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Indian IT provider sees $125 million fall in Q3 profits due to US trade secret verdict

by John R. Fischer, Senior Reporter | December 01, 2023
Business Affairs Health IT
Epic alleges that TCS employees stole its intellectual property to build a competing product to its software.
Following the U.S. Supreme Court’s rejection of its appeal, Tata Consultancy Services, an information technology services provider in India, said it will set aside $125 million in its third-quarter earnings to pay damages awarded to EHR provider Epic Systems in a trade secret lawsuit.

In 2005, TCS employees pretending to be Kaiser Foundation Hospitals employees in need of training were granted access to the company’s internal web, according to The Times of India.

While Kaiser confirmed that the consultants were working for it, Epic says that the individuals allegedly stole over 6,000 documents and more than 1,600 files on its software design to build a competing product, Med Mantra, which was released in 2009 to manage billing, insurance benefits management, and referral services.

Epic filed its lawsuit in 2014. In 2016, a Wisconsin federal jury awarded Epic $940 million, making it one of the biggest payouts among U.S. trade secret cases ever, reported the Business Standard.

This was later reduced to $420 million, which included $140 million in compensatory and $280 million in punitive damages. While TCS paid what it described as an "unjust enrichment award" in compensatory damages, along with interest and costs, it appealed the punitive ones, which were lowered in 2022 to $140 million.

The company then tried to further appeal the punitive damages to the Supreme Court, but that appeal was denied in November.

According to the Business Standard, economic challenges such as high inflation have led to investors in the U.S. and Europe spending less on IT solutions, making players in this market more vulnerable financially.

TCS’ Q2 results were considered poor, and top IT companies Infosys and Wipro also lowered their revenue forecasts last month.

TCS denies misusing or benefiting from the documents and files in any way.

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