Before Apple Lawsuit, a Growing Unease at iPhone Maker Over OpenAI
The Takeaway
- Apple sues OpenAI for trade secret theft.
- The suit accuses OpenAI’s hardware chief and technical staff member, both former Apple employees, of stealing Apple secrets.
- Lawsuit escalates rivalry, potentially clouding OpenAI’s IPO prospects.
In the months ahead of Apple’s lawsuit against OpenAI on Friday, the iPhone maker’s concerns about OpenAI’s plans to compete in consumer hardware have mounted steadily.
For starters, there was the seemingly never-ending stream of Apple employees jumping ship to join the AI startup. As those departures began to reach into the hundreds, Apple scrambled to make counteroffers to employees being recruited by OpenAI with more compensation and additional job responsibilities, said people familiar with the matter.
Apple’s frustration with the outflow of employees came to a head in the lawsuit, which accused the AI startup of a “systematic effort” to steal Apple trade secrets to develop its own AI-powered devices for consumers. The lawsuit says that OpenAI has recruited more than 400 former Apple employees to work at the company and names two Apple alumni as defendants: Tang Tan, OpenAI’s chief hardware officer, and Chang Liu, a member of OpenAI’s technical staff.
The lawsuit, filed in federal court in the Northern District of California, accuses OpenAI and former Apple employees who work there of a pattern of misappropriating confidential Apple documents and plans, while in some cases attempting to cover their tracks to evade detection by Apple’s security team. Tan, the lawsuit alleges, asked some Apple employees that he was recruiting to bring actual parts from Apple devices to job interviews and to share details about an unannounced product.
“At every level, from members of its Technical Staff to its Chief Hardware Officer, and in coordination with business partners, OpenAI has been stealing Apple’s trade secrets and confidential information,” Apple said in its lawsuit. “As a natural result, OpenAI’s nascent hardware business now rests on the shakiest of foundations, rotten to its core by its illegal reliance on misappropriated trade secrets.”
In a statement, a spokesperson for OpenAI said: “We have no interest in other companies’ trade secrets. We remain focused on building innovative technology that empowers people everywhere.” Tan and Liu didn’t respond to requests for comment.
The lawsuit brings to a head the growing rivalry between Apple and OpenAI, two companies that at one time seemed poised to become close partners. Two years ago, Apple integrated OpenAI’s ChatGPT into a newly launched collection of AI features called Apple Intelligence.
But tensions between the companies soon began to mount as OpenAI embarked on an effort to build its own family of AI-powered hardware devices. It didn’t help that OpenAI did so by hiring high-profile former Apple leaders, including Tan and Jony Ive, Apple’s former chief design office. Last year, OpenAI paid $6.5 billion in an all-stock deal to acquire io Products, which was co-founded by Tan and Ive (Ive works as an independent contractor for OpenAI).
Signs of a rupture between OpenAI and Apple began to appear in May when OpenAI threatened a lawsuit of its own against Apple over alleged breach of contract with its disappointing 2024 ChatGPT integration into Apple’s AI platform. An OpenAI official told The Information at the time that the company was considering legal action. A suit hasn’t materialized yet.
Apple’s lawsuit could cast a shadow over OpenAI’s plans to launch its first hardware device, which could happen as early as February. It could also cloud the company’s plans to go public by raising uncertainty among potential investors. The company has filed paperwork confidentially with regulators for an IPO, but the exact timing of an offering is still up in the air. In the past, Apple’s court battles with other power tech companies like Samsung and Qualcomm have taken years to resolve.
In a statement an Apple spokesperson said: “We will always defend our teams’ hard work and innovations, and we are taking all appropriate steps to do so.”
In its lawsuit, Apple, one of the most secretive companies on the planet, chronicles in vivid detail how its former employees allegedly violated their confidentiality agreements with the company.
