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Bloomberg Law Quotes Fred Norton about X.AI Trade Secrets Litigation; Norton Comments on Companies Locking Down High-Stakes Tech From Departing Employees as well as How Hiring Companies May Avoid Being Named as a Defendant

Bloomberg Law reporter Kyle Jahner spoke with Fred Norton, founder of The Norton Law Firm and a litigator who worked for Tesla and formerly represented Twitter, for his analysis of the trade secrets lawsuit X.AI filed against a former engineer, in the article “X.AI Suit Brings Trade Secrets Litigation to Fertile Ground.” 

In X.AI Corp. v. Li, N.D. Cal., No. 3:25-cv-07292, “AI architect Xuechen Li is accused by his former company of stealing ‘entire code base’ and liquidating nearly $7 million in employee stock before joining competitor OpenAI,” as Jahner reported, adding that “[w]hile the basic pattern is typical in trade secrets cases against ex-employees, the alleged theft of generative AI data in an industry swiftly boasting multi-billion dollar valuations sets it apart. The rapidly advancing technology and hyper-competitive race to hire—or poach—a finite supply of elite talent creates a perfect storm over the safety of trade secrets.”

Norton, who has litigated high-stakes trade secrets cases on behalf of defendants and plaintiffs, made the following points in the article:

  • He expects other companies will respond by beefing up their efforts to protect their secrets.
  • “In-house counsel, information security people are going to be more careful about how tech is locked down and pay attention to departing employees. There are going to be lawsuits in any area where you’ve got rapidly developing technology and market value.”
  • What is alleged happens more than one might expect. “The reality is the sophistication of any of these people is kind of siloed.”
  • There’s no way to make it impossible to take secrets while still letting employees do their jobs. But education, vigilance when employees leave, and exit interviews can head off a lot of problems.
  • Companies hiring employees from competitors should be cautious to avoid being roped into lawsuits—OpenAI, for example, isn’t a defendant in X.AI’s suit. 
  • Norton advised hiring a third-party attorney to provide new employees guidance and take information the employee shouldn’t have so the hiring company can say it never had access.

To read the full article, click here. (Subscription may be required.)