StartupNews · Breaking News
OpenAI Hits Back at Apple in Legal Feud: Motion Filed to Dismiss Trade Secrets Lawsuit, Calling Claims "Rotten"
In a 31-page federal filing, OpenAI accuses Apple of using a "baseless and pretextual" lawsuit to mask its own struggles in the AI race and the war for engineering talent, setting up an October courtroom showdown
By Startup news · Published · Updated
The gloves are officially off between two of the most powerful companies in technology. OpenAI has filed a 31-page motion in federal court seeking to dismiss Apple's high-profile trade secrets lawsuit, and in doing so, has turned Apple's own words back on the company — describing the iPhone maker's complaint as, in the ChatGPT maker's phrasing, "rotten to its core." The filing, submitted Wednesday, August 5, 2026, in the U.S. District Court for the Northern District of California, marks the sharpest and most aggressive escalation yet in a legal battle that has been building for months and now sits at the center of Silicon Valley's biggest corporate rivalry.
At stake is far more than a single lawsuit. This case touches on the fierce, often bitter competition for AI engineering talent, the secretive hardware ambitions both companies are racing to bring to market, and lingering questions about who really controls the next generation of consumer devices in an AI-first world. With a formal hearing now scheduled for October 1, 2026, before U.S. District Judge Edward J. Davila in San Jose, this fight is likely to remain one of the most closely watched corporate legal battles in the technology industry for months to come.
Let's walk through exactly what happened, what each side is arguing, how we got here, and what comes next.
QUICK SNAPSHOT: THE CASE AT A GLANCE
Case Name: Apple Inc. v. Liu, et al. Case Number: 5:26-cv-07078 Court: U.S. District Court for the Northern District of California Presiding Judge: Edward J. Davila Original Complaint Filed: July 10, 2026 OpenAI's Motion to Dismiss Filed: August 5, 2026 Length of OpenAI's Motion: 31 pages Defendants Named by Apple: OpenAI Foundation, OpenAI Group PBC, io Products LLC, Tang Yew Tan, Chang Liu Apple's Core Legal Claims: Misappropriation of Trade Secrets (Defend Trade Secrets Act) and Breach of Intellectual Property Agreement OpenAI's Key Phrase: Apple's complaint is "rotten to its core" Apple's Pending Request: A preliminary injunction to block OpenAI from using any alleged trade secrets while the case proceeds OpenAI's Deadline to Respond to Injunction Motion: August 17, 2026 Scheduled Hearing Date: October 1, 2026, 9:00 AM, San Jose, Courtroom 4
THE MOTION, IN DETAIL: WHAT OPENAI ACTUALLY ARGUED
OpenAI's motion to dismiss doesn't merely deny Apple's allegations — it goes on the offensive. Lawyers for the company argued that Apple's lawsuit is "plainly filed without adequate investigation and built on selectively excerpted communications and ordinary conduct stripped of context," adding, in a pointed rhetorical flourish, that Apple's own complaint is — to borrow the company's own language — "rotten to its core." That phrase, lifted directly from language used elsewhere in Apple's original filing, has become the single most quoted line to come out of this entire legal saga, and it signals just how combative OpenAI intends to be in defending itself.
Beyond the memorable soundbite, OpenAI's substantive legal argument rests on a few key pillars. First, and perhaps most significantly, OpenAI's filing argues that Apple never actually identifies any specific trade secrets that were allegedly compromised — instead, the company claims, Apple has pointed only to broad, "generalized product development categories" rather than concrete, protectable information, which OpenAI argues is legally insufficient to sustain a trade secrets claim. Second, OpenAI contends that Apple failed to demonstrate it took reasonable steps to actually protect the information it now claims was stolen — a required element under trade secrets law, since a company generally cannot claim legal protection over information it did not make genuine efforts to keep confidential in the first place.
Third, and most strikingly, OpenAI's filing makes an argument about motive that goes well beyond a typical legal defense. The company said Apple "should not be permitted to use a baseless and pretextual lawsuit to make up for its shortcomings in the market for talent and retaining its employees" and for what OpenAI characterized as Apple's own "failures to integrate AI into its products." In plain terms: OpenAI is arguing that Apple isn't really suing over stolen secrets at all, but is instead using the courts to publicly explain away its own struggles — both in holding onto top engineering talent and in catching up to rivals in the broader AI race.
OPENAI'S THREE-PRONGED DEFENSE
Pillar 1: No Specific Trade Secrets Identified Apple named only broad "product development categories," not concrete, protectable trade secrets, OpenAI argues.
