Regardless of the law, I just don't understand why Khosla is going into this PR disaster. Which entrepreneur who has a choice (and 99% of successful entrepreneurs have a choice) between Khosla and another VC would choose Khosla after that?
Also, as it happens, KV is an investor of YC startups: http://blog.ycombinator.com/khosla-ventures-is-joining-the-y...
That being said, I want to moderate my comment. Until now, the situation is still under control, but it could become worse and then start to be a PR problem for KV. It's still time for them to do something.