Former partners face off in court! Apple Inc. (AAPL.US) lawsuit against OpenAI over trade secret theft heads into key hearing.

Apple Inc. (AAPL.US)'s lawsuit against OpenAI over trade secret theft is heading into its first key court hearing. Wednesday's hearing will address two key issues: first, Apple Inc.'s request for a court order requiring OpenAI to immediately stop using the trade secrets it is alleged to have stolen; second, OpenAI's separate request for the court to dismiss Apple Inc.'s lawsuit outright. U.S. District Judge Edward Davila in San Jose, California, will hear arguments from both sides on Apple Inc.'s application for a preliminary injunction. The injunction would require OpenAI to stop using any confidential information obtained from Apple Inc. and to immediately halt related actions to obtain other private information. As part of its application, Apple Inc. argues that OpenAI is using job interviews with its current and former employees as an opportunity to obtain proprietary information. Apple Inc. says OpenAI executives instructed candidates to bring prototypes and other "design artifacts" to "show-and-tell" sessions. If the court grants the order, it would remain in effect while Apple Inc.'s lawsuit against OpenAI continues. Davila ruled on Tuesday that Apple Inc. may expedite access to OpenAI's recruiting-related materials. Specifically, the court granted it access to documents related to "OpenAI's pre-interview contacts with Apple Inc. employees" candidates targeting positions in OpenAI's consumer hardware and Siasun Robot&Automation divisions, shortly before the rumored launch of OpenAI's first hardware device. The documents could include interview checklists, guidelines, scripts, technical demonstrations, and records corroborating "references to Apple Inc. technology or components during interviews." Davila ordered OpenAI to hand over the organized materials within five days, with the remainder related to this application to be completed within 14 days; he also granted Apple Inc. access to LINE private chat records of individuals connected to the case, involving OpenAI employees Chang Liu and Alyssa Peng, and authorized out-of-court depositions of the two and OpenAI's chief hardware officer Tang Yew Tan (all three came from Apple Inc.). However, Davila denied Apple Inc.'s request for expedited access to OpenAI's research and development materials in specific areas, such as metal surface treatment and power management. The judge also rejected several other broader discovery requests by Apple Inc., including access to OpenAI's hardware research materials and information related to work produced by former Apple Inc. employees after joining OpenAI. The denial is not final, and the judge said Apple Inc. may narrow the scope of its requests and refile. Meanwhile, Davila will also hear another motion by OpenAI seeking to dismiss Apple Inc.'s lawsuit outright. OpenAI argues that Apple Inc. failed to identify any specific trade secret that was stolen, and that its lawsuit involves only broad categories of information about hardware development. In court filings, OpenAI said the lawsuit actually exposes vulnerabilities in Apple Inc.'s own security measures and human resources processes, rather than any attempt by OpenAI to steal trade secrets. OpenAI says Apple Inc. encouraged employees to use personal iCloud accounts for work matters. The company added that due to an authentication error, Chang Liu, a former iPhone engineer who joined OpenAI in January and is named in the lawsuit, still had relevant access after leaving Apple Inc. OpenAI's lawyers say that after Liu left, Apple Inc. employees continued to access materials in his personal iCloud account and asked him to find files and answer technical questions. In August, OpenAI published on its website copies of private messages between Liu and other employees, showing that after Chang Liu left Apple Inc., Apple Inc. employees continued to contact him about technical questions on previous projects. OpenAI argues that these exchanges, combined with Apple Inc.'s lapses in its employee offboarding process that allowed Chang Liu to retain access to company files after leaving, together rebut Apple Inc.'s account of how Chang Liu obtained the relevant information. Apple Inc. argues that the information in Chang Liu's personal iCloud account is "completely irrelevant" to its core allegation. Apple Inc.'s core allegation is that Chang Liu later used an authentication vulnerability to access Apple Inc.'s network storage system and download confidential files. Former partners face off in court In July, Apple Inc. filed a lawsuit in the U.S. District Court for the Northern District of California, accusing OpenAI of deliberately inducing Apple Inc. employees to leak information about unreleased