TCS To Take $125 Million Hit To Q3 Earnings Over US Trade Secret Lawsuit

Tata Consultancy Services (TCS) on Tuesday said it would make a $125 million provision in its third-quarter results in relation to a trade secret lawsuit filed by US-based Epic Systems.

Epic had filed the lawsuit against TCS in 2014, alleging the information technology (IT) services provider stole its intellectual property while it was contracted to implement Epic’s healthcare software.

The US Supreme Court on Monday rejected TCS’ appeal against a verdict passed by the District Court of Wisconsin, the company said in a statement.

Epic had originally secured a $940 million award against TCS from a Wisconsin federal jury in 2016, in what was one of the biggest trade secret verdicts in U.S. history.

The following year, this was more than halved to $420 million – of which $140 million comprised compensatory damages and $280 million was punitive. This was based on a Wisconsin law that allows punitive damages of up to double the compensatory damages.

In a subsequent appeal by TCS, the punitive damages were lowered to $140 million in 2022.

The Tata group company then appealed the punitive damages, and the petition was denied on Nov. 20.

In its appeal to the US Supreme Court against the punitive damages, TCS said it paid the compensatory “unjust enrichment award” after the first appeal, plus interest and costs.

The decision to make a provision in its results also comes amid a soft demand environment for IT services, as high inflation has led to clients tightening their wallets in key markets such as the US and Europe through the last year.

Industry heavyweights such as Infosys and Wipro trimmed their revenue forecasts last month, while TCS posted weak second-quarter results.

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