Courts Rule That Sharing Secrets with AI Can Destroy Trade Secret Protection

Two recent federal court decisions have put businesses on notice: sharing confidential information with public artificial intelligence tools like ChatGPT can permanently destroy trade secret protection. The rulings, issued in early 2026, are among the first to directly address the legal consequences of disclosing proprietary information to AI platforms, and they carry significant implications for any company that uses generative AI in its operations.

The Trinidad v. OpenAI Decision

In January 2026, a federal judge in the Northern District of California dismissed trade secret claims brought by a plaintiff who alleged that OpenAI misappropriated proprietary AI development frameworks she had created. The problem was that the plaintiff had developed those frameworks using ChatGPT itself. Judge Jon S. Tigar found that by using the platform, the plaintiff had voluntarily shared the very information she claimed was secret. Because she accepted OpenAI's Terms of Service without negotiating any confidentiality protections, the court concluded she had failed to take "reasonable measures" to keep her frameworks secret, a fundamental requirement under the federal Defend Trade Secrets Act. The decision in Trinidad v. OpenAI is the first to squarely hold that inputting proprietary information into a public AI tool can constitute a voluntary disclosure that eliminates trade secret status.

The Heppner Ruling Extends the Principle

Just weeks later, Judge Jed Rakoff of the Southern District of New York reached a similar conclusion in United States v. Heppner, though in the context of attorney-client privilege rather than trade secrets. Judge Rakoff held that documents created using a publicly available AI platform were not privileged because the platform's operator was not contractually bound to maintain confidentiality. He compared sharing information with an AI tool to sharing it with any other unrelated third party. Taken together, Trinidad and Heppner establish a clear legal principle: when businesses or individuals share sensitive information with a public AI platform that has no contractual obligation to protect it, that information may lose its legal protections entirely.

Key Takeaway for Business Owners

These decisions should prompt every business owner to take a hard look at how employees and contractors are using AI tools in their daily work. If your team is entering customer data, proprietary formulas, product designs, pricing strategies, or any other confidential business information into a public AI platform, you may be inadvertently waiving the legal protections that make that information valuable. The fix is not to ban AI entirely, but to implement clear policies governing its use. Consider upgrading to enterprise AI subscriptions that include contractual confidentiality provisions. Require employees to use only approved AI tools for work involving sensitive data. Train your team on what types of information should never be entered into a public platform. And review your existing trade secret protection program to identify any gaps that AI usage may have created.

The convenience of generative AI is undeniable, but these rulings make clear that convenience comes with legal risk. Businesses that fail to establish guardrails around AI use may find that their most valuable secrets are no longer secrets at all.

Want to learn more about protecting your business's trade secrets in the age of AI? Schedule a free consultation with Diorio IP Law Group to discuss your options.