Scale AI is dragging its rising rival Mercor and a former employee into court, claiming they tried to poach its most valuable customers using stolen intel.

Scale AI claims Mercor targeted key customers

The lawsuit, filed Wednesday, alleges that Eugene Ling, a former sales executive at Scale AI, lifted over 100 internal documents tied to Scale’s customer strategy. According to the complaint, Ling didn’t wait until his final day before pitching Mercor’s services to what Scale calls “Customer A” one of its biggest accounts.

Scale’s legal playbook names Mercor for trade secret theft and Ling for breaching his contract. If Mercor lands Customer A, Scale says, the contract would be worth “millions.”

Mercor pushes back on Scale AI’s accusations

Mercor’s co-founder Surya Midha insists the company never accessed any of the files in question. He confirmed Ling told them about documents in his personal Google Drive, but denies they’ve been used in any way.

In an emailed statement, Midha said, “We’re investigating the situation and already offered to delete the files. We’ve heard nothing back.” According to the lawsuit, Scale wants Mercor to cough up a full list of the files and block Ling from working with Customer A. So far, Mercor hasn’t agreed.

Ling, who now works at Mercor, responded publicly on X. He admitted the files existed but said he never used them and is still waiting on instructions from Scale. “There was no shady intent,” he wrote.

Scale AI’s legal move hints at deeper concerns

The situation seems to go beyond just one employee or one customer. Scale’s decision to escalate things to court reflects a growing anxiety over Mercor’s momentum in the AI data arena.

Here’s why the fight matters:

• Mercor is gaining traction with companies training large language models (LLMs), thanks to its use of subject matter experts.
• Meta recently invested $14.3 billion in Scale AI, buying nearly half the company, then pulled away its founder.
• After Meta’s deal, some of Scale’s other big clients, likely rivals to Meta, walked away.

Why this dispute isn’t just about files

This isn’t just a squabble over some cloud-stored PDFs. At its core, the suit reflects a wider anxiety: Scale is trying to hold its ground as more players like Mercor eat into its turf.

Mercor’s growing appeal, especially among Meta’s competitors, makes it a serious contender. And the timing couldn’t be worse for Scale, right as its biggest backer now shares interests that might scare off others.

The AI training business is cutthroat. And right now, Scale’s trying to keep its biggest contracts from bleeding into the hands of a hungrier, leaner competitor.

Fast hires, fast exits, and faster lawsuits welcome to the new AI arms race.