[Update] WinZO And Hike’s Court Battle Over Alleged IP Violation Heats Up

[Update] WinZO And Hike’s Court Battle Over Alleged IP Violation Heats Up

SUMMARY

In an order passed last month, the Delhi High Court has directed WinZO and Hike to submit the source codes of their apps, WinZO and Rush

WinZO filed a petition under Section 9 of the Arbitration and Conciliation Act, 1996, seeking interim reliefs against Hike

The dispute started from WinZO's allegations that Hike Singapore, through its Indian subsidiary Hike Private Limited, launched a competing app called 'Rush' in November 2020

Update Note: June 13, 2024; 20:50

After the article was published, Hike sent a statement claiming that WinZO has filed a frivolous case.

“The short answer is that this is a frivolous case aimed at tarnishing our credibility. The fact that they did not get the interim reliefs they requested from the Hon’ble High Court, establishes that the Hon’ble Court did not see any merit in their case,” a company spokesperson said.

Hike also claimed that its Rush gaming app has grown rapidly and has threatened players like WinZO, which prompted this case. “We strongly believe that we will succeed in the Arbitration proceedings like we succeeded before the Hon’ble High Court.”

The company also claimed it worked with WinZO to bring in investors for the latter, and that there were demonstrable differences in Hike’s Rush and WinZO app when it comes to match-making.

The Hike spokesperson added, “WinZO overnight wanted Hike to merely be a financial investor and not a strategic partner as originally agreed. As a part of this exit, non-compete was dropped as WinZO was well aware that Hike was no longer a long term investor in WinZO. The dropping of the non-compete was signal enough that it would be open for Hike to enter the real money gaming sphere. Therefore, to invoke arbitration more than 3 years post the launch of Rush, clearly establishes that all such allegations are an afterthought”.

Original Story: June 12, 2024; 21:26

The legal battle between WinZO and its former strategic investor Hike has taken a new turn as the Delhi High Court has granted WinZO’s request for arbitration and the appointment of an arbitrator.

In an order passed last month, the Delhi High Court has directed WinZO and Hike to submit the source codes of their apps, WinZO and Rush, in sealed covers to the Registrar General. This will allow for future comparisons if needed, the order said.
The sole arbitrator has the power to request these source codes for the arbitration process and will be provided with necessary assistance.

Additionally, WinZO’s algorithm, allegedly copied by Hike, must also be submitted in a sealed cover. If access to the source code or algorithm is required, parties can request the formation of a confidentiality club from the sole arbitrator.

WinZO filed a petition under Section 9 of the Arbitration and Conciliation Act, 1996, seeking interim reliefs against Hike.

The dispute started from WinZO’s allegations that Hike Singapore, through its Indian subsidiary Hike Private Limited, launched a competing app called ‘Rush’ in November 2020. According to WinZO, several key features of the WinZO app have been imitated or copied by the respondents.

WinZO claimed that similar features on the ‘Rush’ app violate its IP rights and misuse confidential information. Additionally, WinZO alleges that Hike Singapore filed a patent application on December 21, 2020, for an algorithm titled ‘A Method And System For Determining Compatible Contenders For A Contest,’ which is claimed to imitate WinZO’s proprietary match-making algorithm.

Therefore, WinZO sought to restrain the respondents from using any of its confidential information or intellectual property.

Inc42 has reached out to both the parties. The article will be updated based on their statement.

The Conflict That Dates Back 5 Years

Back in 2019, WinZO Games raised $5 Mn in Series A funding. The round was led by Kalaari Capital and messaging and payments platform Hike.

As per sources, Hike initially agreed to invest $3.2 Mn for 25% equity in WinZO. However, during the document signing, Hike insisted on receiving 25+1% shares, which WinZO founders granted. Kavin Bharati Mittal of Hike, who was on WinZO’s board, had signed a non-compete and non-solicit agreement.

Differences between WinZO’s founders and the strategic investor, Hike, emerged within weeks of Hike’s investment in early 2019. When WinZO needed to raise Series B funds, Mittal suggested getting additional funds from Hike instead of other investors. WinZO’s founders, seeking to diversify their investor base and bring in more expertise, preferred raising funds from a large VC firm.

WinZO then received a second term sheet from prominent investors at a valuation of $60 Mn post-money. Mittal sought to waive the non-compete clause, assuring WinZO’s founders that Hike would not enter the gaming industry. WinZO’s Series B funding round closed in August 2020, after which the non-compete agreement was waived. Hike launched Rush in October 2020.

In response, WinZO held an Extraordinary General Meeting (EGM) and revoked Hike’s information rights, offering an exit. Hike, having invested $3.2 Mn, received $12 Mn from WinZO.

Hike was founded in 2012 by Kavin Bharti Mittal as an instant messaging app but later pivoted to a gaming platform. Since rebranding, the startup raised capital from crypto investors such as JumpCrypto, Tribe Capital, Republic, Polygon, among others.

Meanwhile, WinZO was founded by Paavan Nanda and Saumya Singh in 2018, WinZO is an online skill-based gaming startup that partners third-party developers to host games on its mobile-based application. It earns revenue through platform fees charged from users for real-money games.

The gaming startup saw its consolidated operating revenue zoom nearly 3X to INR 673.94 Cr in the financial year ended March 31, 2023 (FY23). The Delhi NCR-based gaming major reported an operating revenue of INR 233.89 Cr in the previous fiscal year.

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