Companies
Why a US court ordered TCS to pay $194 million in fine to CSC
Summary
- As TCS plans to appeal, the case highlights the complexities involved in safeguarding proprietary technologies in the competitive tech industry
Tata Consultancy Services Ltd. (TCS) was slapped with a $194.2 million fine last week, after a US court ruled that India’s largest IT services company used proprietary software from Computer Sciences Corp. (CSC) to develop its banking platform.
The judgment, delivered on 13 June by a district court in the Northern District of Texas, Dallas Division, broke down the fine into $56.15 million in compensatory damages, $112.3 million in exemplary damages, and $25.78 million in interest claims.
“TCS was unjustly enriched in the amount of $56,151,583 as a result of TCS’s misappropriation of the Trade Secrets," the court ruled.
The ruling underscores the importance of protecting proprietary technologies in the competitive tech industry.
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CSC had first filed a compliant with TCS on 22 June 2018, alleging that the Indian company misappropriated trade secrets during a 2017 due diligence process when it was bidding to replace CSC at Transamerica Life Insurance Co. It filed a case against TCS later on 22 April 2019.
The court calculated the interest payments at an 8.5% rate on the compensatory damages over a period of five years and four months, starting six months after the June 2018 complaint.
In response, TCS has announced plans to file a review petition, maintaining that the judgment will not significantly impact its financial health or operations.
“The company believes that the judgment has no major adverse impact on its financials and operations," TCS said in a filing to the stock exchanges. The IT major ended the last year with $29.1 billion in revenue and $5.6 billion in profits.
This case echoes a previous legal battle TCS faced with Epic Systems.
In 2014, Epic Systems, a Wisconsin-headquartered privately held company, filed a case against TCS for allegedly stealing its proprietary software. Two years later, a Wisconsin court imposed a $940 million fine on TCS.
"The jury's verdict will not have any impact on the TCSQ4 and FY16 financial results to be announced on Monday, April 18, 2016," TCS had informed the exchanges in April 2016.
After years of contesting the case, a court's appeal in November 2023 reduced the damages to $140 million.
Despite this, TCS continues to contest the case. However, in November of last year, the company made a provision of $125 million as an exceptional expense in its financials.
The CSC lawsuit traces back to TCS winning a $2 billion, 10-year contract from Transamerica in January 2018, which had previously partnered with CSC since 1998. CSC contended that TCS improperly accessed software codes from its Vantage and CyberLife platforms, which are used to manage annuities and life insurance policies. These allegations were supported by testimonies from over two dozen executives during the discovery process.
“CSC only allowed TCS to use the Trade Secrets for the sole benefit of Transamerica and did not expressly or impliedly consent to TCS using the Trade Secrets for any kind of development of BaNCS," CSC argued in court, adding that TCS’s misappropriation focused on “calculations, data structures, business rules, correspondence triggers, and software interfaces."
TCS has consistently denied any wrongdoing, claiming that CSC’s actions aimed to disrupt its contract with Transamerica. The company reiterated its stance in court filings over the past five years, asserting that CSC’s allegations were unfounded.
An email sent to TCS seeking comment went unanswered.
