Apple sues OpenAI over trade secrets as hardware plans loom

On a recent episode of TechCrunch's Equity podcast, hosts Kirsten Korosec, Sean O'Kane, and Anthony Ha examined the implications of Apple's newly filed trade secrets lawsuit against OpenAI. The suit accuses OpenAI of a pattern of misconduct at the highest levels, specifically targeting OpenAI employees who previously worked at Apple. Apple named OpenAI's chief hardware officer Tang Tan in the complaint, alleging that OpenAI has been systematically attempting to recruit former Apple workers to share confidential information. OpenAI responded by saying it is "not aware of any evidence that this complaint has merit."

The lawsuit centers on a hardware product—a mobile smart speaker—that OpenAI has been developing with Jony Ive's team. This is OpenAI's first major foray into hardware, following cryptic references the company made last year in a video shot at a San Francisco café or bar where executives discussed hardware and legacy devices like laptops and phones without revealing specifics. According to Apple's allegations, more than 400 Apple employees now work at OpenAI, though as a percentage of both companies' large workforces this may not be enormous, the absolute number reflects a significant talent drain.

The lawsuit's timing amplifies its business impact. OpenAI has filed confidentially for an IPO, with industry speculation placing it as early as the end of 2024 or early 2025, based on CEO Sam Altman's cautious public statements. Sean O'Kane emphasized that even if courts do not grant injunctive relief or restraining orders, litigation naturally causes operational delays—something he suggested was likely part of Apple's strategic motivation. More critically, if OpenAI has pegged a meaningful portion of its addressable market to a hardware division, this lawsuit could fundamentally alter how the company pitches itself to bankers and investors, potentially reshaping IPO pricing and valuation.

The speakers debated whether OpenAI would seek a quick settlement or endure a protracted trial. Korosec predicted the latter, pointing to OpenAI's recent courtroom victory against Elon Musk as evidence the company has learned it can survive litigation and public embarrassment. That trial, while largely won by OpenAI, nonetheless exposed internal details that proved uncomfortable. The question now is whether OpenAI views the potential damage to its hardware timeline and IPO positioning as worth fighting through another trial, or whether the company will move to settle and protect its near-term business plans.

Apple's lawsuit strikes at a particularly sensitive moment for OpenAI. The company has been planning to diversify beyond software into hardware—a shift reflected in its hiring of Jony Ive's team and the mobile smart speaker project. That diversification effort could significantly alter OpenAI's business model and market opportunity as it approaches what may be one of the most important valuations in tech history.

The timing is no accident. OpenAI's expected IPO will force the company to disclose its addressable market and revenue projections to investors. If hardware is positioned as a meaningful revenue driver, but the lawsuit constrains or delays that division, investors may view the company's growth claims as diminished. Even without a court injunction, litigation naturally introduces operational uncertainty and delays—something Sean O'Kane notes may well have been part of Apple's strategic calculation. The fact that more than 400 Apple employees now work at OpenAI underscores the talent flow and competitive stakes at play.

The question of how OpenAI responds—settle or fight—carries lessons from its recent courtroom victory against Elon Musk. Despite that win, the trial exposed embarrassing internal details. OpenAI could choose to avoid a repeat, or it could gamble that survival through litigation is worth the risk. Kirsten Korosec's prediction that OpenAI will choose to fight suggests the company may prioritize its hardware ambitions and IPO timing over the cost and reputational wear of a prolonged trial.