Internet giant Yandex (NASDAQ: YNDX), which operates the biggest search engine in Russia, was recently sued by music-streaming site Zvooq for $29 million over allegations that it had poached key staff members. Zvooq claims that by recruiting its employees, Yandex breached an NDA it signed after it expressed interest in becoming an investor in the start-up.
The key facts
Under the terms of that NDA, Yandex was prohibited from soliciting or hiring Zvooq employees in the six-month period after it was signed. But earlier this year, Zvooq’s marketing director Varvara Semenikhina left the start-up for an identical job at Yandex’s streaming service, Yandex.Music. Konstantin Ryabinin, the former technical director at Zvooq, also joined Yandex as head of its Search projects.
Zvooq claims that Semenikhina, who had been with the company for over two years, was “intimately involved” in the development of its streaming platform. Zvooq co-founder Victor Frumkin told TechCrunch that his company was suing because “unfair competition and bad business practices affects the entire online industry in a negative way.” Yandex responded by stating that it was “surprised” by the lawsuit, that the agreement was never violated, and that it would defend its position in court.
Zvooq is currently backed by major record labels, including Sony, Time Warner‘s Warner Music, and Comcast‘s Universal Music. It has a catalog of about 25 million tracks, and is believed to be Russia’s fourth-largest streaming service after Yandex.Music, Google Play, and Apple Music.
Yandex is expected to generate $1.13 billion in revenues this year, so losing the lawsuit wouldn’t significantly hurt it’s bottom line directly. However, an adverse ruling could hurt Yandex.Music’s ability to remain competitive in the Russian music streaming market, if the court rules that certain functions of the service were illegally “borrowed” from Zvooq.
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