Embedding Asymmetry as Attack Signal: Detecting and Defending Active Label Inference in Vertical Federated Learning

Vertical federated learning lets organizations train a shared model over features they hold separately, while one party keeps the labels private. The active label inference attack of Fu et al. [12] breaks this: a feature-holding party runs a modified optimizer, MaliciousSGD, that forces class structure into its embeddings and then recovers the labels with semi-supervised learning. Defenses that perturb the shared gradient fail, because the attack acts on the party's internal optimizer, not on the message it sends. We show the attack leaves a signal the server can read from the embeddings it already receives. The adversary's Fisher class-separability pulls away from the honest party's, and the gap is visible within a few epochs. A defense triggered by this signal acts on the adversary alone. Scaling its gradient down handles few-class tasks, and a norm non-expansive projection handles many-class tasks, with the Discriminative Coverage Ratio explaining why the projection rank must grow with the class count. The defense breaks the alignment between embedding clusters and labels rather than destroying the embedding. Across four seeds on CIFAR-10, CIFAR-100, and CINIC-10, label inference falls below what honest training already leaks, at under two points of task-accuracy cost.