Ahead of IPO, Chinese social app Momo accused of stealing its name and tech

On Momo’s journey to the US stock market, China’s third-biggest social app has gone through great pains to transform its reputation from sleazy hookup app to well-rounded, family-friendly social network. But it seems the startup’s public image isn’t the only hurdle in the race to IPO.

Netease, a local internet giant in China, today released a statement (h/t Techweb) confronting Momo CEO Tang Yan about his alleged misconduct while he worked for Netease, prior to starting the app. Tang was an editor at Netease from December 2003 to September 2011.

The statement lays out three accusations of wrongdoing. First, Tang started working on Momo while he was still employed at Netease in July 2011, and used his senior position to obtain technical resources and private records from Netease. Netease states this was done in violation of a non-compete clause in Tang’s contract.

Next, Netease alleges Tang used his position to funnel “millions of yuan in economic benefits” (translation ours) to his wife’s advertising agency, Sidu Beijing Advertising (四度北京广告有限公司). Note that Netease does not say Tang embezzled funds, but that his abuse resulted in his wife’s company’s economic benefit.

Lastly, while working for Netease in 2007, the company says Tang was taken into police custody for 10 days, and did not truthfully inform Netease as to why.

These actions, according to Netease, cost the company both a loss of reputation and a loss of business, and Tang retains legal liability.

See: Linked to prostitution, China’s favorite flirty chat app slammed by state media

Momo v. Momo

In another legal battle, Momo is being sued by Hangzhou Momo Wedding Service, claiming it owns exclusive rights to the “Momo” brand name. Hangzhou Momo wants to collect RMB 11 million (US$1.79 million) for Momo’s infringement, saying it was Momo first, according to WSJ.

That trial is set to take place at the end of this month. In a regulatory filing, Momo said it would probably win the case because the two company’s scopes of business differ. The phrase Momo translates to “unacquainted” in Chinese.

Hangzhou Momo is a web-based dating service for Chinese parents trying to marry off their single adult children.

Trademark conflicts like this aren’t unheard of in China. Apple had to pay US$60 million for the iPad trademark, while Tesla settled a similar court case over its branding with a Chinese skincare company.

Momo is expected to raise US$256.6 million in its initial public offering tomorrow on the Nasdaq under the symbol MOMO.