Rotten to Its Core: Apple Sues OpenAI Over the Secrets Behind Its First Device

Two years ago, Apple put ChatGPT inside the iPhone. On Friday, it took OpenAI to federal court and accused the company of building its hardware business out of stolen Apple property.

The complaint, filed July 10 in the U.S. District Court for the Northern District of California, names OpenAI, its hardware subsidiary io Products, its Chief Hardware Officer Tang Tan, and a member of its technical staff named Chang Liu. The language is unusually hot for a corporate filing. Apple alleges that "at every level, from members of its Technical Staff to its Chief Hardware Officer, and in coordination with business partners, OpenAI has been stealing Apple's trade secrets and confidential information," and that OpenAI's "nascent hardware business now rests on the shakiest of foundations, rotten to its core."

OpenAI's response, from spokesperson Drew Pusateri, was one sentence long: "We have no interest in other companies' trade secrets. We remain focused on building innovative technology that empowers people everywhere."

What Apple says happened

The allegations fall into three buckets, and the interesting thing is how physical they are. This is not a lawsuit about model weights or training data. It is a lawsuit about hardware.

First, recruiting as an extraction channel. Apple claims Tang Tan — who spent roughly 24 years at Apple, rising to vice president overseeing iPhone and Apple Watch product design before leaving for io Products in 2024 — used Apple's confidential internal project codenames while recruiting, a signal to candidates that OpenAI already knew what they were working on. More strikingly, Apple alleges Tan directed candidates who were still Apple employees to bring "actual parts" from Apple into their OpenAI interviews for show-and-tell sessions, where he and his team could draw out further confidential detail.

Second, exfiltration on the way out the door. Apple alleges that Chang Liu, an eight-year Apple senior systems electrical engineer, failed to return an Apple-issued laptop after leaving for OpenAI and used it to download dozens of confidential hardware files — technical specifications and engineering presentations for unreleased products. Apple further claims Liu coached an Apple employee on how to bypass security controls while copying files, and that departing employees were more broadly coached on evading Apple's exit procedures.

Third, the supply chain. Apple says OpenAI misappropriated its knowledge of supplier relationships and used proprietary Apple terminology when approaching those same partners — including, per the filings, a proprietary metal finishing technique. If you have ever wondered what an iPhone's real moat is, this is Apple's own answer under oath: not the silicon alone, but the accumulated, unpatentable process knowledge of how to make tens of millions of beautiful objects that all come out the same.

Apple says it raised concerns with OpenAI in February and got no response. It is seeking injunctive relief, monetary damages, and declaratory judgments, along with an order to return confidential materials and preserve evidence.

Why this is really about a phone

The subtext is not subtle. OpenAI is widely reported to be developing its first consumer hardware product — a device conceived around AI agents rather than an app grid — and it bought io Products, the design firm co-founded by Jony Ive, in 2025 for a figure reported at roughly $6.4 to $6.5 billion (accounts vary slightly across outlets). Ive is not named as a defendant.

Read the complaint through that lens and its purpose comes into focus. Apple is not primarily trying to win a damages award; it does not need the money. It is trying to attach a legal cloud to a product that has not shipped yet. Every supplier OpenAI approaches, every hardware engineer it recruits, every enterprise partner evaluating the device now has to weigh an active federal trade-secret claim naming the company's hardware chief. Litigation as friction is a real strategy, and Apple has the patience to run it.

Hype versus what's actually established

Some discipline is required here, because the filing reads like a verdict and it is not one. Everything above is Apple's allegation. None of it has been tested in court. OpenAI has denied interest in Apple's secrets and has not yet filed a response.

Trade-secret suits against departing employees are also, historically, hard to win in California. The state does not enforce non-compete agreements, and employees are entitled to take their general skill and knowledge — including everything they learned about how to design good hardware — to a competitor. The line Apple must draw is between "Tang Tan knows how to build a phone" (legal, and unremarkable) and "Tang Tan took specific, identified, protectable Apple secrets and OpenAI used them" (actionable). The strongest facts in Apple's complaint are the concrete ones: the unreturned laptop, the downloaded files, the parts allegedly carried into interviews. Those are discrete acts with forensic trails. The vaguer allegations about codenames and supplier terminology are the kind that tend to get narrowed as a case proceeds.

Also worth flagging: a claim that OpenAI's entire hardware program is "rotten to its core" is advocacy, not a finding. Even if Apple proves every specific act it alleges, that does not establish that the resulting product is derivative.

The partnership that curdled

The 2024 ChatGPT-in-Siri deal was a genuine landmark — Apple, the company that builds everything itself, conceding it needed someone else's model. It has been unwinding ever since. In January of this year, Apple signed a reported billion-dollar-a-year agreement with Google to have Gemini power its rebuilt Siri, with ChatGPT relegated to a secondary integration.

So the sequence is: Apple hires OpenAI's rival to run its assistant; OpenAI hires Apple's designers to build its device; Apple sues. The two companies have been converging on each other's turf, and the collegial framing of 2024 could not survive it. This also lands during a leadership handoff at Apple, with Tim Cook set to step down in September and John Ternus — a hardware executive — taking over. A suit defending the sanctity of Apple's industrial design secrets is a fitting opening statement for that transition.

What to watch next

Three things will tell you whether this is a serious case or a pressure campaign. Does Apple move for a preliminary injunction — the aggressive step that would force an early merits fight? Does discovery reach into io Products' actual design files, which is where the real leverage lies? And does OpenAI countersue or seek to narrow the trade secrets at issue, the standard defense move that grinds these cases down?

Watch the supply chain, too. If Apple's contract manufacturers and finishers start declining OpenAI's business while this is pending, the lawsuit will have already done its work regardless of the verdict.

The takeaway

This is the moment the AI platform war stopped being about models and became about objects. Apple's complaint is an argument that the hardest thing in technology is still making a physical device at scale — and that OpenAI, having decided it wants to be a device company, tried to buy and hire its way past a decade of accumulated manufacturing craft. Whether that argument survives contact with a California courtroom is genuinely uncertain. But the strategic message is already delivered: Apple will treat OpenAI's first device not as a partner's experiment, but as an attack on the iPhone. Everything the two companies do to each other from here follows from that.

Sources: TechCrunch · PBS NewsHour · Fortune · CNBC on the Apple–Google Gemini deal