Elon Musk's legal battle with OpenAI hit another wall Tuesday. A federal judge dismissed xAI's trade secrets lawsuit, ruling that the five-month-old complaint failed to show OpenAI committed any misconduct.

U.S. District Judge Rita Lin in San Francisco zeroed in on what the complaint lacked. "Notably absent are allegations about the conduct of OpenAI itself," Lin wrote. "xAI does not allege any facts indicating that OpenAI induced xAI's former employees to steal xAI's trade secrets or that these former xAI employees used any stolen trade secrets once employed by OpenAI."

The case, filed September 2025, named eight former xAI engineers who joined OpenAI, claiming that they had access to the Grok chatbot source code, training methods, data center deployment strategies, and internal documentation. One engineer, Xuechen Li, uploaded code to a personal cloud account, according to the filing.

But the judge found the complaint focused on employee actions, not OpenAI's. Without allegations showing OpenAI directed the transfers, knew about them, or used the information, the case couldn't proceed.

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What court filings revealed

According to court documents reviewed by Decrypt, the complaint alleged OpenAI offered multi-million-dollar compensation packages to the engineers, including to Li, which he accepted by August 1. However, OpenAI has stated that Li never actually worked for the company. His offer was rescinded, and he never started employment.

Two parallel lawsuits with different stakes

xAI has until March 17 to file an amended complaint. A separate lawsuit targeting Li directly remains active, with his response due March 6.

The trade secrets case runs alongside Musk's $134.5 billion lawsuit against OpenAI and Microsoft. That larger action challenges OpenAI's conversion from a nonprofit to a for-profit company. Jury selection is scheduled for April 27, 2026.

Musk co-founded OpenAI in 2015 as a not-for-profit but left in 2018 and then launched the competing AI startup xAI in 2023. 

"We welcome the court's decision. This baseless lawsuit was never anything more than yet another front in Mr. Musk's ongoing campaign of harassment," OpenAI said about the ruling on Tuesday.

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