Trade secret litigation often turns on fast-moving disputes over information, competition, and control. Each month, we highlight notable rulings, verdicts, and enforcement actions shaping trade secret risk and litigation outcomes.
Federal Judge Dismisses With Prejudice xAI's Trade Secret Claims Against OpenAI
Court finds insufficient the allegations that OpenAI induced a former employee to disclose confidential information
U.S. District Judge Rita Lin dismissed with prejudice xAI's trade secret lawsuit against OpenAI. The suit, filed in February, centered on former xAI employee Xuechen Li, who xAI accused of downloading source code while being recruited by OpenAI and disclosing a confidential xAI presentation during the recruiting process. The case followed the departure of eight xAI engineers and executives in the summer of 2025, most of whom joined OpenAI.
Judge Lin had previously dismissed the misappropriation claim with leave to amend. In the amended complaint, xAI asserted two theories of misappropriation: (1) OpenAI induced xAI’s former employee to misappropriate xAI’s trade secrets; and (2) xAI’s former employee disclosed trade secrets to OpenAI in a presentation delivered during the recruitment process.
Both theories still failed to state a claim as a matter of law.
First, Judge Lin rejected xAI's argument that OpenAI's hiring process amounted to inducement. She held that "Merely asking Li to discuss his previous work — a routine part of the hiring process — does not allow a plausible inference that OpenAI induced Li to reveal anything confidential or secret about that work."
Second, Judge Lin held that the OpenAI’s alleged receipt of trade secrets during a recruitment presentation could not amount to misappropriation. At most, the allegations amounted to OpenAI passively receiving the trade secrets rather than actively attempting to acquire them: "Mere possession of trade secrets is not sufficient to constitute misappropriation," she wrote.
Since Judge Lin had previously given xAI leave to amend the misappropriation allegations—and it failed to do so adequately—she dismissed the amended complaint with prejudice.
What this means: A Plaintiff that sues a competitor over a former employee's alleged theft must allege that the competitor actively participated in the acquisition or use of trade secrets — not simply that it hired someone who may have taken confidential information. Routine recruiting conduct, including asking candidates about prior work, is unlikely to support a misappropriation claim.
Samsara Secures Permanent Injunction Against Former Employee Who Joined Motive
Settlement resolves individual dispute even as broader litigation between the fleet-tech rivals continues
Samsara resolved a trade secret dispute with William Reich, a former senior manager in enterprise field sales who left the company to join competitor Motive. Under a stipulated permanent injunction entered by the U.S. District Court for the Northern District of California, Reich agreed to comply with the confidentiality agreement he signed when he joined Samsara in 2022, including a bar on disclosing Samsara proprietary information to any third party, "including any future employer or his former employer Motive." Samsara said Reich also agreed to pay an undisclosed but substantial sum for breaching his employment agreement and has since resigned from Motive.
Samsara's 2024 complaint had alleged that Reich downloaded a large volume of trade secrets and confidential information, including in-development product offerings and customer data, in the days before he resigned. Samsara Chief Legal Officer Adam Eltoukhy said the company "will always take decisive action to safeguard the innovations that power our platform and serve our customers."
The injunction closes one piece of litigation between the two companies. Motive was recently cleared in a patent infringement suit brought by Samsara, while Samsara separately won a $30.3 million judgment against Motive over false advertising claims earlier this year. Samsara filed a new patent infringement suit against Motive the same day the Reich settlement was disclosed.
What this means: A signed confidentiality and invention-assignment agreement, paired with prompt legal action, can allow a company to resolve an individual departing-employee dispute through a stipulated injunction without fully litigating the merits — even as separate, larger disputes between the same corporate rivals remain unresolved.
Pagaya Sues Klarna Over Point-of-Sale Underwriting Technology
Fintech company alleges former partner used shared data to build a competing system
Pagaya Technologies sued its former partner Klarna, alleging that the buy-now-pay-later company misappropriated trade secrets tied to point-of-sale loan underwriting. Pagaya, which had assessed subprime borrowers for Klarna at checkout since 2022, claims Klarna "distilled Pagaya's core underwriting technology for POS loans and then willfully misappropriated its trade secrets" and breached related agreements.
According to the lawsuit, filed May 14, Klarna's goal was to "absorb Pagaya's trade secrets, use them to build its own competing capabilities, and cut Pagaya out of the very business Pagaya made possible for Klarna," all while misrepresenting an intent to expand the partnership. Pagaya pointed to public statements by Klarna CEO Sebastian Siemiatkowski, including a claim on a February earnings call that Klarna's underwriting relied on "proprietary underwriting systems that we've developed" built on "the knowledge we have built around risk management for the past 20 years." Pagaya alleges that statement was false and that Klarna CFO Niclas Neglén signaled on the same call that Klarna intended to move more transactions onto its own systems.
Klarna disputes the claims, saying it notified Pagaya on March 25 that it was ending the commercial relationship "as is our contractual right," and that it considers the lawsuit meritless.
What this means: Long-running commercial partnerships that involve sharing proprietary technology with a vendor or counterparty can leave both sides exposed once the relationship ends, particularly where one party's later public statements about its own capabilities can be used as evidence of what it allegedly absorbed from the other.
Mariner Wins Summary Judgment Over Edelman in Financial Advisor-Poaching Dispute
Federal judge also faults Edelman's briefing tactics while rejecting claims tied to client lists
Federal judge Holly L. Teeter for the District of Kansas granted summary judgment to Mariner Wealth Advisors, dismissing trade secret claims brought by Edelman Financial Engines over the departure of 10 former Edelman planners who joined Mariner. Edelman first sued in 2023, alleging that Mariner encouraged advisors to breach non-solicitation agreements and misappropriate client information.
The court found that Edelman failed to establish either that the partial client lists the planners brought with them qualified as trade secrets or were improperly acquired under the Defend Trade Secrets Act. Edelman also had insufficient evidence that Mariner directed its new hires to bring client data rather than simply retaining knowledge of client names — which the court held does not rise to the level of a protected trade secret. Teeter concluded that no reasonable jury could find for Edelman on the trade secret claims.
The judge separately admonished Edelman's legal team for what she described as improper briefing tactics, including misrepresenting evidence and missing citations. She noted that the problems "appear throughout Edelman's briefing, to the point that the court cannot excuse them." Edelman said in a statement that it disagreed with the ruling and would continue to pursue its claims; Mariner said it was pleased the court agreed the claims lacked merit.
What this means: Departing employees' memory of client names and relationships generally will not support a trade secret claim absent proof that specific, protectable information was taken or that the new employer directed its acquisition. Litigants should also take note that evidentiary shortcuts in briefing can draw judicial criticism that colors the outcome of a case.
For more information regarding Alto Litigation's litigation practice, please contact one of Alto Litigation's partners: Bahram Seyedin-Noor, Bryan Ketroser, Joshua Korr, or Kevin O'Brien.