TCS Fined $194.2 Million by US Court: What You Need to Know
In a significant development, Tata Consultancy Services (TCS) has been fined a whopping $194.2 million (approximately Rs 1,600 crore) by a US District Court. The court order comes in response to a complaint filed by Computer Sciences Corporation (CSC), which has since merged with DXC Technology Company (DXC). The allegations against TCS revolve around the misappropriation of trade secrets.
TCS fined $194.2 million by US court
According to the BSE filing, TCS has been ordered to pay $56,151,583 in compensatory damages and $112,303,166 in exemplary damages. Additionally, the company will need to pay $25,773,576.60 in prejudgment interest through June 13, 2024. The court has also passed certain injunctions and other reliefs against TCS.
“The Company believes that it has strong arguments against the Judgement and is taking necessary steps to protect its interest through review/appeal.” - TCS BSE filing
TCS has expressed confidence that the judgment will not have a major adverse impact on its financials and operations. The company plans to appeal against the court order and file a review petition.
The Trade Secret Case Against TCS
The lawsuit against TCS dates back to 2019, when CSC sued the company for allegedly misusing its software after licensing it to a Transamerica subsidiary. TCS had secured a $2 billion contract with Transamerica the previous year. The suit accused TCS of exploiting the software access granted to 2,200 Transamerica employees, who were transferred to TCS, to learn about CSC’s software internals and create a rival insurance platform.
Insurance management software at the center of the trade secret case
The court found that TCS had improperly accessed and used confidential data from DXC’s insurance management software, resulting in a $70 million penalty for trade secret misappropriation and an additional $140 million for deliberate infringement.
In a related development, Transamerica terminated its decade-long agreement with TCS prematurely in June 2023. Following a legal defeat and claim from Epic Systems, TCS accounted for a $125 million provision in the December quarter.
What This Means for TCS and the Industry
The fine imposed on TCS is significant, and the company’s decision to appeal against the court order is understandable. However, the implications of this case go beyond TCS. The verdict serves as a reminder to companies operating in the IT sector to respect intellectual property rights and trade secrets.
The verdict has implications for the IT industry
As the industry continues to evolve, companies must prioritize ethical business practices and ensure that they are not misusing confidential information. The TCS case serves as a cautionary tale, highlighting the importance of protecting trade secrets and intellectual property.
