It's important to note that Khosla can now apply for a permit for what he wants, presumably be denied, and then the legal battle can happen all over again on slightly different terms.
"[H]e bought the place on what he says was a whim, has never spent a single night there, and regrets it enormously."
https://www.nytimes.com/2018/08/30/technology/vinod-khosla-b...
IMO, the most plausible explanation for the whole affair was that this was the whole point of his buying the property, applying what he saw as a legal hack that would allow him to convert the property into a much more valuable one and resell it.