A United States judge dismissed XAI trade secrets lawsuit against OpenAI court ruling

A United States judge dismissed XAI trade secrets lawsuit against OpenAI court ruling

U.S. Judge Questions Merits of xAI’s Trade Secrets Lawsuit Against OpenAI

A U.S. federal judge has signaled skepticism toward Elon Musk’s xAI Inc. in its lawsuit alleging OpenAI LLC and former employees stole trade secrets, raising doubts about the case’s viability. During a January 31 hearing, Judge Rita Lin questioned whether xAI had sufficiently linked OpenAI to alleged misconduct by former employees, emphasizing the need for concrete evidence beyond speculative inferences according to court records.

xAI’s lawsuit, filed in September 2025, claims OpenAI engaged in a “strategic campaign” to poach at least eight employees who allegedly shared confidential information, including source code and proprietary data. The company’s attorneys argued that patterns in recruitment—such as the use of a single recruiter and encrypted communications via Signal— suggest coordination. However, Judge Lin pressed xAI’s counsel to clarify how OpenAI could be held liable for actions of individual employees, stating, “Help me understand how it is I should infer OpenAI is directing people to take confidential information” as the judge stated.

OpenAI’s legal team countered that xAI had not demonstrated factual ties between the former employees and OpenAI’s leadership. They noted that two employees were never hired by OpenAI, while others allegedly retained documents on personal devices or attempted to access restricted content. “There is just speculation, and speculation is simply not enough,” said OpenAI attorney Carolyn Luedtke according to court documents.

In a tentative ruling issued January 24, Judge Lin dismissed the case but granted xAI leave to amend its complaint. The court has not yet scheduled a decision on the revised filing.

This case adds to ongoing tensions between Musk and OpenAI. Musk, an early investor and co-founder of OpenAI, previously sued the organization in 2024 over its shift to a for-profit model, a trial set for March 30 as reported. The outcome of this trade secrets dispute could influence broader perceptions of competitive practices in the generative AI sector, though financial impacts remain uncertain pending further legal developments.

(https://www.courthousenews.com/judge-skeptical-of-xai-claims-that-openai-stole-trade-secrets/): Courthouse News, Reuters
(https://www.reuters.com/sustainability/boards-policy-regulation/us-judge-signals-musks-xai-may-lose-lawsuit-accusing-altmans-openai-of-stealing-2026-01-31/): Reuters (summary of judicial signals).