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OCTA-FINAL ROUND
PROBLEM STATEMENT
3rd MNLU-N NATIONAL
COMMERCIAL MEDIATION COMPETITION
MNLU-N NATIONAL COMMERCIAL MEDIATION COMPETITION, 2025
CODE WARS: THE BATTLE FOR AI SUPREMACY
The dispute between Quantum Solutions Pvt. Ltd. (hereinafter “Quantum”) and Innovatech
Systems Ltd. (hereinafter “Innovatech”) arises from complex and deeply intertwined
issues of intellectual property, cybersecurity risks, and business competition in the
artificial intelligence (AI) and cybersecurity industry. At the core of the dispute is
Quantum’s claim that Innovatech has misappropriated proprietary AI algorithms originally
developed by Quantum and integrated them into its newly launched cybersecurity
software, ‘SentinelShield’. Quantum alleges that its technology, which was the result of
years of extensive research and development, has been unlawfully incorporated into
Innovatech’s software, thereby constituting a breach of intellectual property rights,
misappropriation of trade secrets, and unfair competitive practices.
Quantum seeks damages for the alleged infringement and has demanded an immediate
injunction to prevent Innovatech from further distributing SentinelShield. The company
asserts that the algorithm in question is central to its competitive advantage in the AI-
driven cybersecurity market and that its unauthorized use by Innovatech not only results
in financial losses but also undermines Quantum’s position as an industry leader.
Additionally, Quantum has recently suffered a cybersecurity breach, leading to significant
data loss and compromise of sensitive client information. The timing of the breach
coincides with Innovatech’s launch of SentinelShield, leading Quantum to suspect that
Innovatech may have been involved in unauthorized data access or, at the very least,
benefited from confidential data obtained through illegitimate means.
Innovatech, in response, vehemently denies these allegations and maintains that
SentinelShield was independently developed based on its proprietary research and
industry-standard methodologies for Artificial Intelligence. The company asserts that its
software relies on fundamental AI principles that are widely available in academic and
technical literature, and any resemblance to Quantum’s algorithm is coincidental or
attributable to common best practices in AI-driven cybersecurity solutions. Innovatech
further argues that Quantum is attempting to use intellectual property claims as a tool to
stifle competition, thereby preventing Innovatech from gaining market share in a highly
lucrative sector.
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Adding another layer of complexity to the dispute is the involvement of a key former
employee of Quantum, Dr. Arvind Malhotra, who was a senior AI researcher at Quantum
before joining Innovatech as its Chief AI Architect. Quantum suspects that Dr. Malhotra
may have carried proprietary knowledge with him to Innovatech, potentially influencing
the development of SentinelShield. While Innovatech acknowledges Dr. Malhotra’s
significant contributions to its software, it insists that he adhered to all non-disclosure and
non-compete agreements and that no proprietary Quantum technology was transferred or
used in the development of SentinelShield.
The stakes for both companies are extraordinarily high. Quantum’s board has expressed
concerns about the potential ramifications of an unfavorable legal battle, including loss of
investor confidence, disruption of its upcoming product launch, and the risk of exposing
its own proprietary AI methodologies in open court. On the other hand, Innovatech is in
the final stages of negotiating a multimillion-dollar contract with a multinational
corporation for the deployment of SentinelShield. Any delay in the rollout of the software
due to legal complications could result in financial penalties and reputational damage.
The mediation process presents a critical opportunity for both Quantum and Innovatech
to resolve their dispute in a manner that preserves their commercial viability while
addressing their respective concerns.
Quantum comes to the mediation table with a strong belief that its intellectual property
rights have been violated. The company is prepared to present technical evidence,
including forensic analysis of SentinelShield’s source code, to demonstrate similarities with
its proprietary AI technology. However, Quantum also recognizes the challenges of
proving outright misappropriation, particularly given the complex and often overlapping
nature of AI development methodologies. The company is open to considering a
structured licensing arrangement where Innovatech compensates Quantum for the use of
its technology, provided that Innovatech acknowledges Quantum’s contributions.
Additionally, Quantum is interested in establishing collaborative cybersecurity compliance
measures to prevent future allegations of data breaches and intellectual property theft.
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Quantum is also aware that pursuing aggressive litigation could expose its proprietary
algorithms and business strategies to scrutiny, which could be detrimental in the long run.
Moreover, its investors have expressed concerns about the negative publicity that might
arise from an extended legal battle. As such, Quantum’s leadership is willing to explore
alternative resolutions, including an exclusive commercial partnership with Innovatech that
would allow both companies to co-develop cybersecurity solutions while maintaining their
respective intellectual property rights.
On the other side, Innovatech is focused on protecting the integrity of its product and
ensuring that SentinelShield remains commercially viable. While the company strongly
denies any wrongdoing, it is also mindful of the potential risks associated with protracted
litigation, including reputational harm and regulatory scrutiny. Innovatech has conducted
its own internal review and found that while certain coding structures in SentinelShield
bear resemblance to Quantum’s AI, these similarities are incidental and do not constitute
misappropriation. Nevertheless, to mitigate risk, Innovatech is open to discussing potential
licensing agreements or collaborative research initiatives that would allow Quantum to
benefit from SentinelShield’s market success without conceding to allegations of theft.
Another point of contention is the recent cybersecurity breach that affected Quantum.
