Zoho vs Freshworks: Why are India's top Saas companies locked in a legal battle in US?
BENGALURU: Posterboys of India's SaaS (Software as a service) industry, Sridhar Vembu and Girish Mathrubootham, are currently fighting each other in a US district court over allegations of misappropriation of trade secrets as well as data-stealing with a fresh lawsuit filed against Freshworks, a Chennai-based startup headed by Mathrubootham.
The US Court has sought a response from Freshworks by no later than December 7 against the accusations laid by Vembu's Zoho of unauthorized access to the Customer Relationship Management (CRM) software in which a senior official of Freshworks is said to be involved.
In the fresh plea, Zoho has also asked Freshworks for the discovery "of the scope of unauthorised access" that Freshworks might have in case of sensitive data as well as other employees who might be involved in this besides a $5000 compensation for the damages caused. Both Zoho Corp and Freshworks when contacted by The New Indian Express declined to comment on the issue citing it as sub-judice.
The controversy kicked off in March 2020 when Zoho levied charges of violation of the Defense of Trade Secrets Act and various other trade laws of US by Freshworks saying the latter has built its entire business model by stealing sensitive information from Zoho, including trade secrets like critical client data, software products as well as even pricing strategy.
Freshworks' plea before the Northern District of California Court for the dismissal of Zoho's plea was rejected in October by the court, which stated that Zoho's lawsuit had followed the standard for a plea for trade misappropriation.
It also came to light that a former Zoho executive had admitted to stealing CRM data and using the same for Freshworks.
Sources said that the allegations of employee poaching and data-stealing have been going on ever since Mathrubootham, who was a product development manager at Zoho, left the company to start Freshworks in 2001. Unlike Vembu's Zoho, which is a bootstrapped startup and doesn't follow the aggressive growth strategy of a majority of the startups, Freshworks has received huge funds from overseas and homegrown venture capitalists including Sequoia, Tiger Global, Accel, Capital G.
Based out of Chennai, the software companies cater mostly to the small and medium business in the US market with services such as CRM, Information Technology service management (ITSM) and helpdesk software.
"The ascent of both Freshworks and Zoho over the last two decades has been remarkable with many products in their portfolios. While Freshworks has essentially relied on its help desk software, CRM and ITSM, Zoho has built its line of products to cater to clients needs from marketing, sales, operation tools," a Saas professional in Bengaluru said wishing anonymity.