Apple Expands Trade Secrets Lawsuit Against OpenAI and io Products as California Non-Compete Ban Drives Litigation

Apple Expands Trade Secrets Lawsuit Against OpenAI and io Products as California Non-Compete Ban Drives Litigation

The legal battle between Apple and OpenAI over hardware talent and proprietary designs has escalated significantly. In mid-August 2026, Apple expanded its federal trade secrets lawsuit in the Northern District of California (Case No. 5:26-cv-07078), alleging that even more former Apple employees may have leaked proprietary hardware secrets to OpenAI.

The litigation represents a critical strategic flashpoint: because California has a strict ban on employee non-compete agreements, companies like Apple are increasingly turning to aggressive trade secret litigation to prevent competitors from poaching talent and using poached designs to build rival consumer devices.

The Hardware Dispute: Poaching for the Screenless Companion

Apple's expanded lawsuit focuses on OpenAI's hardware organization and its specialized unit, io Products:

• Poaching Executive Talent: Apple alleges that OpenAI conducted a coordinated campaign to poach senior hardware engineering and design talent¹, including former Apple executive Tang Tan and legendary designer Jony Ive. Tang Tan and former Apple chip architect Chang Liu are named as direct defendants alongside OpenAI.
• Stolen Secrets for the Screenless Companion: Apple claims that the poached employees retained confidential product designs, supplier data, and hardware specifications. Apple alleges these stolen secrets are being actively used by OpenAI and io Products to build a radical, screenless, voice-activated AI companion device.
• Q1 2027 South Korea Launch: The screenless companion is reportedly scheduled for an official commercial launch or local trial in South Korea in Q1 2027, making the trade secrets dispute highly time-sensitive. Apple is seeking a preliminary injunction to freeze OpenAI's use of its hardware designs and supplier data before the device can reach production.

OpenAI's Pushback: The Motion to Dismiss

OpenAI has pushed back aggressively against Apple's claims, seeking to throw out the lawsuit:

• The Motion to Dismiss: On Wednesday, August 5, 2026, OpenAI filed a 31-page motion to dismiss, blasting Apple's legal strategy. OpenAI argues that Apple has failed to identify any specific, concrete trade secrets that were allegedly misappropriated, relying instead on vague categories of "hardware designs."
• Blasting iCloud Policy: OpenAI's motion blasted Apple's "rotten" iCloud policies, arguing that Apple failed to demonstrate reasonable security measures because it allowed employees to sync work data to personal iCloud accounts, undermining its claims of strict secrecy.
• The Upcoming Hearing: The federal court has scheduled a highly anticipated hearing on Apple's motion for a preliminary injunction on October 1, 2026, which will determine whether OpenAI's consumer hardware push is frozen or allowed to proceed.

Verbatim Quotes

"California’s strict ban on employee non-compete agreements has made trade secret litigation the primary battleground for Silicon Valley's talent wars. The latest lawsuit between Apple and OpenAI, in which Apple alleges that OpenAI benefited from trade secrets retained by former Apple employees, has made headlines because of the companies involved and the high stakes in the race to develop consumer AI hardware."
— JD Supra, California’s Ban on Non-Competes Is Reshaping Competition Through Trade Secret Litigation

"Apple has filed a federal lawsuit against OpenAI, accusing the artificial intelligence company of running a coordinated campaign to steal confidential product designs and trade secrets... Apple has sued OpenAI in a federal court in California, alleging that the artificial intelligence company orchestrated a widespread effort to steal trade secrets and hardware designs."
— Stocktwits Markets, AAPL Stock Unmoved After-Hours — Apple Sues OpenAI Over Alleged 'Rotten' Campaign To Steal AI Hardware Secrets