While Quantum suspects Innovatech’s involvement, it lacks definitive evidence to support
this claim. Innovatech, in turn, has raised concerns that such accusations could be
defamatory and could harm its reputation in the cybersecurity industry. The company is
prepared to negotiate a settlement that includes a mutual non-disparagement agreement,
ensuring that neither party makes public allegations against the other. Additionally,
Innovatech may consider offering a confidential financial settlement to Quantum as a
goodwill gesture, provided that the terms are framed in a manner that does not imply
liability.
In an effort to avoid prolonged litigation, both parties have agreed to enter mediation. The
mediation process will be facilitated by two neutral mediators and will include
representation from each company’s legal counsel as well as key decision-makers.
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MNLU-N NATIONAL COMMERCIAL MEDIATION COMPETITION, 2025
ANNEXURE A – RELEVANT CLAUSES FROM THE NON-DISCLOSURE AND NON-
COMPETE AGREEMENT OF DR. ARVIND MALHOTRA
Confidential Information: Employee acknowledges that during their employment, they
will have access to proprietary information, including AI algorithms, cybersecurity
models, business strategies, and trade secrets (“Confidential Information”). Employee
agrees not to disclose, use, or exploit such Confidential Information outside the course
of employment.
Non-Compete Clause: Employee shall not engage in, be employed by, or provide
services to any competitor of the Company for a period of two (2) years post-
termination of employment.
Remedies: The Company shall be entitled to injunctive relief and damages in case of a
breach.
Signed:
Dr. Arvind Malhotra – Employee
[Authorized Signatory] – Quantum Solutions Pvt. Ltd.
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ANNEXURE B – ABSTRACT FROM QUANTUM’S AI PATENT DOCUMENT
Patent No: IN2022A000123
Title: Machine Learning Algorithm for Predictive Cybersecurity Threat Analysis
Filed: January 10, 2022
Abstract: This invention relates to an advanced machine learning model that processes
large-scale threat intelligence data to predict, detect, and neutralize cybersecurity threats
in real time. The system utilizes proprietary reinforcement learning models developed
exclusively by Quantum Solutions Pvt. Ltd.
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ANNEXURE C – FORENSIC REPORT ON SOURCE CODE ANALYSIS
Prepared by: CyberForensics Pvt. Ltd.
Date: March 5, 2025
Summary: The forensic team conducted a comparative analysis between Quantum’s
NeuralFort software and Innovatech’s SentinelShield. The following key observations were
made:
37% identical code overlap detected in core AI models.
Structural similarities in cybersecurity response functions.
Metadata analysis reveals timestamps linking portions of SentinelShield’s code to the
period when Dr. Malhotra was still employed at Quantum.
Conclusion: There is a high probability of unauthorized access to Quantum’s proprietary
code, requiring further legal examination.
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MNLU-N NATIONAL COMMERCIAL MEDIATION COMPETITION, 2025
ANNEXURE D – SUMMARY OF FINDINGS IN INTERNAL AUDIT REPORT BY INNOVATECH
Prepared by: Innovatech Legal & Compliance Department
Summary: Our internal review indicates that SentinelShield was independently developed
using publicly available machine-learning methodologies. While some design elements
may resemble industry-standard approaches, there is no evidence of direct code copying
from Quantum’s systems.
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MNLU-N NATIONAL COMMERCIAL MEDIATION COMPETITION, 2025
ANNEXURE E – RELEVANT EXCERPTS FROM CYBERSECURITY BREACH REPORT
CONFIDENTIAL CYBERSECURITY INCIDENT REPORT
Prepared by: Quantum Solutions Pvt. Ltd. Security Team
Date: February 20, 2025
Incident Summary: On February 15, 2025, Quantum Solutions Pvt. Ltd. identified
unauthorized access to its internal servers, resulting in the exfiltration of sensitive client
data, proprietary AI model architectures, and internal research reports. The breach was
detected by Quantum’s cybersecurity monitoring team at 03:15 AM IST, triggering an
immediate incident response protocol.
Findings:
Unauthorized Access Point: The breach originated from an external IP address located
in Singapore, linked to a VPN service known for anonymizing user identities.
Data Compromised: Internal logs indicate that over 250GB of confidential files,
including encrypted AI model parameters, were accessed and copied.
Potential Connection to Innovatech: Forensic analysis revealed that the attack
methodology bore similarities to the encryption bypass mechanisms used in
Innovatech’s SentinelShield software.
Employee Involvement: Suspicious login activity was traced to an employee account
belonging to a former Quantum researcher who joined Innovatech in 2024.
Recommendations:
Legal proceedings to be considered against suspected entities.
Enhanced cybersecurity measures to prevent future breaches.
Internal audit of all access logs and employee communications for further investigation.
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MNLU-N NATIONAL COMMERCIAL MEDIATION COMPETITION, 2025
ANNEXURE F – MARKET IMPACT ANALYSIS (KEY FINDINGS)
IMPACT ASSESSMENT REPORT ON THE ONGOING DISPUTE
Prepared by: Independent Financial Analysts
Date: March 1, 2025
Key Findings:
Quantum's projected financial losses: if Innovatech continues distributing
SentinelShield stand at approximately $75 million annually due to reduced market
exclusivity.
Innovatech's contract risk: If SentinelShield’s rollout is delayed, Innovatech faces up to
$50 million in contract breach penalties.
Investor sentiment: Quantum’s stock has dropped 12% since the dispute became
public, while Innovatech has lost 8% in valuation due to negative media coverage.
Potential resolution impact: A licensing agreement could mitigate financial losses for
both companies, ensuring continued profitability.
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