US judge dismisses xAI trade-secrets lawsuit against rival OpenAI for now

Feb 24 (Reuters) – A federal judge in California on Tuesday dismissed a lawsuit from Elon Musk’s artificial intelligence startup xAI that accused rival Sam Altman’s OpenAI of stealing its trade secrets.

U.S. District Judge Rita Lin in San Francisco said that xAI could refile its case, but for now has failed to allege that OpenAI committed any misconduct.

The lawsuit, filed in September, claimed that former xAI employees took source code related to its Grok chatbot and other confidential information with them when they left for new jobs at OpenAI.

“Notably absent are allegations about the conduct of OpenAI itself,” Lin said. “xAI does not allege any facts indicating that OpenAI induced xAI’s former employees to steal xAI’s trade secrets or that these former xAI employees used any stolen trade secrets once employed by OpenAI.”

Lin had signaled in a January opinion that she would likely rule for OpenAI. She gave xAI until March 17 to file an amended complaint.

xAI has separately sued a former engineer, Xuechen Li, for allegedly taking trade secrets to the ChatGPT maker. Li was blocked in that case from sharing xAI’s technology with OpenAI, though OpenAI has said that Li never worked for the company and that it never acquired or used any of xAI’s secrets.

Spokespeople and attorneys for xAI did not immediately respond to a request for comment on the Tuesday decision.

“We welcome the court’s decision,” OpenAI said in a statement. “This baseless lawsuit was never anything more than yet another front in Mr. Musk’s ongoing campaign of harassment.”

The lawsuit is part of a broader legal battle between Musk and Microsoft-backed OpenAI, which he co-founded and is also suing over its ​conversion to a for-profit company. 

Musk, the world’s richest ‍person, is seeking as much as $134.5 billion in damages from OpenAI and Microsoft in that case. Jury selection ​is scheduled for April 27.

OpenAI said in a court filing that the trade-secrets case was part of a “campaign to harass a competitor ⁠with unfounded legal claims” because Grok could not keep up with ChatGPT.

(Reporting by Blake Brittain in Washington; Editing by David Bario, Chizu Nomiyama and Cynthia Osterman)