Pillar 2: No Reasonable Steps Taken to Protect Secrecy A company must show genuine efforts to keep information confidential before claiming trade secret protection.
Pillar 3: Lawsuit is a Pretext for Apple's Own Failures OpenAI argues the suit distracts from Apple's struggles retaining talent and integrating AI into its products.
Perhaps the single most quotable line in the entire filing came in OpenAI's flat denial of any motive to steal from Apple at all. "OpenAI has no use, need or desire for Apple's trade secrets," the filing states, going on to argue that "OpenAI is building something entirely new and different from anything at Apple." It's a defense that attempts to undercut Apple's case at its foundation: even if some information changed hands, OpenAI argues, none of it would have mattered, because the two companies aren't actually building the same kinds of products in the first place.
HOW WE GOT HERE: APPLE'S ORIGINAL LAWSUIT, EXPLAINED
To understand the intensity of OpenAI's response, it's worth revisiting exactly what Apple accused the company of doing when it first filed suit on July 10, 2026. Apple's complaint reads, according to multiple reports, less like a dry corporate legal filing and more like a corporate espionage thriller — alleging what it described as a coordinated, company-wide effort to extract confidential hardware information from departing Apple employees.
At the center of Apple's complaint are two individuals: Tang Yew Tan and Chang Liu.
Tang Tan spent roughly 24 years at Apple, rising from product designer to Vice President over iPhone and Apple Watch product design — one of the most senior hardware design roles at the entire company. He left Apple in February 2024 to join io, a hardware startup co-founded by Apple's own former chief design officer, Jony Ive, alongside designers Evans Hankey and Scott Cannon. OpenAI acquired io in a deal reported at approximately $6.5 billion, bringing on more than 50 engineers, designers, and other staff, and Tan now serves as OpenAI's Chief Hardware Officer, leading the company's push into physical AI devices.
Apple's lawsuit accuses Tan of using confidential Apple project code names during OpenAI's recruiting interviews with current Apple employees, directing job candidates who were still working at Apple to bring "actual parts" from Apple into their interviews for what Apple's complaint describes as "show and tell" sessions, and coaching departing Apple staff on how to evade the company's internal security procedures when they left.
Chang Liu, the second named individual, worked at Apple for eight years as a senior systems electrical engineer before joining OpenAI's San Francisco office in January 2026. Apple alleges that Liu failed to return at least one Apple-issued laptop after his departure, did not respond to requests to complete an exit interview or confirm he had returned all company devices, and — over a period of several weeks after leaving Apple — accessed and downloaded confidential hardware-related files after discovering an authentication bug that allowed him continued access to Apple's internal systems.
Apple's complaint also describes an ongoing relationship between Liu and a then-current Apple employee, Yu-Ting "Alyssa" Peng, who Apple alleges continued having detailed conversations with Liu about confidential Apple projects even while she was still employed at Apple, before she herself later joined OpenAI. Apple claims Liu helped coach Peng ahead of her OpenAI interview, including advising her on which specific Apple projects to study beforehand.
Taken together, Apple's complaint characterizes this as a pattern — not an isolated incident — describing what it called a "pattern of theft" targeting some of what Apple calls the "most valuable intellectual assets in all of American business." Apple's complaint further claims that more than 400 former Apple employees now work at OpenAI, a figure the company cited as evidence of a broader, systemic talent drain the lawsuit suggests has been actively encouraged and, in some cases, exploited to extract confidential information.
Apple is suing under two separate legal claims: breach of intellectual property agreement, and misappropriation of trade secrets under the federal Defend Trade Secrets Act. According to Apple's complaint, the company sent a warning letter to OpenAI back in February 2026 raising these concerns directly — and received no response, which Apple's filing points to as part of its justification for escalating to a full lawsuit five months later.
