Magic Leap CEO Rony Abovitz. Photograph by Kevin Moloney/Fortune Brainstorm Tech, under Creative Commons license

A federal judge in the city of San Jose, California has set back a lawsuit that Magic Leap brought against a former Chinese employee by the name of Chi Xu, an engineer who happened to found his own augmented reality hardware company and Magic Leap competitor after leaving Magic Leap. The judge granted a request by Xu, who founded Nreal, to dismiss the case on the grounds that Magic Leap didn’t provide specifics after alleging that Xu exploited proprietary information to launch his competing startup. The judge, however, gave Magic Leap a 30-day window to amend its lawsuit, which alleges breach of contract, fraud, and unfair competition.

The judge’s ruling marks another apparent setback for Magic Leap, which is fresh off $350 million in additional funding after seemingly burning through about $2.6 billion in previous funding. In April, Magic Leap had to cut 1,000 jobs, more than 50% of its workforce, to contain costs. The company reportedly risked running out of cash if additional funding wasn’t secured. Fortunately for the company, more funding came.

Magic Leap alleges Xu plotted to launch a competing company and “neglected his work duties” to gather proprietary information during a 13-month stint at Magic Leap. The company alleges Xu made use of “confidential information” to start his competing company, Nreal, whose product actually looks similar to Magic Leap’s. Magic Leap’s complaint against Xu “is devoid of any allegation as to what specific ‘confidential information” the startup believes Xu used to start Nreal, quoting Lucy Koh, the federal judge who granted Xu’s request to dismiss the case.

Nreal as a company has raised some $31 million in private funding. Its backers include the likes of iQiyi, Shunwei Capital, Everbright, and China Growth Capital.