Zoho files lawsuit against Freshworks for ‘trade secret misuse’

Chennai and US-based Saas firms- Zoho and Freshworks have entered into a legal battle. Zoho has filed a lawsuit against Freshworks- promoted by Zoho’s ex-employees, Girish Mathrubootham and Shan Krishnaswamy.

In a lawsuit filed in the US District Court Northern District of California on March 17, Zoho has reportedly accused Freshworks of building its business by stealing and misusing Zoho’s financial information that was not public. It also accuses the company of poaching Zoho’s employees.

The duo violated the Defense of Trade Secrets Act, the California Uniform Trade Secrets Ace, the Intentional Interference with Prospective Economic Relations, Conversion and Unjust Enrichment, stated lawsuit. 

Mathrubootham and Krishnasamy had long stints at Zoho. The duo worked for about nine years with the Vembu-led firm before incorporating Freshworks in 2010. While Mathrubootham served the company in the capacity of vice-president, product manager and head of customer support, Krishnasamy worked as Technical Architect till October 2010. 

Since both were in knowledge of confidential information about Zoho's products, financials, pricing, and customer information, they have used them to pitch to the investors to raise initial investments.  Mathrubootham and Krishnasamy also suggested that Freshworks would be like Zoho.

The duo also used Zoho’s undisclosed customer and competitive marketing information, planning press releases to coincide with Zoho’s undisclosed product launch dates, and putting pressure on Zoho’s business partners to reveal their customer information, added the lawsuit.

Freshworks and Zoho, both companies are known as an outlier in B2B SaaS space. Working on a similar business model, both companies offer web-based business tools and software such as CRM for sales, customer support, and IT management, among others.

Recently, Zoho had shown a stellar performance for the financial year 2019. The company recorded a 37.1% growth in operating revenue to Rs 3,308 crore in FY19  with profits surging by 26.3% to Rs 516 crore in FY19 from Rs 408.4 crore in FY18. 

On the other hand, Freshworks' valuation soared 3.5 times to $3.5 billion in 15 months after raising $150 million from its existing investors.