TLDR: AI data-labeling giant Scale AI has filed a lawsuit against competitor Mercor and former executive Eugene Ling, alleging corporate espionage and the theft of over 100 confidential documents. This legal action comes as Scale AI navigates a period of significant upheaval, including client defections and layoffs, following a controversial $14.3 billion investment from Meta Platforms.
In a significant development shaking the artificial intelligence industry, Scale AI, a prominent provider of data preparation services for AI model training, has launched a lawsuit against its rival, Mercor, and a former high-ranking executive, Eugene Ling. The lawsuit, filed in a California court on Wednesday, September 3, 2025, accuses Ling, who served as Scale AI’s Head of Engagement Management, of corporate espionage and the misappropriation of over 100 confidential documents containing proprietary trade secrets and sensitive customer strategies. These alleged actions occurred before Ling’s departure to join Mercor.
According to Scale AI’s legal filing, Ling’s alleged document downloading spree commenced shortly after he engaged in discussions with Mercor’s leadership team. The lawsuit further claims that Ling actively attempted to poach one of Scale AI’s major clients, referred to as ‘Customer A,’ and recruit Scale AI employees while still under Scale AI’s employment. Internal communications cited in the case reportedly include messages from Ling to a customer representative, promoting Mercor’s services and arranging calls between the parties.
This legal battle intensifies an already tumultuous period for Scale AI. The company has been grappling with significant challenges since Meta Platforms’ substantial $14.3 billion investment in June 2025, which saw Meta acquire a 49% stake. This deal, intended to bolster Meta’s AI capabilities, inadvertently compromised Scale AI’s perceived neutrality, leading to a reported exodus of major clients, including industry giants like Google and Microsoft, who reportedly reconsidered their partnerships. The client defections created a substantial revenue gap, forcing Scale AI to implement drastic measures, including laying off 14% of its workforce in July, just one month after the Meta deal.
Mercor, through its co-founder Surya Midha, has publicly pushed back against the allegations. Midha stated that Mercor has ‘no interest in any of Scale’s trade secrets’ and is ‘intentionally running our business in a different way.’ Mercor claims that the allegedly stolen files were stored on Ling’s personal Google Drive, which the company never accessed, and that they offered to have Ling destroy the documents. Scale AI, however, dismissed this offer as an attempt to eliminate crucial evidence, with a company spokesperson stating, ‘We won’t allow anyone to take unlawful shortcuts at the expense of our business.’
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Scale AI is seeking various legal remedies, including the immediate return of all proprietary documents, an injunction to prevent Mercor from utilizing the stolen information, monetary damages, and coverage of legal expenses. The lawsuit also aims to block Ling from engaging with ‘Customer A.’ This high-stakes dispute underscores the fierce competition for talent and intellectual property within the rapidly evolving AI data industry, a sector critical for fueling generative AI models across the tech landscape. The outcome of this case could establish important precedents for trade secret disputes and data protection strategies in the AI sector.
