Scale AI Sues Former Employee and Rival Mercor Over Alleged Trade‑Secret Theft
Key Points
- Scale AI sues former employee Eugene Ling and rival Mercor for alleged theft of over 100 confidential documents.
- The lawsuit claims Ling attempted to pitch Mercor to one of Scale's largest customers, referred to as "Customer A."
- Mercor co‑founder Surya Midha denies use of Scale's trade secrets and says Ling's files were stored on a personal drive.
- Ling posted on X acknowledging the lawsuit, expressing regret, and stating he never used the documents in his new role.
- Scale seeks a court order to prevent Ling from working with Customer A and to obtain a full inventory of the disputed files.
- The case highlights growing tensions in the AI data‑training market, especially after Meta's $14.3 billion investment in Scale.
- Industry experts warn that trade‑secret litigation may cost millions and set important precedents for AI data providers.
Scale AI has filed a lawsuit against former sales employee Eugene Ling and competitor Mercor, alleging that Ling took more than 100 confidential documents and tried to use them to win a major Scale customer for Mercor. Mercor co‑founder Surya Midha says the firm did not use any of Scale’s trade secrets and that Ling merely stored old files on a personal drive. Ling has responded on X, expressing regret and denying any malicious intent. The case highlights growing tensions in the AI data‑training market, especially after Meta’s multibillion‑dollar investment in Scale AI‑training services.
Background
Scale AI, a company that provides data‑preparation services for artificial‑intelligence model training, recently intensified its legal posture by suing a former sales employee and a rival firm. The lawsuit, filed in a U.S. federal court, targets Eugene Ling, who left Scale to join Mercor, and Mercor itself, a competitor that has been gaining traction in the large‑language‑model (LLM) training arena.
Allegations Against the Former Employee
According to the complaint, Ling allegedly took more than 100 confidential documents that detailed Scale’s customer strategies and other proprietary information. The suit claims these files were stored on Ling’s personal Google Drive after his departure from Scale. Scale asserts that the documents would enable Mercor to serve “Customer A,” identified in the filing as one of Scale’s largest clients, as well as several other key accounts.
Scale is also seeking a court order to prevent Ling from working with Customer A and is demanding that Mercor provide a full inventory of the files in Ling’s possession. The company alleges that Mercor refused to comply with these requests, intensifying the “misappropriation of trade secrets” claim.
Mercor’s Response
Mercor co‑founder Surya Midha responded via email, denying that his company used any of Scale’s trade secrets. Midha acknowledged that Ling possessed some old documents but maintained that Mercor has no interest in Scale’s proprietary data and operates its business differently. He stated that Mercor had offered to have Ling destroy the files and was awaiting Scale’s response.
Midha also emphasized that Mercor hired many former Scale employees but insists that none of those hires have accessed or utilized Scale’s confidential information. The firm’s stance is that any alleged wrongdoing rests solely with the individual former employee.
Eugene Ling’s Public Remarks
Following the filing, Ling posted on the social platform X, acknowledging the lawsuit and expressing regret over the situation. He claimed he never used the documents in his new role at Mercor and that his intent was not nefarious. Ling indicated that he had asked Scale for guidance on how to handle the files and was waiting for instructions.
His statements suggest a willingness to cooperate but also highlight a disconnect between the two companies regarding the handling of the alleged trade‑secret materials.
Industry Context and Implications
The dispute emerges amid heightened activity in the AI‑training sector. Earlier this year, Meta announced a $14.3 billion investment for a 49 percent stake in Scale AI and began recruiting Scale’s founder. Following that investment, several of Scale’s largest data customers—who are competitors to Meta’s AI initiatives— reportedly cut ties with the company.
Mercor, meanwhile, has been positioning itself as a specialist provider of LLM training data, employing content experts, often with PhDs, to curate domain‑specific datasets. The lawsuit underscores the competitive pressures and the high stakes involved, as the suit notes that winning the contested customer could be “worth millions of dollars” for Mercor.
Legal experts note that trade‑secret litigation in the fast‑moving AI space is likely to increase as companies vie for exclusive data assets that can accelerate model development. The outcome of this case may set precedents for how former employees and rival firms handle proprietary information during talent transitions.
Potential Outcomes
If the court rules in Scale’s favor, Mercor could be compelled to provide the requested documents, destroy any proprietary files, and possibly face monetary damages. Conversely, a ruling for Mercor could limit Scale’s ability to protect its client‑specific strategies, potentially encouraging more aggressive talent poaching across the sector.
Both companies appear prepared to continue the legal battle, with Scale seeking to protect its competitive edge and Mercor defending its operational integrity.