Scale AI, which helps tech companies prepare data to train their AI models, filed a lawsuit against one of its former sales employees and its rival Mercor on Wednesday. The suit claims the employee, who was hired by Mercor, “stole more than 100 confidential documents concerning Scale’s customer strategies and other proprietary information,” according to a copy seen by TechCrunch.
Scale is suing Mercor for misappropriation of trade secrets and is suing the former employee, Eugene Ling, for breach of contract. The suit also claims the employee was trying to pitch Mercor to one of Scale’s largest customers before he officially left his former job. The suit calls this company “Customer A.”
Mercor co-founder Surya Midha denies that his company used any data from Scale, although he admits that Ling may have been in possession of some.
“While Mercor has hired many people who departed Scale, we have no interest in any of Scale’s trade secrets and in fact are intentionally running our business in a different way. Eugene informed us that he had old documents in a personal Google Drive, which we have never accessed and are now investigating,” Midha told TechCrunch in an emailed statement.
“We reached out to Scale six days ago offering to have Eugene destroy the files or reach a different resolution, and we are now awaiting their response,” Midha said.
Scale alleges that these documents contained the specific data that would allow Mercor to serve Customer A, as well as several other of Scale’s most important clients.
Scale wanted Mercor to give it a full list of the files in the drive, and to prevent Ling from working with Customer A. It alleges in the suit that Mercor refused. Ling did not immediately respond to TechCrunch’s request for comment, but he later wrote on X: “Just heard I’m getting sued by Scale. Last month, I left Scale to work at Mercor. I know this was frustrating for my old team, and I feel bad about that.”
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Continued Ling, “When Scale reached out about some files I had in my personal drive, I asked if I could just delete them. But Scale asked that I not do anything with them, so I’m still waiting for guidance on how to resolve this. I’ve never used any of them in this role. It sounds like Scale wants to sue me and that’s up to them. But I just wanted to say that there truly was no nefarious intent here. I’m really sorry to my new team at Mercor for having to deal with this.”
There are scant clues in the suit about the identity of Customer A. The suit does say that if Scale’s rival did win this customer away, it would be a contract “worth millions of dollars to Mercor.”
Whatever the details of this suit, it does show one thing: Scale is clearly concerned enough about the threat of Mercor to pursue legal action. As TechCrunch previously reported, even with Meta’s multibillion-dollar investment into Scale, TBD Labs — the core unit within Meta tasked with building AI superintelligence — is still using Mercor and other LLM data training service providers.
Mercor is rising in the LLM training arena because it is known for 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 are competitors to Meta’s efforts, reportedly cut ties with it.
Updated with comments on social media from Eugene Ling.
