Law360 (June 15, 2026, 7:04 PM EDT) -- A California federal judge on Monday dismissed xAI Corp.'s trade secret lawsuit against OpenAI without leave to amend, finding that despite updating its complaint once previously, the company still failed to plausibly allege that OpenAI knowingly obtained or used confidential information from former xAI employees.

U.S. District Judge Rita F. Lin ruled that xAI's amended complaint relied on speculation that OpenAI's recruiting practices induced employees to share proprietary information, and at most alleged passive receipt of information, which does not constitute misappropriation under the Defend Trade Secrets Act.

"In essence, xAI equates asking a candidate about their prior work experience with encouraging the candidate to divulge trade secrets obtained during that prior work experience," Judge Lin said, adding that holding otherwise without more "would potentially expose employers to liability any time they inquire about a candidate's past work."

XAI sued last year, accusing OpenAI of orchestrating a hiring push targeting its engineers in order to obtain trade secrets related to its AI systems, including source code and data center operations. XAI alleged several employees took confidential information before joining or attempting to join OpenAI, but Judge Lin said in dismissing the initial complaint in February that the company failed to allege facts showing OpenAI itself induced the conduct or that it acquired, used or disclosed any trade secrets.

In its amended complaint, xAI narrowed its claims to focus largely on allegations that a single engineer, Xuechen Li, disclosed trade secrets during OpenAI's recruiting process. But the court held that those added details still failed to show OpenAI knowingly solicited or used confidential information.

Rejecting xAI's theory that Li's interview presentation itself supported an inference of wrongdoing, the court said the allegations did not plausibly show that OpenAI requested or received protected information.

"XAI does not identify any facts supporting an inference that presenting on these topics would necessitate the disclosure of trade secrets, and nothing in the [second amended complaint] supports xAI's speculation that OpenAI's presentation request to Li included a request that his presentation cover xAI's 'proprietary methods,'" Judge Lin said.

The court also held that even if Li disclosed protected information, xAI at most alleged that OpenAI passively received it, which is not actionable under the DTSA. Judge Lin said the statute requires active acquisition, disclosure or use of trade secrets to state a claim.

"Indeed, were passive receipt enough, that would run dangerously close to imposing liability for the mere possession of trade secrets," Judge Lin said.

The court said xAI had already been given multiple opportunities to address deficiencies identified in its earlier complaint and that another amendment would be futile.

"XAI has already been provided multiple opportunities to state a valid claim," Judge Lin said.

Counsel for the parties did not immediately respond to requests for comment Monday.

XAI is represented by LeElle B. Slifer, Angela Campbell Tarasi, Jonathan Hung, Lauren K. Myers and Mark Anthony Zambarda of King & Spalding LLP, and Jennifer P. Swarbrick, Jolee Porter and Kosta Stanko Stojilkovic of Wilkinson Stekloff LLP.

OpenAI Inc. is represented by Carolyn Hoecker Luedtke, Dane P. Shikman, Gabriel M. Bronshteyn, and Joseph N. Glynn of Munger Tolles & Olson LLP.

The case is xAI Corp. et al. v. OpenAI Inc. et al., case number 3:25-cv-08133, in the U.S. District Court for the Northern District of California.

--Additional reporting by Bonnie Eslinger. Editing by Linda Voorhis.

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