tcs suit

File photo of Tata Consultancy Services campus. (IANS photo)

An appeals court in Chicago, Illinois, has upheld the compensatory damages of $140 million while directing reassessment of the punitive damage of $280 million against Tata Consultancies Services in a trade secret lawsuit filed by medical software company Epic Systems.

According to reports, U.S. Court of Appeals 7th Circuit in Chicago held that the punitive damages award of $280 million is constitutionally excessive and directed the Trial Court to reassess the punitive damages.

The court, however, upheld the compensatory damages award of $140 million, according to an exchange filing by TCS, India’s largest software services provider, said the reports.

In 2018, TCS gave Epic Systems a $440-million letter of credit. TCS’ appeal against U.S. software firm Epic Systems' trade secret theft lawsuit moved to a U.S. federal appeals court in May 2019.

"TCS is exploring the options available to it, as it believes that there is no evidence of misuse of EPIC information by TCS. TCS will vigorously defend its position before the relevant court," the company said in a statement to stock exchanges, according to the report.

The U.S. firm's lawsuit dates back to 2014. Epic Systems had accused TCS stealing its intellectual property. A jury in 2016 found TCS guilty and awarded Epic Systems a damage worth $940 million.

A year after the original award, a court in Wisconsin brought the damage amount down to $420 million. It was done to comply with an existing legal limit on punitive damages for such matters.

Epic had claimed that TCS employees were brought on as consultants to a Kaiser Permanente Sunnyside Medical Center in Portland to help implement an Epic software there and took more than 6,000 documents containing Epic’s development information by creating a fake user account.

The user pretended to be an employee of the hospital and did not disclose that he was a consultant, the lawsuit said.

In May 2020, the Securities and Exchange Board of India issued a warning to TCS for not adequately disclosing the damages in the 2016 Epic Systems' case to investors.

In the financial results declared on April 18, 2016, $940 million, was shown as damages awarded by the Jury verdict, as part of contingent liabilities.

In a related disclosure dated Oct. 1, 2017, TCS had mentioned that the court significantly reduced the compensatory and punitive damages to $420 million, the reports noted.

“The damages are substantial, more so when seen in comparison to RS 24,292 crore net profit of TCS for FY16.

The disclosures made by TCS to stock exchanges on 16 April, 2016 should have prominently displayed the extent of damages to enable investors assess the impact of the Jury's verdict on the financials of the listed entity," said Sebi on May 28, reports said.

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