It’s been a tumultuous summer for Scale AI: Meta took a multibillion-dollar stake in the company, Mark Zuckerberg hired Scale CEO Alexandr Wang and other top staff, and Scale laid off 14 percent of its workforce. Now the latest development is a lawsuit over corporate espionage in the AI industry.
The AI data labeling company, which has provided training data to fuel many of the industry’s leading AI models, filed a lawsuit Wednesday against a former employee, Eugene Ling, and his current employer, Mercor, which is one of Scale’s key competitors.
Scale alleged that Ling, who was its head of engagement management, stole more than 100 confidential documents that contained proprietary information and company strategies for managing customers. The company also alleged that a significant number of the documents related to one of Scale’s important customers and that Ling downloaded many of them the day after he met with Mercor’s CEO. It also alleged that Ling tried to recruit the customer to join Mercor while he was still at Scale.
When Ling reached out to an employee of the customer, he allegedly said, “I’m staying within the data space and I’m actually really excited about [how] this new company can support you.” According to the lawsuit, the employee asked if Ling meant Mercor, to which Ling replied, “Are you working with Mercor already?” The two then allegedly planned to discuss the matter on a call. The lawsuit also states that Ling chatted with multiple other researchers at the customer, and he also attempted to recruit multiple Scale employees to join Mercor, according to correspondence quoted in the lawsuit.
The lawsuit from Scale comes during a continuous shake-up in the AI industry. Mergers and acquisitions, quasi acqui-hires, eye-popping pay packages, and musical-chairs-like departures from one AI company to another (and sometimes back again) are rampant. And that naturally lends itself to sensitive information moving around — an especially thorny matter when the intensity of the AI arms race is at an all-time high, with companies like OpenAI, Anthropic, Google, Meta, and Microsoft constantly attempting to one-up each other with new features, tools, computing resources, and funding.
Last Thursday, Elon Musk’s xAI sued one of its former engineers, Xuechen Li, in California federal court, alleging that Li “betrayed the trust and faith xAI had placed in him by willfully and maliciously copying xAI Confidential Information … and trade secrets from his xAI-issued laptop,” according to the complaint. It goes on to allege that in late July, Li sold about $7 million of his company stock and uploaded the “trade secrets” to his personal device before resigning for a role at OpenAI.
As part of Scale’s lawsuit, it’s requesting that the US District Court for the Northern District of California award the company both legal costs and damages, as well as bar Mercor from using its proprietary information and require that Scale’s documents be returned.
“Scale has become the industry leader on the strength of our ideas, innovation, and execution,” Joe Osborne, a Scale AI spokesperson, told The Verge in a statement. “We won’t allow anyone to take unlawful shortcuts at the expense of our business.”
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