Former xAI Engineer Sued for Allegedly Stealing Trade Secrets

SAN FRANCISCO—A Chinese national who was formerly an xAI engineer is being sued by the company for alleged “willful and malicious” stealing of xAI’s trade secrets and documents, including “cutting-edge [artificial intelligence] technologies with features superior to those offered by ChatGPT and other competing products.”

The 29-page federal civil complaint filed on Aug. 28 in the Northern District of California seeks a temporary restraining order, ordering the defendant to surrender all stolen files and documents, as well as injunctions to prevent any others from accessing those materials.

The lawsuit also seeks damages and emergency injunctive relief to prevent defendant Li Xuechen from working at OpenAI or any other competitor of xAI pertaining to generative artificial intelligence (AI) until xAI confirms that all allegedly stolen files have been deleted.

Li, a Stanford University alumnus and permanent resident of Canada, joined xAI’s technical team with approximately 20 engineers in late February 2024. According to the court filing, Li allegedly secretly uploaded a copy of data containing xAI’s trade secrets three days before his sudden resignation on July 28.

Before this, Li had accepted an offer from xAI competitor OpenAI to join its team starting Aug. 19.

Elon Musk, xAI founder and owner, said in an X post, “He downloaded the entire xAI code repo, the logs prove he did it and he admitted he did it!” Details of Musk’s accusations are included in the court documents.

Generative AI was introduced for public access in late 2022 with ChatGPT’s debut as a chatbot. xAI entered the race in November 2023. The company’s advanced model, Grok 4, achieved groundbreaking results that surpassed rival products in some AI benchmark tests published on July 11.

As part of the Grok 4 team, Li wrote in his last public X post on July 10, just one day after the announcement of Grok 4, “It never fails to astonish me how much a small group of talented people working with extreme focus and intensity can achieve in a very short time.”

While Li was working for xAI developing and training Grok, he was granted “restricted and controlled access to its confidential documents and proprietary information” to enable him to perform his job duties, according to the complaint.

“The data could be used by xAI’s competitors, such as OpenAI, and/or foreign entities to preempt xAI’s product offerings and market expansions, and understand and use its current and in-development product features to strengthen their own AI models, thus giving any competitor or entities with access to the data a potentially insurmountable competitive advantage in the AI race,” the complaint reads.

Li worked as an intern in the Google AI-related TensorFlow team when he was a student at the University of Toronto, according to his LinkedIn profile. Li also entered Meta’s PhD fellowship during his time as a PhD candidate at Stanford, studying AI.

Employees in the AI community, such as Li, get paid well. Li sold nearly $7 million in xAI company stock through two transactions facilitated by xAI, receiving $4.7 million on July 23 and another $2.2 million on July 25, according to the complaint.

The complaint states that xAI facilitated the latter of Li’s sale requests because the company “valued his contributions, and wanted to retain him as a productive and successful employee.”

The court document states that Li allegedly stole xAI’s confidential info and trade secrets and “betrayed the trust and faith” of the company on the same day he received millions of dollars from the second stock sale.

The company only discovered the theft through a routine security log review on Aug. 11.

Li, with his criminal attorneys present, admitted in a handwritten document that he “misappropriated xAI’s Confidential Information and trade secrets” and further verbally admitted that he tried to hide the theft in a consequent in-person meeting from Aug. 14 to Aug. 15, the court file reads.

Li has 21 days from Aug. 29, when the court issued the summons against him, to answer the litigation, or he will be facing judgment by default, according to a court file.