Zoho drags Freshworks to US court for trade secret misuse

TE Raja Simhan Updated on March 27, 2020
Sridhar Vembu, CEO, Zoho Corp | Photo Credit: Bijoy Ghosh

‘Misuse of confidential information’ alleged

Zoho Corporation on March 17 filed a lawsuit against Freshworks — promoted by former Zoho employees Girish Mathrubootham and Shan Krishnasamy — for ‘Trade Secret Misappropriation’ in the US District Court Northern District of California.

Zoho accused Freshworks of violating the Defense of Trade Secrets Act; the California Uniform Trade Secrets Act; the Intentional Interference with Prospective Economic Relations; Conversion and Unjust Enrichment.

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Zoho (9,800 employees), which focusses on web-based business tools and IT, was started in 1996 by Sridhar Vembu, and Freshworks (2,800 employees) in 2001 as a software-as-a-service company. Both are privately-held, US-headquartered companies with maximum workforce in Chennai.

In the lawsuit, Zoho said Freshworks built its business through theft and misuse of Zoho’s confidential business information; secured initial funding by using Zoho’s non-public financial information and has since engaged in poaching Zoho’s employees. It is using Zoho’s confidential customer and competitive marketing information, planning press releases to coincide with Zoho’s undisclosed product launch dates, and pressuring Zoho’s business partners to divulge confidential customer information, the lawsuit says.

Privy to information

Having worked at Zoho for nine years before founding Freshworks, Mathrubootham and Krishnasamy were privy to confidential Zoho product, financial, pricing, and customer information and were well aware of Zoho employees’ creation of and access to competitive business information.

After starting Freshworks, Mathrubootham improperly included Zoho‘s confidential revenue figures in early Freshworks’ investor pitch materials to secure initial investments, leveraging his work at Zoho and suggesting his new start-up would perform like Zoho, the lawsuit said.

At Zoho, Mathrubootham was V-P, Product Management for ManageEngine — Zoho’s IT Management software. He was head of customer support for ManageEngine, which offered him specialised and non-public knowledge of what Zoho would need in a tool to provide efficient and effective support to its customers. Freshworks’ first project was a prototype for a customer support tracking and management software — the type of service Mathrubootham headed at Zoho.

Mathrubootham did not respond to e-mail and WhatsApp messages sent by BusinessLine till the time of going to press.

Published on March 27, 2020
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