Cloud software provider Zoho has accused Sequoia and Accel-backed rival Freshworks of stealing confidential customer data in February that accounts to misappropriation of trade secrets.
Zoho, which is among the first of India’s software-as-a-service companies, in a lawsuit said that its customers were sent emails by Freshworks executives to court business. Both companies are US-headquartered with a majority of employees in Chennai.
The case was filed in a US District Court by Zoho on March 17.
According to executives at Zoho, the case was filed after a two-week internal investigation by the company following complaints by Zoho customers and partners that their confidential email ids were receiving mails from Freshworks.
“Freshworks contacted Zoho’s customers at email addresses created solely for registration with Zoho’s cloud-based offerings. The only way Freshworks would have knowledge of the email addresses it used to contact Zoho’s customers is through unauthorized direct access of Zoho’s confidential CRM database, which houses Zoho’s confidential customer lists and leads, as well as confidential and competitive pricing and customer requirements data,” alleged the company in its court filing accessed by ET.
Freshworks said that it would fight the case in the court. “Freshworks is taking these allegations very seriously and plan on defending ourselves,” a Freshworks spokesperson said in an email response. “We have no further comments at this time.” Unauthorised access and use of confidential customer data is covered under the US Defend Trade Secrets Act, 2016.
Legal experts suggested that the email evidence produced by Zoho could back up their allegations.
“The emails showing the communications between Freshworks and Zoho’s client are very strong evidence. Also there is corrobarative evidence where the client has specifically asked them (Freshworks) as to where they got the access to their email ids and whether they comply with GDPR,” said Salman Waris, Partner at Tech Legis Advocates and Solicitors.
Freshworks founders Girish Mathrubootham, who is the CEO and CTO Shan Krishnaswamy were employees at Zoho before they branched out to start Freshdesk, a customer service software company in 2010. They expanded to offer a suite of software and renamed the company as Freshworks. The company has raised $399 million from investors and is valued at over $3.5 billion and plans a public listing in the next few quarters. Zoho has remained private and its founder Sridhar Vembu has publicly stated that he is against raising funds from venture capital and private equity funds
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