products, components, drawings, and other materials, and of using that information to "advance OpenAI's efforts to enter the consumer hardware market." The complaint also names OpenAI chief hardware officer Tang Tan a former Apple Inc. vice president of product design who led development of core hardware products including the iPhone, Apple Watch, and AirPods and former iPhone hardware engineer Chang Liu. According to the lawsuit, after leaving, Chang Liu discovered he could still access Apple Inc.'s cloud file storage because he retained his company-issued Apple Inc. laptop when he left. A flaw in Apple Inc.'s system allowed him to continue reading internal files after departure. Chang Liu then joined OpenAI in January, and within weeks thereafter "secretly accessed and downloaded dozens of Apple Inc. confidential hardware files, including extensive detailed unreleased product information, engineering presentations, technical specifications, and proprietary project data." Apple Inc. also disclosed a more serious allegation: OpenAI is accused of systematically coaching departing employees on how to circumvent the company's security procedures, with these actions directly directed by OpenAI's senior leadership. Apple Inc. even wrote directly in its complaint: OpenAI's emerging hardware business is now built on the shakiest of foundations, its core corroded by illegally misappropriated trade secrets. Apple Inc. also noted that more than 400 former Apple Inc. employees now work at OpenAI. OpenAI strongly denies the allegations. The company says Apple Inc. filed the lawsuit to restrict employees from moving to competitors and is trying to "characterize ordinary job interviews as trade secret theft." In a court filing submitted in October, OpenAI said: "OpenAI is developing a series of new devices designed for the AI era. OpenAI neither needs nor wants Apple Inc.'s trade secrets." Two years ago, Apple Inc. and OpenAI were a model of a powerful AI partnership. In 2024, the two sides finalized a collaboration: Apple Inc. planned to build ChatGPT into the iPhone to make up for the shortcomings of native Siri's intelligence; OpenAI would rely on Apple Inc.'s massive device ecosystem to quickly gain a huge user base and broaden commercialization channels. At the time, the outside world generally believed the two would achieve a win-win. At Apple Inc.'s Worldwide Developers Conference (WWDC) at the time, OpenAI CEO Sam Altman was a guest of honor at Apple Inc. Apple Inc. software chief Craig Federighi also publicly praised OpenAI as a "pioneer and market leader" in AI. But the honeymoon period of cooperation did not last long, as diverging interests and competition in the same arena gradually surfaced. OpenAI was unwilling to remain merely a companion tool inside Apple Inc.'s phones, and its ambitions pointed directly at the consumer hardware market. The company spent heavily to recruit legendary Apple Inc. designer Jony Ive to lead a new hardware project, and the industry widely expected this self-developed AI hardware to compete directly with Apple Inc.'s phones and smart devices, directly shaking the hardware foundation on which Apple Inc. depends. Even as OpenAI streamlined its business this year to focus on the core ChatGPT model, investment in developing its own hardware never stopped, making its competitive relationship with Apple Inc. increasingly sharp. Earlier this year, reports said OpenAI, dissatisfied with the returns from the partnership, had even considered taking legal action against Apple Inc. and issuing a notice of breach. At the same time, Apple Inc. itself is also accelerating development of AI devices, working on multiple products including smart glasses, pendants, and AirPods equipped with cameras to adapt to the AI era. TF International Securities analyst Ming-Chi Kuo previously analyzed that the device OpenAI is developing may be a smartphone that relies on AI agents rather than traditional apps. If that direction is correct, the competition between OpenAI and Apple Inc. is not one AI company trying to take market share from a traditional tech company, but a direct challenge to the core logic of the iPhone. PP Foresight analyst Paolo Pescatore said the relationship between the two companies is gradually deteriorating, and even if Apple Inc.'s allegations ultimately cannot be substantiated, OpenAI's hardware plans could still be affected. He explained: "Apple Inc. is watching OpenAI turn from partner into competitor, while OpenAI is trying to reduce its dependence on the iPhone and build a direct connection with consumers. Even if the allegations in the complaint are not substantiated, OpenAI's hardware products are likely to be dragged down, and the already fragile cooperative relationship between the two sides could weaken further."