Scale AI Sues Former Employee and Rival Mercor for Alleged Theft of Confidential Documents and Breach of Contract
Tech firm Scale AI has filed a lawsuit against an unnamed former employee and rival company Mercor over allegations of stolen trade secrets. The suit, reviewed by media outlets, accuses the employee, identified only as Eugene Ling, of stealing more than 100 confidential documents related to Scale’s customer strategies and other proprietary information before joining Mercor.
Scale is seeking damages for misappropriation of trade secrets and breach of contract against both parties. The lawsuit claims that the employee attempted to pitch Mercor to one of Scale’s largest clients, referred to as “Customer A,” prior to his departure.
Mercor co-founder Surya Midha denies any wrongdoing, stating that while Ling may have had Scale documents in a personal Google Drive, the company has never accessed them and is currently investigating. Midha told media outlets that Mercor reached out to Scale six days ago offering to have Ling destroy the files or reach a different resolution, and they are now awaiting a response.
The lawsuit alleges that these documents contain data crucial for Mercor to serve Customer A, as well as several other significant Scale clients. Scale is demanding that Mercor hand over a complete list of the files in the drive and prevent Ling from working with Customer A. As of yet, Ling has not responded to media requests for comment.
The lawsuit provides few details about the identity of Customer A. However, it does mention that if Mercor were to secure this client, it would represent a significant contract worth “millions of dollars” for the company.
The legal action between Scale and Mercor highlights growing competition in the field of large language model (LLM) data training services. Scale is concerned about the threat posed by Mercor, as even with Meta’s multibillion-dollar investment into Scale, Meta’s TBD Labs unit continues to utilize Mercor and other LLM data training service providers.
Mercor has gained prominence in the LLM training market due to its focus on hiring content specialists, often PhDs, to train LLM data in their areas of expertise. In June, Scale announced that Meta was investing $14.3 billion for a 49% stake in Scale and was hiring away its founder. Shortly after that, several of Scale AI’s largest data customers, who compete with Meta’s initiatives, reportedly ended their relationships with the firm.
