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.

OpenAI and Microsoft are renegotiating the terms of their multibillion-dollar alliance in a move that could clear a path for the ChatGPT creator to go public,   while preserving Microsoft ’ s access to cutting-edge AI technology, the Financial Times   reported last month.   At the heart of the talks is Microsoft ’ s investment in OpenAI and how much equity it will hold in the company ’ s restructured for-profit arm. According to the report, Microsoft is willing to give up part of its stake in exchange for extended rights to AI technologies developed beyond the current 2030 licensing cutoff.   The partners are   also   reportedly   reworking a broader commercial agreement that dates back to 2019, when Microsoft made its initial $1 billion bet on OpenAI.