SaaS unicorn Freshworks has asked a US court to dismiss a plea filed against it by rival Zoho Corporation, a Chennai-based SaaS company. In March, Zoho filed a case against Freshworks at the California Northern District Court under the Defense of Trade Secrets Act, accusing it of accessing and using confidential customer data. Now, Freshworks has said that Zoho’s plea lacked “specificity and particularity” in its allegations.
According to the case filed by Zoho Corp earlier this year, files of which were accessed by Inc42, the company accused Freshworks of building its business through theft and misuse of Zoho’s confidential business information.
Freshworks was founded by two former Zoho employees, Girish Mathrubootham, formerly a vice president of product management at Zoho and Shan Krishnasamy, who was Zoho technical architect working under Mathrubootham. Both of them had worked in Zoho from 2001 to 2010 before founding Freshworks.
Zoho has alleged that Freshworks used its non-public financial information to gain the trust of investors, which in turn, helped the company seal its first round of funding. Freshworks raised $1 Mn in its first round of funding, a Series A round back in 2011, led by Accel, an early and growth-stage venture capital firm. The company has raised a total of $484 Mn in nine funding rounds from six investors. The company’s most recent funding, worth $85 Mn, was in January 2020 from a Secondary Market round, led by Steadview Capital.
“After leaving to start Freshworks, Mathrubootham improperly included Zoho confidential revenue figures in early Freshworks investor pitch materials to secure initial investments, leveraging his work at Zoho and suggesting his new startup would perform like Zoho,” the lawsuit read.
In response to Inc42’s email in March this year, Zoho had said, “Recently, compelling evidence has emerged that Freshworks has stolen customer data from Zoho and attempted to contact those customers. We are investigating the extent of the data theft. To protect customer data, we were compelled to immediately sue Freshworks to stop their illegal and immoral behaviour. We cannot discuss this further, as it is now a legal matter.”
In its response filed on July 16, Freshworks accused Zoho of expanding one alleged incident of customer data theft into a broader case of trade secret misappropriation.
As of March, Zoho was also engaged in a legal tussle with US-based sales and marketing platform HubSpot over the names of one of its suit tools. Both companies offer marketing and sales services under the “Marketing Hub” banner. However, HubSpot, which launched its Marketing Hub product in July 2018, has accused Zoho Corp of trademark infringement.