A lawsuit by Apple against OpenAI and two former employees has sparked a tit-for-tat battle between two technology giants over allegedly stealing company records with information regarding Apple’s hardware designs and manufacturing process. The lawsuit, filed in U.S. District Court for the Northern District of California, alleges that Apple’s former employees, recruitment strategies, and supplier deals have all been used to systematically steal its trade secrets in order to gain a head start in the consumer hardware business by the parent company of ChatGPT. The lawsuit marks a major shift in a seemingly promising cooperation between the company that makes the iPhone and the AI firm.
The lawsuit highlights the two former Apple staffers who are alleged to be at the heart of the company’s controversy: Chang Liu, a former senior system electrical engineer, and Tang Yew Tan, a former vice president of product design for iPhone and Apple Watch. Liu is said to have neglected to return a company work laptop, and then used a security flaw in the authentication process to breach Apple’s internal network and download dozens of confidential hardware-related files. While at Apple, Tan, who is now OpenAI’s hardware chief, is alleged to have “wisely exploited” Apple’s confidential data in his years there to benefit his new employer. The grievance alleges that Tan sends himself emails containing information about Apple suppliers and industry reports that are summarized in Apple. He even invited Apple staff to OpenAI to meet with him for what he called “show and tells,” where they were expected to bring parts from Apple. In one instance mentioned in the filing, an applicant for OpenAI jobs said that he didn’t know they were allowed to take those things out of the office.
Apple’s grievance states that over 400 former Apple employees are now working at OpenAI and the company says it’s no surprise that some of these individuals have knowledge of Apple’s confidential information. The iPhone maker explicitly said in its filing that OpenAI’s use of individuals who were assigned the responsibility for handling Apple’s trade secrets doesn’t grant the company the right to use the same information to kick off its own hardware push. The lawsuit also claims that OpenAI employees had asked for confidential information from Apple suppliers, at one point allegedly even asking a supplier to perform a secret metal finishing technique on Apple’s assumption that it had Apple’s permission to use the technique. The claim is particularly targeted at Apple’s fears about its own proprietary manufacturing methods being used by a rival manufacturer.
In a statement, OpenAI has defended itself against the lawsuit, stating: “We have no interest in other companies’ trade secrets. We are focused on developing innovative technology that will empower people all over the world.” The legal battle, however, establishes a fight for control of future AI devices that aren’t based on traditional applications or operating systems, and may shift consumer focus to something else other than Apple’s best-selling iPhone. As the industry races to create AI products, the rivalry for technical expertise and intellectual property has caused an already strained relationship to further deteriorate as industry analysts believe OpenAI is developing a phone or other device of its own. The collaboration between Apple and OpenAI was unveiled in 2024, where users can access ChatGPTs answers via Siri and register for ChatGPT memberships directly from the iOS settings menu. But it has been strained in recent years as both companies battle for dominance in the fast-changing AI arena.
Paolo Pescatore, an analyst at PP Foresight, weighed in, saying that Apple is making OpenAI its current partner but soon its intent is to become a competitor while OpenAI’s aim is to cut down on reliance on the iPhone and establish a direct relationship with consumers. The case may impact OpenAI’s hardware plans, and it may also inflict more damage on the rapidly shaky relationship, even if the claims aren’t substantiated, Pescatore said. The timing is significant as it follows OpenAI’s recent victory in its legal battle with XAI, established by Elon Musk, which was determined to be a sham.The timing also comes as a follow-up to OpenAI’s recent win against a legal action by Elon Musk’s xAI, which was ruled a sham.
The $6.5 billion purchase of the hardware start-up io Products, which was started by former Apple designer Jony Ive, last year was clearly a sign that OpenAI was transitioning from software to consumer hardware, and that caused the leadership at Apple considerable concern. The lawsuit does not mention Jony Ive, but the acquisition of his company by OpenAI seems to have been a factor in the feud between the two tech companies. Together with the lawsuit, Apple also names OpenAI Foundation, OpenAI Group PBC, and io Products as defendants, highlighting Apple’s wide-ranging legal action. Apple alleges it sent a letter to OpenAI in February about concerns its confidential information was being shared with OpenAI and requested a discussion, but it “did not receive a response,” indicating that attempts to resolve the matter amicably were unsuccessful.
Mark Lemley, a professor at Stanford Law School, pointed out that Apple’s case could be big, but that some of what Apple claims — hundreds of employees at Apple being hired by OpenAI, for instance — is not illegal in California, which is where Silicon Valley got started, in large part, due to California laws enabling employees to leave to work for a competitor. But if Apple’s allegations of the employees taking confidential documents with them and that OpenAI has used these documents is true, that’s a big issue for OpenAI, Lemley said. Camilla Hrdy, a law professor at Rutgers Law School, said the case has the potential to be a precedent-setting legal battle, since most previous cases involving AI and trade secrets have been based on software and not hardware. However, cases of this nature do often occur in the tech world, Hrdy added, and additional information generally tends to come to light as cases unfold, and OpenAI has no reason to be afraid to defend itself.
