OpenAI's planned $3 billion acquisition of AI coding startup Windsurf has collapsed due to concerns over intellectual property arrangements linked to OpenAI's deal with Microsoft. Following the breakdown, Google DeepMind hired Windsurf's CEO Varun Mohan, co-founder Douglas Chen, and key research and development staff to support its AI efforts, including work on its Gemini project. Google secured a non-exclusive license to Windsurf's technology and agreed to pay approximately $2.4 billion in licensing fees but did not acquire equity in Windsurf. Subsequently, Cognition AI, the creator of the AI coding agent Devin, signed a definitive agreement to acquire the remainder of Windsurf, including its intellectual property, product, trademark, brand, and workforce. Cognition valued Windsurf at $82 million and is integrating Windsurf's tools into its Devin platform to enhance AI-driven coding capabilities. Most of Windsurf's approximately 250 employees remain with the company, which will continue operating independently under new CEO Jeff Wang. The deal structure allowed Windsurf employees to receive accelerated vesting of their equity, providing financial participation for all staff. This sequence of events illustrates a growing trend among tech companies to hire top AI talent and license technology rather than pursue full acquisitions, thereby avoiding lengthy merger reviews. Investors in Windsurf, including Greenoaks Capital Partners, General Catalyst, and Kleiner Perkins, are expected to benefit from the rapid payout resulting from Google's licensing deal.