The Apple v. OpenAI Lawsuit: What Happens When Your Trade Secrets Live in Someone Else's Factory?
Apple's new lawsuit against OpenAI is a reminder that a large share of a company's trade secrets actually lives outside the physical office walls. In the current digital age and visibility, the sensitive information lives on servers of suppliers, contract manufacturers, and distributors who build, ship, and sell the product.
đź“Ś Case: Apple Inc. v. Liu
Court: U.S. District Court, Northern District of California (San Jose Division)
Case No.: 5:26-cv-07078
Filed: July 10, 2026
Apple's complaint names former Apple engineer Chang Liu, former Apple VP of product design Tang Yew Tan (now OpenAI's Chief Hardware Officer), OpenAI Foundation, OpenAI Group PBC, and OpenAI's hardware subsidiary io Products. Apple is suing for trade secret misappropriation against the two individual defendants and OpenAI.
OpenAI moved to dismiss on August 5, arguing Apple has not identified a specific, protectable trade secret or plausibly alleged misappropriation. Apple opposed the motion, and in its opposition, restated that departing employees were directed to detail unreleased devices, components, manufacturing processes, and vendor relationships. The hearing is set for October 1, 2026. The court has not ruled yet on either side's account.
Vulnerability in Supply Chain Partner Network
Apple’s unique product designs often require custom machinery, processes and specialized, proprietary machinery in its suppliers’ factories. Because of that, Apple’s manufacturers have access to the proprietary Design For Manufacturability (“DFM”) information, testing data, performance evaluation, and trends.
The Complaint further describes Apple’s global supply chain operations and supplier relationships as a trade secret. Its value sits in the confidential coordination and management of the complex network of suppliers, subsuppliers, vendors, and internal teams.
- Apple alleges that OpenAI persuaded Apple’s trusted manufacturing partner to carry out a proprietary metal-finishing process for OpenAI's benefit. OpenAI, the lawsuit alleges, misled the partner to believe they had Apple's permission to do so.
- Apple alleges OpenAI separately approached a second longtime Apple supplier, one that manufactures power and battery components, using insider terminology to ask targeted questions about specific Apple parts.
Internal Vulnerability
Over 400 former Apple employees now work for OpenAI. Inevitably, these employees have accumulated knowledge of Apple’s proprietary and confidential information. They are not allowed to share or use it. However, in the current pro-competition trend of employees’ freedom of movement, trade secrets are becoming harder and harder to protect.
- Job candidates, including some still employed at Apple, were reportedly asked to bring physical hardware components to OpenAI interviews for "show and tell" sessions, and Tan allegedly used Apple's internal project codenames during recruiting.
Lessons for Manufacturers, Distributors, and Suppliers
Every company up and down a supply chain wants more visibility: real-time data from suppliers, embedded quality engineers at contract manufacturers, shared forecasting with distributors. Visibility reduces disruption risk and improves service levels. But visibility runs in both directions. The same access that lets you see deeper into a supplier's operations may be used by a competitor as a vulnerability point. The situation becomes even more complex with shared manufacturing relationships which are common in this industry: OpenAI has separately been reported to be working with some of Apple's long-time device assemblers. Your trade secrets do not need to be on your server to be accessed.
Your Supply Chain Partner Knows More Than You Think: Manufacturing processes and finishing techniques, unreleased component specifications, bills of materials and cost data, testing protocols, and the identity of the supplier relationships themselves are all potentially protectable trade secrets. A supplier's floor may hold as much competitively sensitive information as your own R&D files.
The Confidentiality Language Has to Name It: A trade secret claim generally requires the owner to show the information derives value from staying secret and that reasonable measures were taken to protect it. A generic confidentiality clause referencing "confidential information" broadly does less work than a provision that specifically identifies the categories of process and technical information covered.
Consider a Verification and Authentication Requirement Before a Partner Acts on “Your” Word: What makes the metal-finishing allegation notable is that the manufacturing partner believed it had Apple's authorization. Consider requiring your supply chain partners to authenticate all requests purportedly made on your behalf. Consider setting a specific mode of authentication to avoid the Apple situation.
Recruiting by a Competitor Can Function as a Discovery Channel: When a competitor is hiring aggressively from your workforce, interviews are not a neutral space. Non-competes may or may not be enforceable, depending on your state or country. So, your ability to prevent your employees from leaving may be limited. Yet, confidentiality and non-solicitation may still be valid. It is worth reviewing those provisions and tightening the onboarding and offboarding procedures.
Trade Secret Map: Consider mapping out all information that you want to protect. Determine its value and invest in securing it. Optimize the information flow and minimize unnecessary links and vulnerability.
Bottom Line
A trade secret does not stop being yours because it is sitting on a supplier's floor. But it may be more vulnerable there. What do you do to protect it?
Disclaimer: This blog post is not legal advice. It is for informational purposes only. Reading this content does not create an attorney-client relationship. Consult with a licensed attorney to address your specific issues. Do not act upon this information without seeking professional legal counsel. IB Law Firm does not endorse any of the cited sources and is not responsible for the content of linked resources