US District Judge Rita F. Lin has dismissed xAI’s trade secret lawsuit against OpenAI, ruling that the complaint does not allege any direct misconduct by OpenAI itself.
The lawsuit attributed all alleged wrongdoing to eight former xAI employees who left to join OpenAI around the same time. Specific allegations in the lawsuit include two former employees accused of stealing source code while in contact with an OpenAI recruiter. Notably, xAI did not allege that the recruiter directed this theft. Two other former employees allegedly kept work chats on their devices after departing. Another employee reportedly refused to provide certifications regarding confidential information. A fifth former employee allegedly attempted to access xAI hiring and datacenter optimization information after already working at OpenAI, but was unsuccessful.
Judge Lin noted that xAI failed to allege that OpenAI directed the theft or that any stolen trade secrets were actually used at OpenAI. The dismissal was granted with leave to amend, allowing xAI to file an amended complaint by March 17, 2026.
This legal action is part of a broader conflict between the two companies. Elon Musk, an early OpenAI funder, has a separate ongoing lawsuit against OpenAI and Microsoft. Musk accuses OpenAI of violating its nonprofit status and is seeking $79 billion to $134 billion in damages for alleged “wrongful gains.”
