Apple just lobbed a legal grenade at OpenAI’s hardware ambitions. The iPhone maker filed a federal trade secrets lawsuit on July 10 in California, alleging that OpenAI and its hardware subsidiary io Products orchestrated a systematic campaign to steal proprietary information, including secrets tied to iPhone manufacturing and unreleased hardware.

The complaint spans 41 pages and names several former Apple employees alongside OpenAI. Apple claims hundreds of its ex-staffers were involved in funneling sensitive information to help OpenAI build consumer AI devices designed to compete directly with the iPhone.

What Apple is actually alleging

The lawsuit centers on OpenAI’s acquisition of io Products, the hardware venture led by legendary Apple designer Jony Ive. OpenAI picked up that company for approximately $6.5 billion in May 2025, a deal that signaled its serious intent to move beyond software and into the device business.

Apple argues that acquisition became a vehicle for something far less innocent than product development. The complaint alleges unauthorized access to Apple’s network and a coordinated effort among former employees to transfer proprietary knowledge to their new employer.

Apple had already sent a cease-and-desist letter to OpenAI back in February 2026 after internal concerns surfaced about how sensitive information was being handled. When that apparently didn’t resolve the situation, Apple escalated to a full federal complaint.

Apple is reportedly seeking to either block or force a redesign of OpenAI’s planned hardware releases, including a screenless, agent-based AI smartphone anticipated for late 2026.

The hardware race gets complicated

The Jony Ive connection makes this especially awkward. Ive spent nearly three decades at Apple, serving as the design mind behind the iMac, iPod, iPhone, and Apple Watch. His departure in 2019 was already a sore point.

What this means for the broader AI and tech landscape

Market analysts have flagged that delays in OpenAI’s product rollout could trigger a broader reassessment of risk across the AI hardware sector. Enterprise customers evaluating AI hardware partnerships will now need to factor in litigation risk. Companies planning to integrate OpenAI’s forthcoming devices into their workflows may pause those plans pending resolution.