Musk has no proof Open AI stole x AI trade secrets, judge rules, tossing lawsuit - Ars Technica

Overview

Musk has no proof Open AI stole x AI trade secrets, judge rules, tossing lawsuit

Even twisting an ex-employee’s text to favor x AI’s reading fails to sway judge.

Details

Elon Musk appears to be grasping at straws in a lawsuit accusing Open AI of poaching eight x AI employees in an allegedly unlawful bid to access x AI trade secrets connected to its data centers and chatbot, Grok.

In a Tuesday order granting Open AI’s motion to dismiss, US District Judge Rita F. Lin said that x AI failed to provide evidence of any misconduct from Open AI.

Instead, x AI seemed fixated on a range of alleged conduct of former employees. But in assessing x AI’s claims, Lin said that x AI failed to show proof that Open AI induced any of these employees to steal trade secrets “or that these former x AI employees used any stolen trade secrets once employed by Open AI.”

Two employees admitted to stealing confidential information, with both downloading x AI’s source code and one improperly grabbing a supposedly sensitive recording from a Musk “All Hands” meeting. But the rest were either accused of retaining seemingly less consequential data, like retaining work chats on their devices, or didn’t seem to hold any confidential information at all. Lin called out particularly weak arguments that x AI’s complaint acknowledged that one employee who Open AI poached never received access to confidential information allegedly sought after exiting x AI, and two employees were lumped into the complaint who “simply left x AI for Open AI,” Lin noted.

From the limited evidence, Lin concluded that “while x AI may state misappropriation claims against a couple of its former employees, it does not state a plausible misappropriation claim against Open AI.”

Lin’s order will likely not be the end of the litigation, as she is allowing x AI to amend its complaint to address the current deficiencies.

Ars could not immediately reach x AI for comment, so it’s unclear what steps x AI may take next.

However, x AI seems unlikely to give up the fight, which Open AI has alleged is part of a “harassment campaign” that Musk is waging through multiple lawsuits attacking his biggest competitor’s business practices.

Unsurprisingly, Open AI celebrated the order on X, alleging that “this baseless lawsuit was never anything more than yet another front in Mr. Musk’s ongoing campaign of harassment.”

Other tech companies poaching talent for AI projects will likely be relieved while reading Lin’s order. Commercial litigator Sarah Tishler told Ars that the order “boils down to a fundamental concept in trade secret law: hiring from a competitor is not the same as stealing trade secrets from one.”

“Under the Defend Trade Secrets Act, x AI has to show that Open AI actually received and used the alleged trade secrets, not just that it hired employees who may have taken them,” Tishler said. “Suspicious timing, aggressive recruiting, and even downloaded files are not enough on their own.”

Tishler suggested that the ruling will likely be welcomed by AI firms eager to secure the best talent without incurring legal risks from their hiring practices.

“In the AI industry, where talent moves fast and the competitive stakes are enormous, this ruling reaffirms that suspicion is not enough,” Tishler said. “You have to show the stolen information actually made it into the competitor’s hands and was put to use.”

Open AI not liable for engineers swiping source code

Through the lawsuit, Musk has alleged that Open AI is violating California’s unfair competition law. He claims that Open AI is attempting “to destroy legitimate competition in the AI industry by neutralizing x AI’s innovations” and forcing x AI “to unfairly compete against its own trade secrets.”

But this claim hinges entirely upon x AI proving that Open AI poached its employees to steal its trade secrets. So, for x AI’s lawsuit to proceed, x AI will need to beef up the evidence base for its other claim, that Open AI has violated the federal Defend Trade Secrets Act, Lin said. To succeed on that, x AI must prove that Open AI unlawfully acquired, disclosed, or used a trade secret with x AI’s consent.

That will likely be challenging because x AI, at this point, has not offered “any nonconclusory allegations that Open AI itself acquired, disclosed, or used x AI’s trade secrets,” Lin wrote.

All x AI has claimed is that Open AI induced former employees to share secrets, and so far, nothing backs that claim, Lin said. Tishler noted that the court also rejected an x AI theory that “Open AI should be responsible for what its new hires did before they arrived” for “the same reason: without evidence that Open AI directed the theft or actually put the stolen information to use, you cannot hold the company liable.”

The strongest evidence that x AI had of employee misconduct, allegedly allowing Open AI to misappropriate x AI trade secrets, revolves around the departure of one of x AI’s earliest engineers, Xuechen Li.

That evidence wasn’t enough, Lin said. x AI alleged that Li gave a presentation to Open AI that supposedly included confidential information. Li also uploaded “the entire x AI source code base to a personal cloud account,” which he had connected to Chat GPT, Lin noted, after a recruiter sent a message on Signal sharing a link with Li to another unrelated cloud storage location.

x AI hoped the Signal messages would shock the court, expecting it to read through the lines the way x AI did. As proof that Open AI allegedly got access to x AI’s source code, x AI pointed to a Signal message that an Open AI recruiter sent to Li “four hours after” Li downloaded the source code, saying “nw!” x AI has alleged this message is short-hand for “no way!”—suggesting the Open AI recruiter was geeked to get access to x AI’s source code. But in a footnote, Lin said that “Open AI insists that ‘nw’ means ‘no worries,’” and thus is unconnected to Li’s decision to upload the source code to a Chat GPT-linked cloud account.

