Zoho takes Freshworks to US court for trade secret violations

Software-as-a-solution provider Zoho has filed a lawsuit in a US court against San Mateo, California based software firm Freshworks and its two founders, Shan Krishnasamy and Girish Mathrubootham, for allegedly building their company “upon the theft and misuse of Zoho’s confidential business information.”

In a lawsuit filed at the US District Court Northern District of California on March 17, which TechCircle has read, Zoho alleged that Krishnasamy and Mathrubootham, both ex-employees of Zoho, engaged in systematic poaching of Zoho employees.

Zoho also said that both used confidential customer and competitive marketing information of Zoho to expand their business.

Also read: Zoho waives off fee for small businesses amid Covid-19 crisis

The formal allegations against Freshworks include violation of the US Defence Secrets Act, violation of California Uniform Trade Secrets Act, intentional interference with prospective economic relations and unjust enrichment.

Mathrubootham has worked with Zoho as a former vice president of product management at Zoho, while Krishnasamy was a former Zoho technical architect who now serves as the CEO and CTO of Freshworks. The complaint also alleged that Freshworks had secured initial funding through the usage of Zoho’s non-public financial information.

Freshworks, founded in 2010 and formerly known as Freshdesk, provides solutions such as software for customer support, customer messaging, sales customer relationship management (CRM), information technology (IT) service management, business process outsourcing and human resources. The duo had worked with Zoho for about nine years before starting out on their entrepreneurial journey.

Zoho began operations in 1996. Both Zoho and Freshworks are private companies, with a significant workforce in Chennai.

The complaint stated that the Freshworks founders, during their stint at Zoho were privy to confidential Zoho product, financial, pricing, and customer information and also had access to Zoho’s competitive business information.

Zoho also said that Mathrubootham had improperly included confidential revenue figures in early Freshworks investor pitch materials to secure initial investments.

TechCircle reached out to Freshworks and Zoho for a comment.

While Zoho refused to comment citing that the matter was legal, Freshworks responded saying “Freshworks is taking these allegations very seriously and plan on defending ourselves. We have no further comments at this time.”

Also read: Indian unit of Freshworks reports 75% uptick in FY19 profits

The complaint also included allegations that many software developed by Freshworks mirrored those produced by Zoho. These Zoho products were being used by Mathrubootham and Krishnasamy while being employed at Zoho and looked to copy their exact functioning.

For example, IT service Management tool Freshservice, was launched to compete against Zoho’s ManageEngine ServiceDesk plus software, which was worked on by Mathrubootham during his Zoho tenure. Other supposedly copied apps include Freshsales, which competed against Zoho CRM, Freshteam against Zoho recruit and FreshChat, against Zoho chat.

 “Zoho will be irreparably injured by the continued acts of Freshworks until and unless it is enjoined,” the complaint read.