TIMELINE: HOW THE APPLE-OPENAI LEGAL BATTLE HAS UNFOLDED
Feb 2024 Tang Tan departs Apple after ~24 years, joins Jony Ive's io startup 2025 OpenAI acquires io Products in a ~$6.5 billion deal; Tan becomes OpenAI's Chief Hardware Officer Jan 2026 Chang Liu joins OpenAI after 8 years at Apple as a senior engineer Feb 2026 Apple sends a warning letter to OpenAI; receives no response Jul 10, 2026 Apple files lawsuit against OpenAI, io Products, Tan, and Liu Aug 4, 2026 Court schedules Motion to Dismiss hearing for October 1, 2026 Aug 5, 2026 OpenAI files 31-page motion to dismiss, calling suit "rotten to its core" Aug 17, 2026 Deadline for OpenAI to respond to Apple's separate preliminary injunction request Oct 1, 2026 Scheduled hearing before Judge Edward J. Davila in San Jose
WHY THIS LINE — "ROTTEN TO ITS CORE" — MATTERS
It's worth pausing on why OpenAI's chosen phrase has generated so much attention beyond the legal community. "Rotten to its core" isn't just a colorful insult — according to reporting on the filing, OpenAI's lawyers deliberately borrowed the phrase from language that appeared elsewhere in Apple's own complaint, turning Apple's own rhetorical framing back against the company. It's an aggressive legal tactic: rather than simply arguing the facts don't support Apple's claims, OpenAI is explicitly trying to reframe the entire narrative — casting Apple, rather than itself, as the party acting in bad faith.
Legal commentators have been divided on whether this approach is a smart strategic move or a risky one. Some technology publications have been openly skeptical of OpenAI's framing, with at least one prominent technology outlet describing the "rotten to the core" defense as OpenAI's "weakest play yet" — arguing that leaning so heavily on an aggressive counter-narrative, rather than a more measured factual rebuttal, could risk appearing evasive if the underlying evidence Apple has gathered proves more substantial than OpenAI's filing suggests. Whether that skepticism proves justified will likely become clearer only as both sides' full evidence is tested in court.
THE OTHER FRONT: APPLE'S PUSH FOR AN EMERGENCY INJUNCTION
OpenAI's motion to dismiss the underlying lawsuit is only one part of a rapidly escalating two-front legal battle. Separately, and around the same time, Apple asked the court for something far more urgent: a preliminary injunction that would block OpenAI from using any of the allegedly stolen trade secrets while the broader lawsuit continues to play out. This is a significant escalation, because a preliminary injunction — if granted — could have immediate, real-world business consequences for OpenAI's hardware division well before the case ever reaches a final resolution, potentially forcing changes to product development timelines or design work already underway.
OpenAI has pushed back hard against this request too, arguing that Apple's injunction motion relies on inaccurate information and is entirely unnecessary given that, in OpenAI's telling, there is no genuine risk of Apple's trade secrets being used in OpenAI's products in the first place. The court has set August 17, 2026, as OpenAI's formal deadline to respond to Apple's injunction request — a deadline that arrives well before the October hearing on the broader motion to dismiss, meaning the next major development in this case is likely to come within days or weeks, not months.
TWO PARALLEL LEGAL TRACKS IN THIS CASE
Track 1: Motion to Dismiss (the underlying lawsuit) Apple's Complaint Filed: July 10, 2026 OpenAI's Motion to Dismiss: August 5, 2026 Hearing Scheduled: October 1, 2026
Track 2: Preliminary Injunction (urgent, parallel request) Apple's Injunction Request: Filed separately, more recently OpenAI's Response Deadline: August 17, 2026 Purpose: Block alleged use of trade secrets while the full case proceeds
THE BIGGER PICTURE: WHY OPENAI'S HARDWARE AMBITIONS ARE AT THE HEART OF THIS FIGHT
To understand why this case has generated so much attention, it helps to understand exactly what OpenAI has been building — and why Apple, of all companies, feels so threatened by it. OpenAI's hardware ambitions trace back to its 2025 acquisition of io Products, the secretive hardware startup co-founded by Jony Ive, Apple's legendary former chief design officer, whose design work shaped the iPhone, iPad, and Apple Watch for more than two decades before he departed Apple in 2019. The roughly $6.5 billion deal brought Ive's design sensibilities, along with more than 50 experienced hardware engineers and designers — including Tang Tan, Evans Hankey, and Scott Cannon, all former senior Apple design and engineering leaders — directly into OpenAI's orbit.
That team has reportedly been working on genuinely ambitious consumer hardware. Industry analyst Ming-Chi Kuo, a widely followed supply-chain researcher, has reported that OpenAI is developing its own smartphone, with a potential launch window as far out as 2028. Separately, other reporting has pointed to OpenAI working on a HomePod-style smart speaker device — positioning the company to compete directly with Apple not just in software and AI models, but in the physical consumer electronics category Apple has dominated for nearly two decades.
Seen through that lens, Apple's lawsuit takes on added significance. This isn't simply a dispute over a handful of departing employees — it's playing out against the backdrop of what could become direct, head-to-head competition between Apple and OpenAI in consumer hardware, powered in no small part by former senior Apple hardware executives now working for the company Apple is suing. Whether or not Apple's specific trade secrets claims hold up in court, the broader subtext of this case — a former insider team building competing hardware, backed by one of the world's most valuable AI companies — is likely a significant part of why Apple chose to escalate this dispute into full-blown federal litigation rather than pursuing a quieter resolution.
