San Francisco, September 2025 – The competition in artificial intelligence training just got more heated. Scale AI Sues Former Employee, one of the biggest names in preparing data for AI models, has filed a lawsuit against its rival Mercor and a former employee, claiming they tried to take confidential business information and lure away major customers.
According to the filing, Scale says Eugene Ling, a former sales executive, downloaded more than 100 internal documents before leaving the company for Mercor. The files allegedly included details about customer strategies and sensitive business plans. The lawsuit also accuses Ling of trying to pitch Mercor’s services to one of Scale’s most important clients—referred to in the complaint only as “Customer A”—before he officially left his job.
Mercor Pushes Back
Mercor’s co-founder, Surya Midha, denies that his company misused any of Scale’s materials. He admits that Ling had some old Scale files stored in a personal Google Drive, but says Mercor never looked at them. Midha even claims the company offered to have Ling destroy the files or work out another solution with Scale, and is waiting for their reply.
Ling also took to X (formerly Twitter) to give his side of the story. He said he never intended to use the documents and had even asked if he could delete them. “When Scale reached out about some files I had in my personal drive, I asked if I could just delete them. They told me not to touch them, so I’ve been waiting for guidance,” he wrote. “I’ve never used any of them in this role. There was no bad intent here.”
Why This Case Matters
On the surface, this looks like a dispute between a former employee and their old employer. But at its core, this case is about the future of the AI training industry. The lawsuit suggests that if Mercor gained access to the files, it could compete for Customer A—a deal that would be worth millions of dollars.
That potential loss explains why Scale is taking such an aggressive stance. In the fast-growing Scale AI Sues Former Employee, where every client can tip the balance, protecting trade secrets and customer relationships is crucial.
A Rival on the Rise
Mercor has been gaining attention in recent months. Unlike Scale, which works at a massive scale with tech giants, Mercor focuses on hiring highly educated specialists—often PhDs—to train data for large language models (LLMs). This approach has won them clients looking for quality over quantity.
Even Meta, which poured $14.3 billion into Scale earlier this year for a near-50% stake, is still working with Mercor and other providers. That shows just how competitive and fragmented this market has become.
Scale’s Bigger Picture
For Scale, the lawsuit comes at a tricky time. Its huge deal with Meta, announced in June 2025, boosted its financial strength but also raised concerns among other customers, some of whom are Meta’s rivals. Reports suggest that several of those companies cut ties with Scale after the investment, opening the door for competitors like Mercor to step in.
By going after Mercor in court, Scale is signaling that it won’t let its rivals gain ground easily. It also highlights how sensitive the AI training market has become, where intellectual property, client trust, and talent movement are all deeply interconnected.
What Happens Next
The outcome of this lawsuit could set the tone for how similar disputes are handled in the AI industry. If Scale wins, Mercor may be forced to step back from certain clients and face restrictions. But if Mercor clears its name, it could walk away stronger, showing the market that it is a serious alternative to Scale.
One thing is clear: as Scale AI Sues Former Employee to explode in importance, battles like this—over data, people, and customers—are only going to become more common.
Key Background
- June 2025 – Meta invested $14.3 billion for a 49% stake in Scale, shaking up the industry.
- 2024–2025 – Mercor built momentum as a challenger by focusing on quality-driven data labeling with experts.
- Earlier in 2025 – Some of Scale’s biggest customers reportedly left after the Meta deal, creating new opportunities for rivals.
This lawsuit is more than a legal fight—it’s a snapshot of the high-stakes competition shaping the next era of artificial intelligence.