft CEO Satya Nadella was being a bit cute about it in his tweet. First setting out that he remains committed to their partnership with OpenAI and looking forward to getting to know the new CEO. But then right in the next sentence happily announcing they’ll hire Sam Altman and Greg Brockman, together with colleagues. Strategically it’s clever – better get the all-star team working for you than somewhere else. But it must leave an extremely bitter taste in OpenAIs mouth, if your biggest investor/supporter is essentially trying to put you out of business like that. Not just hiring Sam and Greg, but also raiding your team. It should make any tech company think twice about taking money from a strategic investor.”

To be fair to Microsoft, they didn’t initiate this drama. But they are certainly not letting a good crisis go to waste.  

This in many senses is no surprise: Microsoft and OpenAI have arguably been on a collision course since the beginning of their partnership. OpenAI is committed to Microsoft Azure as a cloud provider, but Microsoft has been engaging OpenAI competitors such as Databricks, and Microsoft Copilot competes with ChatGPT Premium.  

Casey Flaherty, co-founder and chief strategy officer at US legal technology collective LexFusion, points out that it is not at all unusual for technology companies to compete on one level and collaborate on another. He also says that the events of the past few days have been over-dramatised, commenting: “The shakeup is not that surprising for a young company going through such a meteoric rise, especially given that the original mission was not commercially oriented.”

He adds: “It is not at all uncommon for hyper growth companies to go through turbulent times, where the founders are at odds with one another, or at odds with the board.” Flaherty refers to famous examples such as Bill Gates and Paul Allen at Microsoft; Steve Jobs and Steve Wozniak at Apple; Mark Zuckerberg and Eduardo Saverin at Facebook (now Meta); and Peter Thiel and Elon Musk at PayPal. The list goes on.

He says: “It’s easy to attribute meaning, significance and downstream impact that simply aren’t there.”

The big question right now is how does or will any of this turbulence impact the legal sector, which, despite the availability of other large language models, has so far largely been wedded to OpenAI’s GPT-3.5 or GPT-4, with GPT-4 Turbo racing down the track.

The likely answer is that, thanks to OpenAI’s partnership with Microsoft, there could well be little impact. Even if the worst were to happen and OpenAI fails, as many forerunners have done, according to one argument, end users would just continue to work with Microsoft.  [Edit: See here for an interesting debate on whether this is correct or not.]

While Nadella has said in the past day that Microsoft is committed to its partnership with OpenAI, the tech giant will inevitably now be backing Altman’s AI research team. Given the flux and threats of staff departures from OpenAI, the situation going forward vis-a-vis their relationship is far from black and white.

Holger Zscheyge, a board member at the European Legal Technology Association and managing director of Infotropic Media, said on LinkedIn in response to Nadella’s announcement: “In plain English the statement of Nadella says the following «As soon as the new AI research unit under Altman is up and running, OpenAI is toast.». Not sure whether this was intentional, it looks like Microsoft was taken by surprise. Either way, mutinies like these will not stand with an investor like Microsoft.”

Rightly or wrongly, the events of the last few days have left Microsoft stronger than ever.

caroline@legaltechnology.com

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