Scale AI Inc., a prominent data-labeling startup, has initiated a lawsuit against its rival, Mercor, accusing the firm and a former Scale employee of orchestrating the theft of trade secrets to gain new business. The complaint, filed in San Francisco federal court, centers on allegations that Eugene Ling, who previously served as Scale’s head of engagement management, downloaded over 100 customer strategy and other proprietary documents to a personal Google Drive account. This alleged activity occurred while Ling was reportedly in communication with Mercor.

According to the lawsuit, Ling purportedly met with Mercor Chief Executive Officer Brendan Foody while still employed at Scale. Furthermore, other Mercor employees are accused of discussing Scale’s business strategies and products with Ling. Surya Midha, a co-founder of Mercor, acknowledged the ongoing investigation into the claims. Midha stated that Mercor has no interest in Scale’s trade secrets and is operating its business distinctively. He also mentioned that Ling had informed Mercor about old documents in a personal Google Drive, which Mercor claims it has never accessed and is now investigating. Mercor reportedly reached out to Scale six days prior to the lawsuit, offering for Ling to destroy the files or find an alternative resolution.

This legal action underscores the intense competition within the artificial intelligence industry's crucial data-labeling sector. Founded in 2016, Scale AI has long been recognized as a leader in providing services to tech companies for labeling and annotating data essential for building AI models. However, the company has reportedly faced increasing pressure from competitors in recent months. Joe Osborne, a spokesperson for Scale, emphasized the company's reliance on