Apple, OpenAI Head to Court in High-Stakes AI Trade Secret Fight

Apple and OpenAI are heading to court for the first high-stakes hearing in the iPhone maker’s lawsuit accusing the artificial intelligence company of scheming to steal proprietary information about upcoming products.

Two critical issues are on the agenda for a hearing Wednesday: a request by Apple for a court order that would require OpenAI to immediately stop using allegedly stolen trade secrets and a separate demand by OpenAI to dismiss Apple’s lawsuit entirely.

The companies have been at odds for months, despite a two-year-old partnership that wove ChatGPT into Apple software. The dispute arose while hundreds of Apple employees defected to OpenAI and has put a cloud over the startup as it targets a $1.4 trillion valuation and prepares to go public.

Apple sued OpenAI, its hardware chief and a former iPhone hardware engineer in July, accusing them of conspiring to extract confidential information from former Apple employees related to product design, manufacturing, component technologies, testing methodologies and the company’s supply chain.

In its suit, Apple said OpenAI is exploiting that information to “advance OpenAI’s efforts to enter the consumer hardware market.”

OpenAI has vehemently denied the allegations. The startup argues that Apple’s lawsuit is an effort to restrain employees from leaving for a competitor, and that the company seeks to cast “ordinary job interviews as acts of trade secret misappropriation.”

“OpenAI is developing a new family of devices designed for the AI era,” the company said in an October court filing. “OpenAI has no need or desire for Apple’s trade secrets.”

Bloomberg News has reported that OpenAI’s first consumer hardware product will be a doughnut-shaped smart speaker priced at more than $300. People within the company see it as a novel AI-centric device that’s different from anything Apple is set to release.

US District Judge Edward Davila in San Jose, California, will hear arguments on Apple’s request for a preliminary injunction that would require OpenAI to cease using any confidential information that it has acquired from Apple and immediately halt efforts to acquire other private details.

As part of its request, Apple argued that OpenAI was using job interviews with its current and former employees as a means of eliciting proprietary information. The company claims that OpenAI leaders instructed candidates to bring prototypes and other “design artifacts” for “show and tell” sessions.

If granted, the order would stay in place while Apple’s lawsuit against the company proceeds.

On Tuesday, Davila ordered OpenAI to expedite turning over documents concerning its alleged theft of trade secrets to advance forthcoming consumer hardware products.

At the same time, Davila will also consider a motion filed by OpenAI to dismiss Apple’s lawsuit entirely.

OpenAI argues that Apple failed to identify any specific trade secrets that have been stolen and that its lawsuit points only to broad categories of information about hardware development.

In court filings, OpenAI argued that the lawsuit actually exposes weaknesses in Apple’s own security practices and human resources procedures, rather than any kind of effort to steal trade secrets by OpenAI.

The company said Apple encouraged its employees to use their personal iCloud accounts for work. OpenAI also said that an authentication error left Chang Liu, a former iPhone engineer who joined OpenAI in January and is named in the lawsuit, with access after he departed.

OpenAI’s lawyers claim that Apple employees continued to access material in Liu’s personal iCloud account and asked him to locate files and answer technical questions after he left.

The startup published copies of private messages between Liu and other employees on its website in August, showing how Apple employees continued to contact him after he left the company with technical questions about prior projects.

OpenAI contends that those exchanges, coupled with loose offboarding processes that left Liu with access to company files, rebut Apple’s account of how he obtained the information.

Apple has argued that the information in Liu’s personal iCloud account was “entirely separate” from its core allegation that he later exploited an authentication flaw to access Apple’s network storage and download confidential files.

The case is Apple v. Liu, 5:26-cv-07078, US District Court, Northern District of California (San Jose Division).