San Francisco Judge Dismisses xAI Trade Secret Lawsuit Against OpenAI

Authored by Kimberley Hayek via The Epoch Times,

A federal judge dismissed a trade secret lawsuit filed by Elon Musk’s xAI against OpenAI, ruling that the plaintiff failed to demonstrate the competing artificial intelligence company improperly obtained confidential information.

U.S. District Judge Rita Lin issued the order Monday in San Francisco, dismissing the case with prejudice, resulting in xAI being unable to refile an amended version of the complaint based on the same arguments.

Lin found that xAI did not make clear that OpenAI led former senior engineer Xuechen Li to reveal trade secrets or that OpenAI engineers had knowledge.

The claims were based on Li’s departure from xAI and related discussions during his recruitment with OpenAI.

The judge noted that requesting a job candidate’s prior work experience is standard practice during the recruitment phase and that one ⁠could not infer that that itself constituted an improper solicitation of confidential material.

“To hold otherwise would potentially expose employers to liability any time they inquire about a candidate’s past work,” Lin wrote.

The lawsuit, first brought in September 2025, alleged that OpenAI misappropriated trade secrets tied to chatbot development, such as source code and other proprietary details linked to xAI’s Grok system.

An earlier version of the complaint was dismissed in February 2026, with the amended filing centering primarily on a presentation Li gave about his prior Grok-related work.

OpenAI has maintained that Li never ended up working for the company and never provided it with any xAI trade secrets. In papers favoring the dismissal of the case, OpenAI’s lawyers criticized xAI, stating, “OpenAI does not need or want anyone’s trade secrets, especially not from xAI, which is failing in the marketplace and hemorrhaging talent.”

xAI and OpenAI did not immediately return a request for comment.

xAI has also brought a separate action against Li, who has denied any impropriety.

The court’s decision curtails xAI’s ability to pursue claims over recruitment discussions and the engineer’s presentation detailing his previous experience. Due to the decision being made with prejudice, any future efforts to pursue similar allegations centering on the same facts would run into procedural blocks.

The dismissal marks Musk’s second legal loss involving OpenAI in roughly a month.

On May 18, a jury threw out a separate $150 billion lawsuit in which Musk, who co-founded OpenAI alongside Altman and others in 2015, alleged that OpenAI and Altman, its chief executive, abandoned the company’s original nonprofit mission.

During the trial, Altman countered that he had never promised to keep OpenAI a nonprofit forever.

U.S. District Judge Yvonne Gonzalez Rogers concurred with the jury’s decision at the time.

“There’s a substantial amount of evidence to support the jury’s finding, which is why I was prepared to dismiss on the spot,” she said.

After leaving OpenAI, Musk started his own AI project, xAI, which is a direct competitor with OpenAI and other players in the field.