OpenAI’s “io” Problem: A Two-Letter Snag Worth $6.5 Billion

How is it possible for a multibillion-dollar acquisition-making company to drop a two-letter name? The OpenAI-iyO battle serves an important lesson in trademark, business strategy, and brand clearance.

The announcement made by OpenAI in May 2025 marks a significant point in the company’s shift from being just a software firm to an end-user technology company. It announced the acquisition of io products, co-founded by Jony Ive (ex-Apple designer of some of Apple’s most famous products). The deal was a stock swap worth $6.5 billion.

The goal opened prospects beyond the acquisition of a single device or engineering team. OpenAI and Jony Ive envisioned a new generation of physical products based on artificial intelligence. Their announcement saw io as a convergence of OpenAI technology and Jony Ive’s human-centered design approach. 

This announcement serves the purpose of making the industry stop and think. However, while people are busy thinking about what OpenAI and Jony Ive are going to create in the future, another question has begun to arise: whether they will be able to do so under the chosen name.

Roughly three weeks later, iyO, a smaller AI hardware company, launched a legal battle against its larger rival for trademark infringement in the Northern District of California.

The conflict serves as a reminder that acquiring a company does not mean acquiring the rights to use that company’s name in the future. A firm can legitimately acquire a talent pool, a new technology, and a vision for a product, only to find out that the name that comes with it creates a different legal problem.

When Two Letters Are Too Close

iyO was not a different company that just happened to have a similar name. It was originally a project of X, which is a lab for innovating within Alphabet, before it was formed into its own company. The company’s statement concerning its objectives is simply to develop the “audio computer,” which allows communicating with AI without any screens.

Therefore, the proximity of both brands is too close, especially because both are active in AI hardware, things having to do with nonstandard computing methods, and the idea of making interaction with technology more organic.

Although “iyO” and “io” are different in writing, they both sound the same.

Trademark law typically cannot be based solely on reading differences. The question of whether consumers would be able to get confused remains paramount.

In general, courts consider how trademarks look, how they sound, what the meanings of both components are, whether products are close, and how consumers will receive them.

In other words, changing one letter doesn’t mean the brands got more distant.

OpenAI stated that the product is not yet released. However, the lack of a product does not put an end to the evaluation procedure.

The Ninth Circuit Court of Appeals held that trademark infringement can exist without the existence of a sale or sale transaction. Just simply disseminating a mark that is confusingly similar to another mark when advertising is a basis for taking legal action.

This makes the May 2025 launch video by OpenAI significant from a legal standpoint. The Ninth Circuit determined that the intention behind launching that video was to create a buzz around the very first product offered by the company and that iyO made an accurate claim with respect to the announcement being infringing.

This part of the case is relevant for many contemporary product launches. Technology companies in the present day start asset creation well before the date set for any sale to consumers. A name could be uncovered in several investment talks, announcement videos, press articles, and online discussions well before the beginning of sales, and thus attract public attention long before an actual sale is made.

When the Larger Company Creates the Confusion

What is truly fascinating in this dispute is not merely the similarity of the two entities’ names. The interesting issue is the area in which the confusion works.

In most trademark cases, the smaller company or the new company is a possible victim of confusion between the trademark and the name of a well-known company. iyO is doing something different. Believe it or not, the company refers to the doctrine of reverse confusion.

Reverse confusion can happen when the well-established brand has a trademark like the one used by a smaller company. The consumers may know the well-known brand of the product and assume that the original brand was, in fact, using the same trademark as the new brand. As a result, the smaller business can suddenly appear to be the imitator of the very brand it used earlier. 

This very doctrine has been considered by the Ninth Circuit in the case of Ironhawk Technologies, Inc. vs. Dropbox Inc. In fact, the doctrine recognizes the fact that a company cannot have the right to take the identity of the previous user and destroy it just because it is larger in size and market capitalization.

The risk is especially evident in the case involving OpenAI. The publicity surrounding the launch of I/O was significant. OpenAI’s commercial power could have enabled the creation of a link between “I/O” and AI hardware before I/O acquired the means to build its own brand accordingly.

In December 2025, the Ninth Circuit upheld an order banning the defendants’ use of “I/O.” The court determined that there was no evident error in its preliminary finding that confusion was probable. It also noted the similarity between the competing names; they differ by one letter only, sound the same, and denote similar goods. Both companies claimed to offer a more natural method of interacting with AI technology.

The court examined iyO’s investors’ reaction following the launch of io as a sign of confusion and took the view that the announcement from the larger enterprise could potentially interfere with iyO’s fundraising activities and affect its ownership over the brand.

These are preliminary conclusions. They are not a final decision indicating that OpenAI has intentionally infringed iyO’s trademark, nor do they resolve all issues in the case once and for all. It is important to stress this distinction at the same time. Additionally, preliminary injunctions are not granted simply because there is a disagreement between two companies regarding the name. The court must believe that the claimant has reasonable chances of winning the case and might suffer damages that cannot be repaired in the future.

The Corporate Cost of a Trademark Problem

The acquisition was finalized. OpenAI declared in July of 2025 that the io Products division had been incorporated into the company, while Jony Ive and LoveFrom continued to function independently, taking on broader duties in the field of design.

The trademark issue didn’t hinder the acquisition process, but it did not allow the acquired entity to preserve its original identity.

Initially, OpenAI removed any references to information technology obstacles because of the court ruling; nevertheless, it was still opposed to iyO’s claim. By the beginning of the year 2026, according to a court document cited in WIRED, OpenAI completely stopped using “io” and “IYO”.

This ruling didn’t resolve the dispute entirely. In April 2026, the district court granted iyO a preliminary injunction.

The judge was not convinced that the discontinuation by OpenAI meant that future use would not be likely. So, the injunction remains in effect. This is where the case becomes more impactful for business than just an interesting story between two tech companies.

Trademark clearance is often misunderstood to mean that it is just a search for an identical name. This is not true. Finding a name that is different from a trademark does not answer the question of whether it is possible to use it legally, since a well-prepared clearance search takes into consideration phonetic, visual, and conceptual similarities, marketplace use, possible pending applications, and other trademarks in the same industry or product category, as well as the jurisdictions in which the particular brand will be used.

It is important to note the distinction between asking, ‘Can we file an application for this trademark?’ and saying, ‘Can we build a global business with this trademark?’ 

The next question is one that mergers and acquisitions teams should not let slide in the process of conducting acquisitions. The more important the name is for the transaction from a commercial perspective, from a perspective of public discourse, or from the perspective of future product strategies, the sooner it should be put to the test. Though it is impossible to remove all potential legal risks associated with any name, trademark analysis has many variables. No two people sitting at the negotiation table will ever agree on the similarity of two trademarks.

Consequently, the scope of potential consequences is not restricted to legal fees and damage payments but goes far beyond that, leading to failed campaigns, lost momentum, rebranding costs, complicated communications with investors, and the need to reintroduce a new trademark when the old one had been made known to the public.

The organization OpenAI maintains its talented group and can keep on working on the technology platform it possesses. However, it must now investigate rebranding to promote new goods in the next generation of computers. In this case, there was nothing wrong with the deal. It was just one of the effects of the transaction from a strategic standpoint.