OpenAI Seeks $1 Million From Musk’s xAI Over Dismissed Trade Secret Lawsuit

OpenAI has asked a federal judge to declare that xAI’s trade secret case “should never have been filed” and to order Elon Musk’s company to reimburse more than $1 million in legal fees. The request comes on the heels of xAI’s notice that it plans to appeal after its claims were dismissed twice.

Key points

• A San Francisco federal judge dismissed xAI’s lawsuit twice, finding the company hadn’t shown misconduct by OpenAI.
• OpenAI argues xAI filed first and searched for evidence later, forcing costly, extensive defense work.
• xAI intends to appeal; meanwhile, a separate Apple lawsuit alleging similar conduct is beginning to unfold.

What sparked the dispute

xAI sued OpenAI, alleging that the ChatGPT maker poached employees and encouraged them to bring along confidential information. The case initially pointed to eight former xAI employees who left for OpenAI around the same time. A San Francisco federal judge dismissed the complaint in February, ruling that xAI failed to show any wrongdoing beyond normal hiring activity.

After unsuccessfully seeking a six-month extension to bolster its claims, xAI filed an amended complaint in March. In June, US District Judge Rita Lin dismissed the case again. The court concluded that the new allegations—such as claims that OpenAI asked a new hire to discuss past work—attempted to recast routine hiring and onboarding practices as an illicit effort to induce trade secret theft.

OpenAI’s push for fees

Following the second dismissal, OpenAI moved for a finding that the lawsuit lacked evidentiary support and asked the court to order xAI to cover more than $1 million in defense costs. In its filing, OpenAI contends xAI pursued a sweeping and aggressively litigated trade secret theory without adequate facts, forcing OpenAI to expend substantial resources to defeat it.

OpenAI’s request was filed shortly after xAI signaled it would appeal, a move that could prolong the dispute for months. The company maintains it competed for talent in legitimate ways and that the record supports the court’s conclusions about ordinary hiring practices.

A broader legal backdrop

The OpenAI–xAI clash is unfolding alongside a separate, high-profile lawsuit brought by Apple. Apple’s complaint alleges that OpenAI encouraged Apple employees to share pre-release information, components, drawings, and other materials tied to upcoming products as part of efforts to develop OpenAI’s own hardware initiatives. Apple is seeking damages and a court order to halt the alleged conduct and require the destruction of any proprietary materials. Such legal remedies typically take months or years to resolve.

OpenAI has responded that it has no interest in other companies’ trade secrets and remains focused on building innovative technology.

What it could mean for OpenAI’s IPO

OpenAI is preparing for a potential initial public offering. While the fee motion and xAI’s planned appeal add legal noise, it’s unclear whether they will materially affect any offering timeline. Courts have already twice rejected xAI’s claims, and the fee bid focuses on whether the case was baseless and unduly costly.

The road ahead

Next steps include the court’s decision on OpenAI’s request for more than $1 million in fees and xAI’s appeal process. If the fee motion is granted, it would mark a significant rebuke of xAI’s litigation strategy. Regardless, the parallel Apple case ensures that questions about competitive hiring, confidential information, and the boundaries of aggressive talent acquisition in the AI industry will remain in focus for some time.