THE TALENT WAR BEHIND THE LAWSUIT
Underlying all of this is a theme that OpenAI's own motion to dismiss leans on directly: the fierce, industry-wide competition for elite AI and hardware engineering talent. Apple's complaint itself claims that more than 400 former Apple employees currently work at OpenAI — a striking figure that, regardless of how the legal claims are ultimately resolved, illustrates just how significant the flow of talent between the two companies has become.
OpenAI's motion argues that this migration reflects ordinary, industry-standard recruiting competition rather than any coordinated scheme to extract confidential information — pointing out that Tang Tan's conduct in interviewing prospective hires, including asking about their prior work experience, is common practice across the technology industry, and that hiring departing employees from a competitor is neither unusual nor inherently improper. Apple, for its part, argues the specific conduct alleged here — using confidential internal code names, directing candidates to bring physical hardware components into interviews, and coaching departing staff on how to bypass security protocols — crosses well beyond the boundaries of normal recruiting into something Apple characterizes as deliberate, systematic misappropriation.
This underlying tension — between what's considered fair competition for talent and what crosses the line into trade secret theft — sits at the heart of an increasingly common category of dispute across the technology industry, and this case may end up serving as an important test of exactly where that line gets drawn under current law.
NOT OPENAI'S ONLY TRADE SECRETS FIGHT
It's worth noting that this isn't the only trade secrets battle OpenAI is currently navigating. In a separate, unrelated case, OpenAI has also been fighting a trade secrets lawsuit brought by Elon Musk's AI company xAI, which accused OpenAI of luring away xAI employees specifically to gain access to trade secrets related to its Grok chatbot. OpenAI similarly moved to dismiss that case, describing it as part of what the company called Musk's "ongoing harassment," and a federal judge — U.S. District Judge Rita F. Lin — ultimately granted OpenAI's motion to dismiss that lawsuit, though with leave for xAI to file an amended complaint rather than a permanent end to the case.
That earlier partial win offers some useful context for how courts have approached similar claims against OpenAI recently — though it's worth being cautious about reading too much into it as a predictor of how the Apple case will unfold, given the very different facts, evidence, and specific individuals named in each lawsuit. Still, the fact that OpenAI is simultaneously fighting off trade secrets allegations from both Apple and one of the wealthiest individuals in the world underscores just how central these kinds of disputes have become to the current, high-stakes phase of the AI industry's development — a period in which talent, proprietary technology, and competitive positioning have become as fiercely contested as any product launch.
WHAT LEGAL EXPERTS ARE WATCHING FOR
Beyond the headline-grabbing rhetoric on both sides, legal observers following this case are likely to focus on a handful of more technical, but ultimately decisive, questions as it moves forward. Trade secrets law in the United States generally requires plaintiffs to identify their trade secrets with reasonable specificity — vague references to broad categories of confidential information are often insufficient to survive a motion to dismiss, which is exactly the argument at the heart of OpenAI's filing. How specifically Apple has actually described the information it claims was stolen, in the portions of its complaint not yet fully public, will likely be a central issue the court weighs when ruling on OpenAI's motion.
Equally important will be the question of what Apple did, concretely, to protect the information in question — since trade secrets law generally does not protect information a company failed to take reasonable steps to keep confidential. Apple's complaint reportedly addresses this by pointing to its well-known internal culture of secrecy, including strict device return policies, exit interview requirements, and internal project code names — the same kinds of protocols Apple alleges Tan and Liu helped colleagues circumvent.
Finally, courts will typically also weigh whether the individual conduct described — even if all of Apple's factual allegations are accepted as true for purposes of a motion to dismiss — actually amounts to legally cognizable trade secret misappropriation, as opposed to conduct that, while perhaps aggressive or ethically questionable, doesn't meet the specific legal elements required under the Defend Trade Secrets Act. This is precisely the distinction OpenAI's filing is trying to draw when it frames Tan's recruiting tactics as merely "industrywide" standard practice rather than unlawful conduct.
UNDERSTANDING THE JARGON: A QUICK GLOSSARY FOR READERS
Legal disputes like this one come with plenty of specialized terminology. Here's a plain-English guide to the key terms in this story:
Trade Secret: Confidential business information — such as designs, processes, formulas, or strategies — that provides a company with a competitive advantage precisely because it isn't publicly known, and that the company has taken reasonable steps to keep confidential. Unlike patents, trade secret protection doesn't require public disclosure or registration, but it also only lasts as long as the information actually remains secret.
