San Francisco, February 25: A California federal judge has dismissed a lawsuit filed by Elon Musk’s artificial intelligence company, xAI, which accused OpenAI of stealing trade secrets through the strategic hiring of former staff. On Tuesday, US District Judge Rita F. Lin ruled that xAI failed to provide evidence of misconduct by OpenAI itself, noting that the departure of employees does not inherently constitute illegal corporate behaviour.

The ruling is a significant legal victory for OpenAI amidst a series of escalating courtroom battles between its Chief Executive, Sam Altman, and its former co-founder, Elon Musk. While the judge granted the motion to dismiss, the ruling was made with leave to amend, providing xAI with the opportunity to refile modified claims by 17 March 2026. xAI Sues OpenAI: Elon Musk’s AI Company Files Lawsuit Against ChatGPT-Maker, Alleges Theft of Trade Secrets Through Hiring Former Employees.

OpenAI Wins Lawsuit by Elon Musk's xAI 

Lack of Evidence for Corporate Misconduct

In the court’s decision, Judge Lin highlighted that xAI’s current claims do not point to any specific actions directed by OpenAI. The lawsuit centered on eight former xAI employees who transitioned to OpenAI at approximately the same time. xAI alleged that two of these individuals stole source code for the Grok AI model while in communication with an OpenAI recruiter.

However, the judge determined that there was no allegation suggesting the recruiter instructed the employees to take the code. Other claims involving former staff retaining work chats or attempting to access xAI data after their departure were also deemed insufficient to implicate OpenAI in a conspiracy. The court noted the absence of allegations regarding the conduct of OpenAI as an entity.

Ongoing Legal Friction Between Musk and Altman

Following the decision, OpenAI released a statement on the social media platform X, welcoming the court's move. The company described the lawsuit as "baseless" and characterised it as part of a broader campaign of harassment by Mr Musk. xAI has not yet issued a formal response to the ruling.

This case is one of several legal disputes currently defining the relationship between the two AI giants. The most prominent conflict involves a separate lawsuit regarding OpenAI’s transition from a non-profit to a for-profit organisation. That case is currently scheduled to proceed to a jury trial in April, which could have significant implications for the structure of the AI industry.

Context of the AI Talent War

The dispute underscores the intense competition for engineering talent in the rapidly evolving artificial intelligence sector. Companies are increasingly protective of their intellectual property as they race to develop more advanced large language models. xAI had specifically alleged that confidential information regarding data centre optimisation and hiring strategies was at risk. Elon Musk’s xAI Sues Former Engineer for Allegedly Sharing Grok Secrets With OpenAI.

While the dismissal provides temporary relief for OpenAI, the window for xAI to refile remains open. If xAI chooses to amend its filing before the March deadline, the legal proceedings could continue to scrutinise the hiring practices and internal security protocols of both organisations.

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(The above story first appeared on LatestLY on Feb 25, 2026 01:13 PM IST. For more news and updates on politics, world, sports, entertainment and lifestyle, log on to our website latestly.com).