Apple has filed a lawsuit against OpenAI and two former Apple employees, alleging theft of trade secrets. A trade secret is a type of intellectual property referring to confidential business information, like formulas or processes. More specifically, Apple is claiming that OpenAI used its employees to steal hardware designs as OpenAI prepares to launch its own consumer devices that have an AI-focus. The two employees are alleged to have shared confidential Apple supplier information with OpenAI, and to have stolen files from Apple whilst evading security systems.

Analysis

This lawsuit marks a definitive breakdown in the commercial relationship between Apple and OpenAI. Previously, OpenAI had integrated ChatGPT into Siri, but Apple has since switched to Google for its newest AI features. At the same time, OpenAI has acquired a design studio for billions of dollars that will enable the company to compete directly with Apple on producing consumer hardware. Importantly, OpenAI is preparing for an IPO next year and is already under investor pressure to justify its $850 billion+ valuation. A trade secrets lawsuit from Apple brings reputational and legal liability that complicates OpenAI’s planned public listing.

What does this mean for the sector?

• Tech companies across the sector will be more carefully scrutinising employee exits to ensure devices are returned and network access is restricted to current employees

• OpenAI’s IPO is under serious threat if the lawsuit is successful, as the company will have to pay out large amounts of money in damages and face the associated reputational fallout

• The lawsuit is happening in America, so will test the extent of US trade secret law when it comes to AI hardware development, as the definition of general knowledge is harder to draw here