Scale AI Accuses Former Employee and Mercor of Trade Secret Theft

Leading AI data training company Scale AI has initiated legal action against former sales executive Eugene Ling and his current employer Mercor, an emerging AI startup. The lawsuit, filed Wednesday, alleges systematic theft of confidential business documents to unfairly compete for Scale's core clients.

Allegations of Systematic Data Transfer

Court documents obtained by TechCrunch reveal that Ling allegedly transferred over 100 proprietary files containing customer strategies and trade secrets to his personal Google Drive before departing Scale. These materials reportedly included sensitive information about "Client A," a major account that Scale claims could generate millions in revenue for Mercor if successfully poached.

Mercor's Response: Denial With Qualifications

Surya Midha, Mercor's co-founder, acknowledged hiring multiple former Scale employees but denied utilizing any trade secrets. In an email statement to TechCrunch, Midha emphasized: "Our business model differs fundamentally from Scale's. We proactively reached out six days ago offering to have Ling delete the files or find another resolution."

Ling himself took to social media platform X, stating: "I was willing to delete the files when asked, but Scale instructed me not to touch them. I'm awaiting their guidance on proper handling." He maintained he never used the materials commercially and expressed regret over involving Mercor.

Escalating Competition in AI Services Market

The undisclosed "Client A" represents a strategic battleground in the increasingly competitive AI services sector. Industry analysts note this lawsuit reflects heightened tensions following Meta's $1.43 billion investment in Scale earlier this year, which reportedly caused several major clients (including Meta competitors) to sever ties with Scale.

Legal experts suggest the case may test boundaries around employee mobility and trade secret protection in the fast-evolving AI industry. Both companies declined to comment on potential settlement discussions when contacted by reporters.

Key Points:

• Scale AI alleges former employee transferred 100+ confidential files before joining competitor Mercor
• Mercor denies using trade secrets but acknowledges possession of legacy documents
• Case highlights intensifying competition in enterprise AI services market following Meta-Scale deal
• Legal outcome may establish important precedents for employee mobility in tech sector