Apple v. OpenAI: A New Frontier in AI Hardware Trade Secret Litigation

On July 10, 2026, Apple Inc. filed suit in the U.S. District Court for the Northern District of California against former Apple employees Tang Yew Tan and Chang Liu, together with OpenAI Group PBC, OpenAI Foundation, and io Products, Inc., alleging misappropriation of confidential hardware-development trade secrets to accelerate OpenAI’s entry into the emerging AI consumer hardware market.[1] Recent rulings in Kadrey v. Meta Platforms, Inc.[2] and Bartz v. Anthropic PBC[3] established AI training data as “transformative fair use.” Apple’s complaint invokes traditional trade secret law, making it one of the first major lawsuits testing how long-established trade secret principles apply to the race to build AI-native consumer devices. The litigation also highlights a competitive shift as two Silicon Valley giants pivot from a cooperative software partnership to a high-stakes rivalry over consumer electronics.

Hardware presents unique competitive barriers, requiring years of industrial R&D, metallurgical experimentation, custom tool design, and supply-chain optimization. The emerging AI hardware space presents unique challenges. Lacking decades of physical manufacturing infrastructure, start-ups may be highly tempted to seek to exploit the proprietary supply chains and technical breakthroughs of legacy tech giants. This dynamic is reflected in Apple’s opening pleadings. The complaint states that “Apple keeps its product development, manufacturing, supply chain, technology research, and other innovations confidential. The trade secrets spanning Apple’s hardware operations collectively constitute one of the most valuable intellectual assets in all of American business. They enable Apple to bring new products with unique features to consumers at extraordinary speed and scale.”[4]

According to the complaint, Tang Tan, a longtime senior Apple executive who spent approximately 24 years leading hardware engineering for product, and electrical engineer Chang Liu left Apple to join OpenAI’s hardware initiative following OpenAI’s acquisition of io Products, the AI hardware startup founded by former Apple Chief Design Officer Jony Ive for $6.5 billion in 2025. Apple contends that “[i]n the months before he left Apple, Mr. Tan met with OpenAI or its collaborators and discussed meetings with a key Apple supplier. He began emailing himself information about Apple’s suppliers and internal summaries of the consumer electronics industry. And today, when interviewing Apple employees for jobs at OpenAI, Mr. Tan uses Apple’s confidential information to gain access to even more insider knowledge.”[5]

Apple’s complaint alleges a highly coordinated pattern of corporate misconduct, asserting that “[t]he Corporate Defendants … have been …. exploiting Apple’s confidential information to advance OpenAI’s efforts to enter the consumer hardware market. They have used confidential Apple information in approaching Apple’s trusted partners, even having one carry out a specific trade secret metal-finishing technique for OpenAI, misleading the partner to believe they had Apple’s permission to do so.”[6] The categories of information allegedly misappropriated encompass an “interconnected ecosystem of proprietary information spanning hardware engineering, manufacturing design, supply chain, business operations, and institutional expertise across these and other domains.”[7] In the context of the supply chain, Apple asserts that its “trade secrets … include confidential contractual arrangements with suppliers; supplier qualification and allocation strategies; logistics coordination processes that synchronize global component delivery at scale; and proprietary supplier relationships — including the identities and roles of specialized sub-suppliers and vendors who provide Apple with critical components and equipment …. Apple possesses proprietary and secret information regarding how its global supply chain operations, supplier relationships, manufacturing design and process engineering know-how, DFM expertise, and component technologies interconnect and function together as an integrated whole,”[8] and that “systems-level integration knowledge … is a trade secret in its own right.”[9]

Apple’s sophisticated complaint

Apple’s federal claim arises under the Defend Trade Secrets Act (DTSA),[10] enacted in 2016 to create a nationwide civil cause of action for trade secret misappropriation. Under the DTSA, Apple must prove that the information constitutes a trade secret, that reasonable measures were taken to maintain its secrecy, that the information derives independent economic value from remaining secret, and that the defendants misappropriated it through improper acquisition, disclosure, or use. Apple also asserts claims under the California Uniform Trade Secrets Act (CUTSA),[11] which closely parallels the DTSA while incorporating decades of California appellate precedent governing employee mobility and trade secret identification. In addition, the complaint includes contractual claims arising from confidentiality agreements, proprietary information agreements, and obligations to return company property upon termination.

Perhaps the most sophisticated aspect of Apple’s complaint is how it is drafted to avoid California’s strong public policy favoring employee mobility. California courts have repeatedly rejected the Doctrine of Inevitable Disclosure[12] and California generally prohibits post-employment noncompetition agreements[13]. Under the landmark decision Whyte v. Schlage Lock Co., an employer cannot prevent a former employee from joining a competitor merely because the employee inevitably remembers confidential information.[14] Apple focuses the complaint on specific acts of alleged misconduct, such as the retention of company devices, continued post-employment access to Apple’s systems, downloading confidential engineering files, the solicitation of proprietary information during interviews, and the retention of confidential supplier intelligence. This distinction is legally significant because California protects an employee’s accumulated knowledge, engineering judgment, and professional experience, but it does not permit employees to retain confidential documents, proprietary databases, engineering drawings, or trade secret information. By framing the dispute around conduct involving identifiable confidential information rather than generalized expertise, as established in the precedent Hooked Media Group, Inc. v. Apple Inc.,[15] Apple has attempted to strengthen its position under both the DTSA and CUTSA.

