For much of the current AI boom, the industry’s biggest legal battles have centered on the development of generative AI. Companies are facing lawsuits involving copyright, licensing, privacy, and other issues arising from the creation and operation of increasingly sophisticated large language models. Now, as leading AI companies move into consumer hardware, disputes over trade secret misappropriation are coming into focus.
That shift is already taking shape. OpenAI recently debuted its first branded hardware product, a limited-run collaboration with electronics company Work Louder. At the same time, OpenAI is facing a sweeping lawsuit filed by Apple that accuses the company, several former Apple employees now working at OpenAI, and OpenAI’s hardware subsidiary io of orchestrating a coordinated effort to misappropriate Apple’s trade secrets in order to accelerate its entry into consumer hardware.
The AI giant has denied the allegations. In a statement responding to the Apple lawsuit, a spokesperson for OpenAI said the company has “no interest in other companies’ trade secrets.”
Taken together, the product launch and the lawsuit underscore a broader transition. As AI companies increasingly seek to build physical devices rather than software alone, they are entering an industry governed by a different set of competitive dynamics – and a different IP playbook.
AI Companies Want More Than Software
Since launching ChatGPT in late 2022, OpenAI has largely existed as a software company. Consumers access its products through browsers, smartphones, and computers designed and manufactured by others. That appears to be changing, as OpenAI has spent the past year assembling a dedicated hardware effort, most notably hiring former Apple Chief Design Officer Jony Ive.
While the company’s long-rumored consumer hardware platform has yet to materialize, OpenAI released its first branded hardware product last week: the Codex Micro. Developed in partnership with Work Louder, the compact keyboard features six illuminated keys that display the status of a user’s AI coding agents. Different colors indicate whether an agent is thinking, awaiting approval, generated a message, or encountered an error.
Although modest in scope, the device represents OpenAI’s first foray into hardware. The company’s broader ambitions reportedly center on a portable, screenless AI companion equipped with cameras and microphones. Whether that vision succeeds remains to be seen, bug its legal implications are already becoming apparent.
A Different Kind of IP
Apple’s new lawsuit extends beyond claims that individual employees improperly retained confidential information. The complaint, filed in the Northern District of California on July 10, alleges that OpenAI’s recruiting and interviewing practices were designed to elicit Apple’s confidential information, including by asking candidates to prepare technical presentations about confidential Apple projects and requesting that they bring Apple components and prototypes to interviews. Those allegations frame the case not simply as a dispute over departing employees, but as one involving the institutional acquisition of trade secrets.
For the past several years, the AI litigation landscape has been dominated by copyright disputes over the use of protected works to train AI systems. Apple’s lawsuit highlights a different form of intellectual property: trade secrets, including confidential manufacturing techniques, engineering processes, confidential supplier information, and other proprietary know-how that Apple says took decades to develop.
Beyond its recruiting allegations, Apple also claims that one former Apple engineer continued to access Apple’s systems after joining OpenAI and downloaded confidential engineering materials. It further alleges that OpenAI leveraged knowledge of Apple’s supplier network to obtain proprietary manufacturing know-how. OpenAI denies those allegations.
THE BIGGER PICTURE: OpenAI’s first hardware product is unlikely to transform consumer computing on its own. But it does signal that the legal questions surrounding AI are beginning to change. If the industry’s first wave of litigation focused on copyright-protected works used to build AI systems, Apple’s lawsuit suggests the next chapter may increasingly involve the confidential know-how used to build the devices themselves.
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