Misappropriation: The legal term for improperly acquiring, using, or disclosing someone else's trade secrets — for example, through theft, breach of a confidentiality agreement, or improper means such as accessing systems without authorization.
Defend Trade Secrets Act (DTSA): A U.S. federal law, enacted in 2016, that allows companies to sue in federal court over trade secret theft, providing a nationwide legal framework alongside the various state-level trade secret laws that existed previously.
Motion to Dismiss: A formal request asking a court to throw out some or all of a lawsuit's claims, typically arguing that even if everything the plaintiff alleges is true, it still doesn't add up to a valid legal claim, or that the claims lack sufficient factual specificity to proceed.
Preliminary Injunction: A court order issued before a case is fully resolved, temporarily requiring or prohibiting a specific action — in this case, Apple is asking the court to bar OpenAI from using any allegedly stolen information while the broader lawsuit plays out, rather than waiting for a final verdict that could be months or years away.
Breach of Intellectual Property Agreement: A separate legal claim alleging that an individual violated a specific contractual agreement — typically one signed as a condition of employment — governing how they may use or disclose a former employer's confidential information after leaving the company.
Defendant: A party being sued in a lawsuit. In this case, Apple has named five defendants: OpenAI Foundation, OpenAI Group PBC, io Products LLC, and the two individuals, Tang Yew Tan and Chang Liu.
WHAT TO WATCH NEXT
A handful of near-term developments will shape how this case unfolds over the coming weeks and months:
The August 17 injunction response: OpenAI's formal response to Apple's request for a preliminary injunction is due well before the broader motion to dismiss hearing, and could offer an early signal of how the court is inclined to view the underlying dispute — a ruling in Apple's favor on the injunction, even a partial one, would suggest the judge sees at least some merit in Apple's claims at this early stage.
The October 1 hearing: The scheduled hearing before Judge Davila on OpenAI's motion to dismiss will be the first major moment where both sides argue their positions directly before the court, and the judge's questions and eventual ruling will offer the clearest indication yet of which side's framing of the case — Apple's narrative of systematic theft, or OpenAI's narrative of a baseless, pretextual lawsuit — the court finds more persuasive.
Additional discovery and evidence: Should the case survive OpenAI's motion to dismiss, both sides would move into a discovery phase, during which internal communications, additional witness testimony, and other evidence would likely become public — potentially revealing far more detail about the specific allegations than either side's public filings have disclosed so far.
Broader industry ripple effects: Regardless of how this specific case resolves, its outcome could influence how other technology companies approach hiring from competitors, structuring exit interviews and confidentiality agreements, and drafting employment contracts — particularly in the AI industry, where competition for specialized talent has become extraordinarily intense and where several other companies are watching this case closely for guidance on where the legal boundaries actually lie.
THE BOTTOM LINE
OpenAI's motion to dismiss represents a forceful, no-holds-barred response to what is shaping up to be one of the most consequential corporate legal battles in the technology industry this year. By turning Apple's own language back against the company and framing the entire lawsuit as a distraction from Apple's struggles retaining talent and competing in AI, OpenAI has signaled it has no intention of settling this dispute quietly or defensively.
Yet Apple's underlying allegations — detailed accounts of confidential code names used in interviews, hardware components brought into "show and tell" sessions, an Apple laptop never returned, and a documented pattern of communication between departing employees and their soon-to-be OpenAI colleagues — represent more than a passing corporate spat. Whether these facts, once tested through the formal discovery process and eventual court proceedings, amount to genuine trade secret theft or simply the kind of aggressive, ordinary competition for talent that OpenAI insists it represents, is now squarely in the hands of a federal judge in San Jose.
With a preliminary injunction decision looming well before the more comprehensive October hearing, this case is unlikely to fade from headlines anytime soon. And given what's genuinely at stake — not just legal liability, but the competitive positioning of two companies both racing to define what AI-powered hardware looks like in the years ahead — this is a legal fight that both Apple and OpenAI appear fully prepared to wage for the long haul.
(This article is based on court filings in Apple Inc. v. Liu, et al., Case No. 5:26-cv-07078, in the U.S. District Court for the Northern District of California, along with subsequent public reporting on the case as of early August 2026. Quotations are drawn from publicly reported excerpts of court filings. This article is intended for general informational purposes and does not constitute legal analysis or advice; readers seeking a definitive legal assessment of the case should consult primary court records or a qualified attorney.)