Elon Musk’s artificial intelligence company, xAI, has filed a lawsuit against OpenAI in a California federal court, claiming that the company stole trade secrets and recruited former xAI employees to gain access to confidential information. The complaint was filed on September 24, 2025, in the United States District Court for the Northern District of California under Case No. 3:25-cv-08133. In its petition, xAI is seeking damages and has requested a jury trial, alleging that the ChatGPT maker’s actions have provided it with an unfair competitive advantage in the AI industry.
The lawsuit centers on the alleged actions of former xAI employees, including Xuechen Li (one of the company’s first 20 hires). According to the complaint, Li downloaded xAI’s entire codebase before leaving the company in July 2025 to join OpenAI. And now, xAI claims that this data transfer was concealed and that additional sensitive information was found on Li’s devices. Beyond Li, xAI claims that OpenAI recruited other former employees, including senior finance personnel, to breach confidentiality agreements and provide insight into xAI’s internal operations, including its data center infrastructure.
Particularly, xAI’s complaint includes three main claims. First, it accuses OpenAI of misappropriation of trade secrets under the federal Defend Trade Secrets Act (18 U.S.C. § 1836 et seq.), claiming that proprietary information about its Grok chatbot and underlying technology was stolen and exploited. Second, the company alleges intentional interference with prospective economic relations, arguing that the Sam Altman-led company’s actions disrupted Musk-owned xAI’s business relationships and potential opportunities by unlawfully leveraging confidential data. Third, xAI charges OpenAI with unfair competition under California Business & Professions Code § 17200 et seq., claiming that the AI trendsetter’s conduct gave it an illegal competitive edge. Importantly, xAI has demanded a jury trial to resolve these claims.
The lawsuit comes amid an escalating legal and business rivalry between Musk and OpenAI. Musk (who was a co-founder of OpenAI) has previously criticized the organization for its shift to a for-profit model and has initiated other legal actions related to its business practices. OpenAI has already responded by countersuing Musk, alleging harassment, which has intensified the conflict between the two AI leaders. Even last month (in August 2025), xAI and X filed a lawsuit against Apple and OpenAI in a federal court in Fort Worth, Texas. That suit alleges that Apple and OpenAI worked together to limit competition in the AI market, giving ChatGPT an unfair advantage over rival services like xAI’s Grok chatbot. It specifically criticizes Apple for integrating ChatGPT into its devices and allegedly manipulating App Store rankings to favour OpenAI.
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