OpenAI is likely to challenge Apple’s claims on several fronts by arguing that its hardware platform was independently developed through its own substantial engineering resources, that the allegedly confidential information reflects general engineering knowledge accumulated over decades of professional experience, and that Apple has failed to identify its trade secrets with sufficient specificity. Furthermore, OpenAI can rely on the precedent set by the dismissal of the xAI v. OpenAI trade secrets lawsuit,[16] which found that “asking a candidate about their prior work experience [is not the same as] encouraging the candidate to divulge trade secrets obtained during that prior work experience.”[17] The judge also ruled that a “‘confidential’ label on the first page of the slide deck [is not] a sufficient basis” to “support a reasonable inference that OpenAI knew or should have known that Li disclosed xAI trade secrets during his presentation.”[18] If OpenAI can show that it maintained well-documented onboarding policies that warned employees not to bring or utilize materials from their prior employer, it may successfully distance the corporate entity from the alleged wrongdoings. The individual defendants would remain personally liable for their alleged breach of contract.

Improving governance to protect trade secrets

Regardless of its ultimate outcome, Apple’s lawsuit highlights several governance measures companies should implement that extend beyond traditional nondisclosure agreements to protect valuable corporate trade secrets:

1. Organizations should implement rigorous technical access controls and clear cybersecurity protocols, so that employees only have access to information necessary for their roles.
2. IT departments should implement automated, real-time logging and alerting systems to flag anomalous data movement, such as bulk downloads of unannounced product schematics or unauthorized personal cloud uploads, especially around the time of an employee’s exit.
3. Companies should establish rapid offboarding protocols and verified device recovery with a documented chain-of-custody procedure.
4. Departing employees should undergo an exit interview and be required to state, under penalty of perjury, that they have returned all company devices and permanently deleted any retained corporate files from personal accounts.
5. Organizations should provide structured onboarding and regular compliance training. Onboarding must prohibit new hires from utilizing devices, USB drives, or cloud accounts associated with their previous employer.
6. Regular compliance training should occur periodically, defining clear boundaries on what can be shared and whether company code or files may be entered into external generative AI platforms or third-party tools.
7. To handle post-employment vulnerability discoveries, companies can include a contractual post-employment duty to report such vulnerabilities or establish programs that legally and financially incentivize former employees to report security loopholes immediately through authorized channels.
8. Organizations must secure information shared with third parties, such as vendors and suppliers, by utilizing NDAs. These agreements must clearly define what constitutes confidential material, set clear boundaries on which vendor employees can view the information, and contain audit provisions that allow physical or digital inspections to verify compliance.
9. Organizations should also clearly identify their authorized vendor representative and immediately inform their vendors and suppliers when the relevant employee exits the company.
10. Suppliers and vendors should be explicitly prohibited from utilizing or demonstrating proprietary techniques for third-party clients without direct, written authorization from the intellectual property owner.

Apple’s lawsuit ultimately illustrates that trade secret protection depends not only upon identifying valuable confidential information but also upon implementing clear technical, contractual, and governance controls that reduce opportunities for misappropriation while respecting employee mobility and fostering technological innovation.

[1] Apple Inc. v. Liu, No. 5:26-cv-07078 (N.D. Cal.) (available at: https://storage.courtlistener.com/recap/gov.uscourts.cand.474095/gov.uscourts.cand.474095.1.0_1.pdf)

[2] Bartz v. Anthropic PBC, No. 4:24-cv-05417 (N.D. Cal. June 23, 2025) (Order Granting in Part and Denying in Part Summary Judgment)

[3] Kadrey v. Meta Platforms, Inc., 788 F. Supp. 3d 1026 (N.D. Cal. 2025) (Order Denying Partial Summary Judgment and Granting Cross-Motion)

[4] Apple Inc. v. Liu, at 1

[5] Id. at 3

[6] Id. at 4

[7] Id. at 9

[8] Id. at 11-12

[9] Id.

[10] Defend Trade Secrets Act (DTSA), 18 U.S.C. §§ 1836–1839

[11] California Uniform Trade Secrets Act (CUTSA), Cal. Civ. Code §§ 3426–3426.11

[12] PepsiCo, Inc. v. Redmond, 54 F.3d 1262, 1269 (7th Cir. 1995) (A plaintiff may prove trade secret misappropriation by demonstrating that the defendant’s new employment will inevitably lead to the reliance on the former employer’s trade secrets)

[13] Business and Professions Code Section 16600 (protects employee mobility, declaring almost all non-compete agreements void)

[14] Whyte v. Schlage Lock Co., 101 Cal. App. 4th 1443, 1447 (2002) (holding that the Doctrine of Inevitable Disclosure is contrary to California law because it creates an “after-the-fact covenant not to compete” that severely restricts employee mobility)

[15] Hooked Media Group, Inc. v. Apple Inc., 55 Cal.App.5th 323 (Cal. Ct. App. 2020) (evidence that a former employee may have protected information in their possession is not sufficient to establish improper acquisition or use. Evidence suggesting that the former employee drew on knowledge and skills they gained does not mean there was a misappropriation of trade secrets).

[16] X.AI Corp. v. OpenAI, Inc., No. 3:25-cv-08133-RFL (N.D. Cal. June 15, 2026) (Order Granting Motion to Dismiss)

[17] Id. at 2

[18] Id. at 4