Judge Dismisses xAI's Trade Secret Lawsuit Against OpenAI

A federal judge has dismissed xAI's trade secret lawsuit against OpenAI, finding that Elon Musk's AI company—which he’s since folded into SpaceX—failed to show that the ChatGPT maker improperly obtained confidential information related to its Grok chatbot.

In a court order on Monday, U.S. District Judge Rita Lin granted OpenAI's motion to dismiss without leave to amend, concluding that xAI failed to prove OpenAI encouraged a former xAI engineer to disclose trade secrets during the recruiting process.

“xAI insufficiently pled inducement in the prior complaint because it offered no nonconclusory allegations allowing a reasonable inference ‘that OpenAI told or encouraged’ xAI’s former employees to exfiltrate its confidential information,” the order said.

The decision is the second defeat that Musk—who co-founded OpenAI before departing in 2018—has suffered in his ongoing feud with OpenAI and CEO Sam Altman.

Last month, a federal jury rejected Musk's $150 billion lawsuit alleging that OpenAI, Altman, and co-founder Greg Brockman abandoned the organization's founding nonprofit mission by shifting toward a commercial structure and deepening its relationship with Microsoft.

This latest lawsuit centered on a presentation Xuechen Li, a former xAI engineer, gave while being recruited by OpenAI, which xAI alleged the ChatGPT developer targeted because of his work on Grok 4's reinforcement learning and post-training systems. The complaint accused OpenAI of knowingly seeking confidential information about those efforts.

Lin rejected that argument, writing that "merely asking Li to discuss his previous work—a routine part of the hiring process—does not allow a plausible inference that OpenAI induced Li to reveal anything confidential or secret about that work." She added that accepting xAI's theory could "potentially expose employers to liability any time they inquire about a candidate's past work."

The judge also found that xAI failed to show OpenAI knew or should have known Li disclosed trade secrets during the presentation.

“These allegations are insufficient to support a reasonable inference that OpenAI knew or should have known that Li disclosed xAI trade secrets during his presentation,” Lin wrote. “It is not clear how much detail Li shared about xAI's reinforcement learning techniques. Similarly, while xAI does not allege that Li actually displayed the slide deck during his presentation, even assuming he did, the level of detail contained in the slides remains unclear.”

The decision also comes as Musk became the world's first trillionaire following SpaceX's record-breaking IPO, which valued the company at around $1.77 trillion and cemented the rocket company's position as one of the world's most valuable firms.