Even interpreting the text using x AI’s reading, however, x AI did not show enough to prove the recruiter or Open AI accessed or requested the files, Lin said.

It also didn’t help x AI’s case that a temporary injunction that x AI secured in a separate lawsuit targeting the engineer blocked Li from accepting a job at Open AI.

That injunction led Open AI to withdraw its job offer to Li. And that’s a problem for x AI, because since Li never worked at Open AI, it’s clear that he never used x AI’s trade secrets while working for Open AI.

Further weakening x AI’s arguments, if Li indeed shared confidential information during his presentation while interviewing for Open AI, x AI has alleged no facts suggesting that Open AI was aware Li was sharing x AI trade secrets, Lin wrote.

This “makes it very hard to argue Open AI ever used anything he allegedly took,” Tishler told Ars.

Another former x AI engineer, Jimmy Fraiture, was accused of copying x AI trade secrets, but Fraiture has said he deleted the information he improperly downloaded before starting his job at Open AI. Importantly, Lin said, since he joined Open AI, there’s no evidence that he used x AI trade secrets to benefit x AI’s rival.

“Other than the bare fact that Fraiture had been recruited” by the same Open AI employee “who had also recruited Li, x AI does not allege any facts indicating that Open AI had encouraged Fraiture to take x AI’s confidential information in the first place,” Lin wrote.

Since “none of the other former employees allegedly shared with or disclosed to Open AI any x AI trade secrets,” x AI could not advance its claim that Open AI misappropriated trade secrets based only on allegations tied to Li and Fraiture’s supposed misconduct, Lin said.

x AI may be able to amend its complaint to maintain these arguments, but the company has thus far presented scant, purely circumstantial evidence.

It’s possible that x AI will secure more evidence to support its misappropriation claims against Open AI in its ongoing lawsuit against Li. Ars could not immediately reach Li’s lawyer to find out if today’s ruling may impact that case.

Ex-executive’s “hostility” is not proof of theft

Among the least convincing arguments that x AI raised was a claim that an unnamed finance executive left x AI to take a “lesser role” at Open AI after learning everything he knew about data centers from x AI.

That executive slighted x AI when Musk’s company later attempted to inquire about “confidentiality concerns.”

“Suck my dick,” the former x AI executive allegedly said, refusing to explain how his Open AI work might overlap with his x AI position. “Leave me the fuck alone.”

x AI tried to argue that the executive’s hostility was proof of misconduct. But Lin wrote that x AI only alleged that the executive “merely possessed x AI trade secrets about data centers” and did not allege that he ever used trade secrets to benefit Open AI.

Had x AI found evidence that Open AI’s data center strategy suddenly mirrored x AI’s after the executive joined x AI’s rival, that may have helped x AI’s case. But there are plenty of reasons a former employee might reject an ex-employer’s outreach following an exit, Lin suggested.

“His hostility when x AI reached out about its confidentiality concerns also does not support a plausible inference of use,” Lin wrote. “Hostility toward one’s former employer during departure does not, without more, indicate use of trade secrets in a subsequent job. Nor does the executive’s lack of experience with AI data centers before his time at x AI, without more, support a plausible inference that he used x AI’s trade secrets at Open AI.”

x AI has until March 17 to amend its complaint to keep up this particular fight against Open AI. But the company won’t be able to add any new claims or parties, Lin noted, “or otherwise change the allegations except to correct the identified deficiencies.”

For Li, the engineer accused of disclosing x AI trade secrets with Open AI, the litigation could eliminate one front of discovery as he navigates two other legal fights over x AI’s trade secrets claims.

Tishler has been closely monitoring x AI’s trade secret legal battles. In October, she noted that Li is in a particularly prickly position, facing pressure in civil litigation from Musk to turn over data that could be used against him in the Federal Bureau of Investigation’s criminal investigation into Musk’s allegations. As Tishler explained:

“The practical reality is stark: Li faces a choice between protecting himself in the criminal action with his silence, and the civil consequences of doing so. Refuse to answer, and x AI could argue adverse inferences; answer, and the responses could feed the criminal case.”

“The practical reality is stark: Li faces a choice between protecting himself in the criminal action with his silence, and the civil consequences of doing so. Refuse to answer, and x AI could argue adverse inferences; answer, and the responses could feed the criminal case.”

Ultimately, the FBI is trying to prove that Li stole information that qualified as a trade secret and intended to use it for Open AI’s benefit, while knowing that it would harm x AI. If they succeed, “x AI would suddenly have a government-backed record that its trade secrets were stolen,” Tishler wrote.

If x AI were so armed and able to keep the Open AI lawsuit alive, the central question in the lawsuit that Lin dismissed today would shift, Tishler suggested, from “was there a theft?” to “what did Open AI know, and when did it know it?”

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Key Takeaways

• Musk has no proof Open AI stole x AI trade secrets, judge rules, tossing lawsuit

• Even twisting an ex-employee’s text to favor x AI’s reading fails to sway judge

• Elon Musk appears to be grasping at straws in a lawsuit accusing Open AI of poaching eight x AI employees in an allegedly unlawful bid to access x AI trade secrets connected to its data centers and chatbot, Grok

• In a Tuesday order granting Open AI’s motion to dismiss, US District Judge Rita F

• Instead, x AI seemed fixated on a range of alleged conduct of former employees