When Liu left in January to join OpenAI, for example, Apple said that it contacted Liu to remind him of the confidentiality agreement, schedule an exit interview and confirm he had returned his company devices. Lui didn’t respond to Apple, according to the lawsuit. Apple said it discovered that Liu had held onto a work laptop after leaving the company.
While at OpenAI, the lawsuit says, Liu exploited a previously unknown authentication bug with Apple’s corporate systems to access and download dozens of confidential hardware-related documents to his Apple work laptop. Apple said Liu then coached Apple employees, whom he was recruiting to OpenAI, how to avoid Apple’s security team when copying Apple files.
While investigating Liu, Apple said in its complaint that it uncovered a broader pattern of theft by alumni who went to work for OpenAI. Apple accused some of its former employees of emailing themselves confidential Apple material before leaving Apple. And it accused others of using knowledge of Apple’s trade secrets to assist in OpenAI’s hardware development.
The case could draw comparisons to a 2017 lawsuit Google filed against Uber after Anthony Levandowski, a longtime leader in Google’s self-driving car team, downloaded files before departing to set up a competing effort at Uber. The companies settled the case, though the U.S. Department of Justice prosecuted Levandowski, who eventually pleaded guilty. President Donald Trump later pardoned him at the end of his first term in office.
Apple has a long track record of protecting its intellectual property by monitoring and taking legal action against current and former employees. In 2019, Apple sued Gerard Williams, a former chief architect for Apple’s chips after he co-founded chip startup Nuvia. Apple alleged that he had breached his Apple employment contract by jumpstarting the concept for his company and recruiting employees while he was still working at Apple.
In legal filings, Williams countered Apple with allegations that Apple was intimidating any Apple employee who might consider leaving the company by monitoring its employees’ phone and text messages “in a stunning and disquieting invasion of privacy.” Williams and Apple settled in 2023.
In the OpenAI lawsuit, Apple said that in the early stages of its investigation in February it wrote to OpenAI raising concern about the potential of confidential information going to the company. Apple asked OpenAI what steps it was taking to avoid this. OpenAI never responded, according to the lawsuit.
Tan has been the primary recruiter for OpenAI’s hardware project, which got a boost after the acquisition of io Products in 2025, the lawsuit says. Since that deal, OpenAI has hired hundreds of Apple hardware employees who’ve worked on everything from product design, to displays and antennas, to supply chain management and hardware procurement.
OpenAI has yet to announce any of its hardware devices. One of the products OpenAI has talked to suppliers about making resembles a smart speaker without a display, The Information has previously reported. OpenAI has also considered building glasses, a digital voice recorder and a wearable pin, and is targeting late 2026 or early 2027 for the release of its first devices. The effort is part of OpenAI CEO Sam Altman’s longtime quest to develop a highly responsive AI akin to the virtual assistant in the Spike Jonze film “Her.”
In conversations with current Apple employees, Tan has promised some people that they will encounter a less bureaucratic and more collaborative environment at OpenAI than Apple, The Information has previously reported.
At Apple, Tan had been a key member of Apple’s hardware engineering team, including overseeing iPhone development, for around 25 years before leaving in early 2024. Apple claimed that before he left Apple, Tan met with “OpenAI or its collaborators” to discuss meetings with an important Apple supplier. He then emailed himself information about Apple’s suppliers.
Last year, The Information reported that Luxshare, a major assembler of iPhones and AirPods in China, had secured a contract to assemble at least one of OpenAI’s devices and that the AI startup had approached Goertek, which assembles AirPods, HomePods and Apple Watches, to supply components for OpenAI’s future products.
Apple’s lawsuit shows how protective it is over its supplier relationships and the techniques it develops with them. It accused OpenAI of tricking an unnamed Apple partner to perform a confidential Apple metal finishing process for OpenAI’s benefit. “OpenAI and its cohorts misled the partner to believe they had Apple’s permission to have the partner carry out the confidential metal-finishing technique for OpenAI’s benefit,” the lawsuit said.