AI Espionage Spots Rise as Scale Sues Ex to Block Data Heist

Scale AI has filed a lawsuit in the US District Court for the Northern District of California against former employee Eugene Ling and his current employer, Mercor, alleging corporate espionage and breach of confidentiality. The lawsuit, announced on September 3, 2025, accuses Ling, who previously served as the head of engagement management at Scale, of stealing more than 100 confidential documents that contained proprietary customer strategies and sensitive business information [1]. According to the legal filing, many of these documents were downloaded the day after Ling met with Mercor’s CEO, indicating a deliberate attempt to transfer valuable data to a key competitor [2].

The lawsuit further alleges that Ling sought to recruit one of Scale’s major clients—referred to in the documents as “Customer A”—to switch to Mercor while still employed at Scale. Communications cited in the filing suggest Ling was promoting Mercor to this client, with one message reportedly stating, “I’m staying within the data space and I’m actually really excited about [how] this new company can support you.” These actions, Scale claims, amount to an attempt to poach a critical account worth millions in potential revenue [2]. The company also alleges that Ling engaged in similar recruitment efforts targeting several other Scale employees for Mercor [1].

Mercor’s co-founder, Surya Midha, has denied that the company used any of Scale’s data or trade secrets, acknowledging that while Ling had access to some documents, they were stored in a personal Google Drive and had not been accessed by Mercor. Midha stated that Mercor had reached out to Scale six days prior to the lawsuit, offering to have Ling destroy the files or find another resolution to the issue [2]. However, Scale insists that Mercor has refused to provide a full list of the files in question and has not prevented Ling from engaging with Customer A, leading to the legal action [2].

This lawsuit occurs amid a period of intense competition and rapid talent movement within the AI industry. In recent months, major players such as OpenAI, Anthropic, Google, and Microsoft have been engaged in a high-stakes race to develop next-generation AI models. The high turnover of executives and the frequent movement of top talent between companies have increased concerns over the protection of intellectual property and trade secrets. The lawsuit highlights the challenges companies face in safeguarding sensitive data in a rapidly evolving and highly competitive sector [1].

Scale AI’s legal action is part of a broader legal trend in the AI industry, where intellectual property disputes are becoming more common. In a separate case earlier in September, Elon Musk’s xAI filed a lawsuit against former employee Xuechen Li, alleging he had stolen trade secrets and confidential information before joining OpenAI. These cases underscore the growing legal and operational risks associated with data security and intellectual property protection in AI development [1].

Scale AI is seeking both monetary damages and an injunction to prevent Mercor from using any of the stolen data. It also requests the return of all confidential documents and seeks to block Ling from working with Customer A. The outcome of this lawsuit could set important precedents for how trade secret disputes are handled in the AI industry and may influence future corporate strategies around data protection and employee management [3].

The lawsuit also raises questions about the broader implications for AI data services, particularly in light of Scale’s recent partnership with Meta, which acquired a 49% stake in the company for $14.3 billion in June 2025. This partnership was expected to bolster Meta’s AI capabilities, but recent reports indicate that some of Scale’s major clients have reportedly distanced themselves from the company following the investment [2]. The ongoing legal challenges may further complicate Scale’s role in the AI ecosystem and could impact the perception of its data quality and reliability among potential clients [4].

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[1] Scale AI still exists and it's suing an ex-employee over ... (https://www.theverge.com/ai-artificial-intelligence/770410/scale-ai-corporate-espionage-data-labeling-mercor-meta)

[2] Scale AI is suing a former employee and rival Mercor ... (https://techcrunch.com/2025/09/03/scale-ai-is-suing-a-former-employee-and-rival-mercor-alleging-they-tried-to-steal-its-biggest-customers/)

[3] Scale AI Files Lawsuit Against Former Employee and Rival ... (https://news.ssbcrack.com/scale-ai-files-lawsuit-against-former-employee-and-rival-mercor-for-trade-secrets-theft/)

[4] Meta's Mega Bet on Scale AI Stumbles: Cracks in the ... (https://opentools.ai/news/metas-mega-bet-on-scale-ai-stumbles-cracks-in-the-partnership-just-two-months-in)