Will Apple’s Lawsuit Crush OpenAI’s Smartphone Dreams?

It’s one feud after another for OpenAI.

Fresh from its court battle with co-founder Elon Musk this spring, Sam Altman’s artificial intelligence company has now found itself in the legal crosshairs of another tech titan. Apple is accusing the ChatGPT developer of stealing trade secrets and hardware designs to bolster its development of an AI-fueled smartphone that would challenge the iconic iPhone.

A Personnel Matter

To say the two companies have a troubled history is an understatement. In 2024, the pair teamed to integrate ChatGPT into Siri and other iPhone features, a partnership that would allow Apple to AI-ify its devices without the massive capex needed to develop its own models while helping OpenAI reach the countless users in the Apple ecosystem. In January, however, Apple announced it would begin integrating Google’s Gemini AI model into iPhones in a multibillion-dollar deal that appeared to supplant ChatGPT as Apple’s AI model of choice. Months later, in May, Bloomberg reported that Apple plans to soon let users choose non-ChatGPT models to power Siri, including models from Google and OpenAI’s archrival Anthropic.

Also in May, Bloomberg reported that OpenAI was considering legal action against Apple after the 2024 Siri deal proved less exclusive (and, crucially, less lucrative) than expected. But now Apple has beaten Sam Altman to the punch with a lawsuit touching not just on hardware but personnel: 

• OpenAI revved up its smartphone ambitions last year after acquiring Io Products, a tech design startup founded by longtime Apple design chief Jony Ive that also employed several other high-profile Apple veterans. OpenAI now employs more than 400 former Apple employees, the lawsuit claims.
• Many of those former employees, Apple alleges, have brought with them trade secrets about Apple hardware designs and confidential information about key Apple suppliers. Worse, Apple alleges, OpenAI advised outgoing Apple employees on how to evade the notoriously secretive company’s security procedures. One key Apple employee poached by OpenAI exploited a “vulnerability” in its  digital storage system to steal confidential files after leaving, the lawsuit claims.

Slow Your Scroll: In sum, Apple is accusing the company of systematic intellectual property theft, a claim that could upend OpenAI’s plans for a smartphone killer if Apple proves trade secrets were used in its design. Nonetheless, one source told Bloomberg on Monday that OpenAI still thinks it’s on track to announce its first device this year and launch it sometime next year, a crucial step as it considers delaying its IPO until 2027.