To protect our proprietary information, Scale AI has taken Mercor and former employee Eugene Ling to court. They claim multiple egregious violations, such as the theft of trade secrets and breach of contract. The lawsuit mainly emphasizes the allegations against Ling. Having recently been hired by Mercor, she is accused of having kept sensitive Scale documents that would hurt Scale’s competitive edge.
A federal court assigned the lawsuit. This shows that Ling kept government owned proprietary data on a personal Google Drive. This data reportedly includes critical information that would enable Mercor to serve Customer A, one of Scale’s most important clients. This breach is a big deal for several reasons. In this scenario, the contract with Customer A might be worth millions of dollars to Mercor.
In their declaration, Scale AI asserts these documents contain important identifying information. This data will allow Mercor to better focus sales efforts on a number of its biggest customers. Over the last few months, Scale has made numerous requests to Mercor for a full list of files that Ling holds. According to Plaintiffs, Mercor has repeatedly refused to do so.
In a futile attempt to avoid any harm, Scale has tried to stop Eugene Ling from consulting with Customer A. The company further argues that permitting him to work with this client presents a direct harm to their business interests.
Surya Midha, co-founder of Mercor, has taken to Medium to deny all accusations of wrongdoing. He flatly denies that his new company will leverage any trade secrets from Scale. He admitted that Ling could’ve had some good data. Yet, he pointed out that Mercor was serious about operating its business in a new manner.
“While Mercor has hired many people who departed Scale, we have no interest in any of Scale’s trade secrets and in fact are intentionally running our business in a different way.” – Surya Midha
Midha revealed that Mercor tried to settle out of court by contacting Scale six days prior to filing. We reached out to Scale six days ago,” he said, “As soon as we found out, we offered to have Eugene destroy the files or come up with some other solution, and then we’re waiting on their response.
As Mercor continues to pick up steam in the rapidly-growing large language model (LLM) training industry, the legal battle intensifies. One piece of their strategy—hiring specialists, especially PhDs—is proving to be a major factor in their success. The competitive landscape has changed dramatically. This latest move comes on the heels of Meta’s recent, $14.3 billion round to acquire a 49% stake in Scale AI, and the founder of Scale’s recent departure to Meta.