“How Microsoft’s Multibillion-Dollar Alliance With OpenAI Really Works: ChatGPT Maker Quietly Clarifies That Tech Giant Has No Equity despite $13bn Investment—But Is in Line to Make Big Profits”, Tim Bradshaw, Madhumita Murgia, George Hammond, Camilla Hodgson2023-12-15 (OA)⁠:

…Those IP rights could have been substantial if Sam Altman and other OpenAI employees had gone to work at Microsoft, as was proposed by Satya Nadella before Altman’s reinstatement. “A lot of relevant technology could have gone with him”, this person said. “Microsoft is technically a competitor but has all the IP, which puts it in a stronger position.”

Microsoft declined to comment on the details of its agreement with OpenAI. It is unclear how long any exclusivity agreements may last.

Transactions involving non-profit organizations are often exempt from the usual pre-merger notification requirements under the US Hart-Scott-Rodino Antitrust Improvements Act, which may have helped to shield Microsoft’s investment from regulatory scrutiny.

However, the US Federal Trade Commission is now looking into Microsoft’s investment in the company, according to a person familiar with the matter, although no formal investigation has been launched.

Any US probe and that of the UK Competition and Markets Authority, which is expected to begin formally next year, are likely to hinge on whether Microsoft’s influence over OpenAI has grown in recent months, either as a result of January’s expansion of their alliance or last month’s boardroom bust-up.

Ever since the launch of ChatGPT in November last year, OpenAI has been divided internally over its commercial direction, including which products to pursue and invest in.

According to one person close to the leadership’s deliberations, some OpenAI executives felt pressured by Microsoft to commercialize faster, as it “really wanted to be deploying AI products and be an AI leader and make money”.

During the leadership crisis at OpenAI last month, Microsoft was given no warning from the board about the coming ructions and raced to re-establish stability. “They wanted more visibility, but everyone realised that them having an actual board seat would be a non-starter”, this person said.

It was eventually agreed that Microsoft would take a non-voting observer role on a reconfigured board. This would “certainly give [Microsoft] some level of additional influence”, this person added, but suggested that would be a positive step for the start-up’s governance. “There would be more of an expectation that things at OpenAI be done by the book.”

See Also:

• Microsoft’s Answer to OpenAI Inquiry: It Doesn’t Own a Stake: The two companies have sought to telegraph their independence, but it’s not clear regulators will buy the argument

• OpenAI has received just a fraction of Microsoft’s $10 billion investment

• OpenAI chief seeks new Microsoft funds to build ‘superintelligence’: Sam Altman expects Big Tech group will back start-up’s mission to create software as intelligent as humans

• OpenAI Investors Plot Last-Minute Push With Microsoft To Reinstate Sam Altman As CEO: With the ousted OpenAI CEO actively discussing a new artificial intelligence venture, investors in his previous company are trying to bring him back using Microsoft and key employees as leverage

• Back at OpenAI, Sam Altman Outlines the Company’s Priorities: In a blog post, Mr. Altman said he would focus on improving products and building a new board, which added Microsoft as a nonvoting member

• OpenAI’s New Board Takes Over and Says Microsoft Will Have Observer Role: Group of directors will expand and strengthen governance structure following CEO Sam Altman’s surprise ouster and return

• Microsoft is likely to get board sets—maybe 2

• OpenAI not expected to offer Microsoft, other investors seats on new board: report

• Microsoft Is Happy Being the Co-Pilot on the OpenAI Rocket Ship: There are benefits and risks to outsourcing the development of a technology as crucial as AI

• Microsoft + OpenAI: Inside Tech’s Hottest Romance. As Microsoft and OpenAI finalize a blockbuster financing round, a big question looms: Can both sides get what they want—and rocket ahead of rivals like Google—without things getting too complicated?

• Inside the structure of OpenAI’s looming new investment from Microsoft and VCs

• Microsoft Bets Big on the Creator of ChatGPT in Race to Dominate AI: As a new chatbot wows the world with its conversational talents, a resurgent tech giant is poised to reap the benefits while doubling down on a relationship with the start-up OpenAI

• Microsoft and OpenAI Forge Awkward Partnership as Tech’s New Power Couple: As the companies lead the AI boom, their unconventional arrangement sometimes causes conflict

• New Bing, and an Interview with Kevin Scott and Sam Altman About the Microsoft-OpenAI Partnership

• OpenAI employees really, really did not want to go work for Microsoft