Apple v. OpenAI: When Employee Mobility Creates Trade Secret Risk

The latest trade secret dispute between Apple and OpenAI highlights a growing challenge for California employers: employees may be free to join a competitor, but their former employer’s trade secrets are not theirs to take.

As competition for specialized talent intensifies—particularly in AI and other technology-driven industries—companies need to manage trade secret risk from both directions: protecting their own confidential information when employees leave and avoiding the introduction of a competitor’s protected information when new employees join.

What Happened?

Apple’s recent lawsuit against OpenAI centers on allegations that OpenAI benefited from trade secrets retained by former Apple employees. Although the ultimate outcome remains to be seen, the dispute illustrates a broader risk for companies hiring from competitors.

The key issue is not simply whether a company can hire a competitor’s employees. It is whether confidential or proprietary information belonging to the former employer follows those employees to their new workplace.

That risk can arise well before litigation—and, in some cases, as early as the onboarding process.

What Does the Law Say?

California has long prohibited most employee non-compete agreements, reflecting the state’s strong policy in favor of employee mobility. This approach has played an important role in California’s innovation economy, particularly in industries where specialized talent moves frequently between competitors.

For employers, however, several important boundaries remain:

• Employees are generally free to move. California employers generally cannot rely on non-compete agreements to prevent employees from joining competitors.

• Employees may use their general knowledge and skills. An employee’s experience, expertise, and general professional knowledge do not automatically belong to a former employer.

• Trade secrets remain protected. Employee mobility does not give employees the right to take or use a former employer’s protected confidential or proprietary information.

• Employers must take reasonable steps to protect their information. Effective trade secret protection depends in part on whether a company has implemented meaningful safeguards to preserve the confidentiality of the information at issue.

• Trade secret protection becomes even more important when non-competes are unavailable. Without non-compete agreements as a tool to restrict employee mobility, companies increasingly rely on trade secret law, confidentiality obligations, and information governance to protect their competitive advantages.

The practical distinction is straightforward: employees may take their skills and experience to a new employer, but they should not take their former employer’s trade secrets with them.

What Does This Mean for Employers?

Trade secret risk runs in both directions. Employers must protect their own information when employees depart while also ensuring that new hires do not introduce confidential information belonging to a competitor.

• Risk can begin during onboarding. New hires may still possess files, code, customer information, or other confidential materials from a former employer.

• Not asking for the information may not eliminate the risk. Even if a company never requests a competitor’s information, problems can arise if that information enters company systems or is used in business or product decisions.

• Managers can create risk. Managers should avoid asking new hires to disclose nonpublic information about a former employer, even during seemingly routine discussions about prior work.

• Sensitive roles may warrant additional safeguards. Employees working in AI, engineering, R&D, product development, and other information-intensive roles may require enhanced onboarding and information-security controls.

• Employers should manage both incoming and outgoing information. A comprehensive trade secret program should address the full employee lifecycle, from recruiting and onboarding through employment and departure.

What Should Employers Do?

Employers can reduce exposure by moving trade secret compliance earlier in the hiring and onboarding process.

• Set clear boundaries during onboarding. Require new hires to acknowledge that they should not bring or use confidential information belonging to a former employer, and distinguish that information from their general skills and experience.

• Strengthen controls for high-risk roles. Depending on the position, companies may consider restricting external storage devices and personal cloud services and monitoring unusual file-transfer activity.

• Train managers and recruiters. Managers should understand that they may ask about a candidate’s experience and expertise without soliciting a former employer’s confidential information.

• Establish a response protocol. If potentially confidential third-party information enters the organization, restrict access and promptly involve the appropriate Legal, IT, Security, or outside counsel resources.

• Review your own trade secret protections. Regularly assess access controls, confidentiality agreements, sensitive-data management, and offboarding procedures to ensure the company is taking reasonable measures to protect its own information.

These safeguards are not intended to interfere with legitimate employee mobility. Rather, they allow employers to benefit from a new hire’s expertise while reducing the risk that a former employer’s proprietary information enters the organization.

Conclusion

As competition for AI engineers, researchers, product leaders, and other specialized talent accelerates, trade secret disputes are likely to remain a significant litigation risk.

For California employers, the limits on non-compete agreements do not mean companies are powerless to protect their competitive advantages. Instead, they make strong trade secret protections, thoughtful onboarding, and effective information governance even more important.

Trade secret protection should therefore extend beyond an NDA signed on an employee’s first day. A well-designed compliance framework should address recruiting, onboarding, access controls, ongoing information management, and offboarding, with coordination among HR, Legal, IT, Security, and business leaders.

In an environment where talent is increasingly mobile, companies should focus less on building walls around employees and more on building effective safeguards around the information that gives the business its competitive edge.

If your company is hiring employees from competitors or reviewing its trade secret, onboarding, or offboarding practices, please contact the ILS legal team at contact@consultils.com.

Disclaimer: The materials provided on this website are for general informational purposes only and do not, and are not intended to, constitute legal advice. You should not act or refrain from acting based on any information provided here. Please consult with your own legal counsel regarding your specific situation and legal questions.

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As Managing Partner at ILS, Richard Liu ranks among the leading U.S. attorneys in corporate, employment, and regulatory law. He is known for crafting legal strategies aligned with clients’ business objectives and advising Fortune 500 companies, startups, and executives on corporate transactions, financing, privacy, and employment matters across the technology, healthcare, and financial sectors.

Before founding ILS, Richard practiced at top defense firms, where he developed a reputation for anticipating risks and designing strategies that balance protection with growth. He has secured favorable outcomes in contract and intellectual property disputes, represented clients in state and federal courts, and is recognized for combining large-firm expertise with boutique-firm agility. Richard is also a frequent speaker at industry and legal conferences.

Email: contact@consultils.com | Phone: 626-344-8949