Scale AI has filed a lawsuit in the U.S. District Court for the Northern District of California against rival startup Mercor and its former executive, Eugene Ling, accusing them of misappropriating confidential business information. According to the complaint, Ling allegedly transferred more than 100 sensitive documents — many of which contained critical customer strategies — to her personal Google Drive shortly after meetings with Mercor’s leadership team.
Mercor has firmly denied using any proprietary data. Co-founder Surya Midha acknowledged that Ling did store certain files on her personal drive but claimed Mercor never accessed them. “We offered to have her destroy the files or resolve this in another way,” Midha said. Scale AI, however, declined the offer, arguing that such a move could “destroy crucial evidence.”
The dispute centers on Scale’s assertion that Ling was hired by Mercor with the intent of leveraging her inside knowledge to win over a major Scale client. Scale further alleges that Ling engaged with that client on Mercor’s behalf while still employed at Scale, potentially violating fiduciary duties and non-compete clauses.
A Scale AI spokesperson underscored the seriousness of the accusations, stating, “We won’t allow anyone to take unlawful shortcuts at the expense of our business.” The lawsuit comes as Scale AI continues to grow its footprint in the industry, recently achieving a $29 billion valuation following Meta’s $14–15 billion investment for a 49% stake.
This legal battle reflects a broader trend of intellectual property disputes in the rapidly evolving AI industry. Meta’s strategic partnership with Scale, finalised in June, has already caused some industry partners to adjust their alliances. Meanwhile, Elon Musk’s xAI has launched a separate lawsuit against former engineer Xuechen Li for allegedly stealing trade secrets before joining OpenAI, further underscoring the competitive tensions over talent and proprietary data in the AI arms race.
As the case unfolds, its outcome could have far-reaching implications for hiring practices, data governance, and the protection of trade secrets in the high-stakes world of artificial intelligence.
