Apple sues OpenAI over 'trade secrets': What the dispute is about

Apple has sued OpenAI in a California federal court, accusing the artificial intelligence (AI) company of orchestrating a campaign to obtain confidential Apple information as it builds its own consumer hardware business.

 

The lawsuit comes after the two companies announced a partnership in 2024 to integrate ChatGPT into Apple's ecosystem.

 

According to Apple's complaint, the case is not about patents or copyright. Instead, it centres on "trade secrets" -- confidential business information that companies rely on to gain a competitive advantage.

 

Apple alleges OpenAI recruited former employees and attempted to obtain internal information that could help develop rival hardware products. OpenAI has denied the allegations, saying it has "no interest in other companies' trade secrets" and remains focused on building its own technology.

What is Apple alleging?

Apple claims OpenAI targeted engineers working on Apple's hardware programmes and encouraged them to share confidential information after they joined the AI company.

 

The lawsuit names former Apple employees and alleges confidential information relating to unreleased products, engineering processes and internal development work was improperly accessed or retained.

 

One of the incidents cited in the complaint involves an internal message from a departing engineer that Apple says became an important piece of evidence in the case.

 

The company is seeking damages and court orders to prevent any further use or disclosure of the information.

What is a trade secret?

Under US law, a trade secret is information that derives economic value from not being generally known and is protected through reasonable efforts to keep it confidential.

 

According to the US Patent and Trademark Office (USPTO), trade secrets can include manufacturing processes, engineering methods, source code, formulas, algorithms, customer information, business plans and product designs. Unlike patents, companies do not register trade secrets with the government. Their protection depends largely on keeping the information confidential.

 

That also means trade secret protection can continue indefinitely, provided the information remains secret.

How are trade secrets different from patents?

Although both protect innovation, they work differently.

 

A patent gives inventors exclusive rights over an invention for a limited period in exchange for publicly disclosing how it works.

 

A trade secret follows the opposite approach. The information is never disclosed publicly, and legal protection lasts only as long as secrecy is maintained. Once the information becomes public through lawful means, trade secret protection generally ends.

 

What does Apple need to prove?

 

Trade secret lawsuits do not simply require a company to show that confidential information existed.

 

Generally, Apple must establish that the information qualifies as a trade secret; it took reasonable steps to keep the information confidential; the information was acquired, disclosed or used through improper means; and the alleged conduct caused, or was likely to cause, commercial harm.

 

Simply hiring employees from a competitor is not unlawful. However, US trade secret law prohibits the unauthorised use or disclosure of confidential business information belonging to a former employer.

Have similar cases happened before?

Disputes involving trade secrets are common in the technology sector, particularly when employees move between competing companies.

 

Some of the best-known cases include:

 

Waymo vs Uber (2017)

 

Google's self-driving car company Waymo accused former engineer Anthony Levandowski of downloading thousands of confidential files before joining Uber. Waymo alleged those files were later used in Uber's autonomous vehicle programme. The companies eventually settled, with Uber agreeing to measures to protect Waymo's confidential information.

 

Bimbo Bakeries vs Botticella (2010)

 

One of the leading US trade secret decisions involved Bimbo Bakeries and a senior executive who accepted a job with a competitor.

 

The court allowed an injunction preventing the executive from joining the rival company after finding there was a substantial likelihood confidential information could be used in the new role, even without proof that the information had already been disclosed. The decision has since become one of the most frequently cited rulings involving employee movement and trade secrets.

 

DuPont vs Kolon Industries

 

Chemical company DuPont accused South Korea's Kolon Industries of misappropriating confidential information relating to Kevlar fibre technology. A US jury awarded substantial damages after finding that trade secrets had been improperly obtained through former employees and other sources.

 

Mattel vs MGA Entertainment

 

Mattel and MGA fought over the ownership of ideas behind the Bratz doll franchise. While the dispute covered several intellectual property issues, it also raised questions about employee agreements and whether product concepts developed during employment belonged to the company or the individual.

 

Coca-Cola's secret formula

 

Unlike the cases above, Coca-Cola's formula is not known for litigation but for its protection strategy. Instead of seeking patent protection, which would require public disclosure, the company has relied on trade secret law for more than a century by keeping the recipe confidential.