The issue was that double quotes were used to specify OPEANAI_API_KEY in the .env file. If the key is written in double quotes, e.g.

OPENAI_API_KEY="sk-proj-...................."

it works in the desktop app, but it results in an INVALID_API_KEY error in a docker image.

I removed the double quotes from the .env file and specified the key as follows:

OPENAI_API_KEY=sk-proj-....................

Now it works both in desktop application as well as in docker image.

Thank you!