In a recent judgment, a US Federal Court at Wisconsin held TCS liable for trade secret misappropriation along with other counts, and granted damages to the tune of 940 million dollars, the highest in a trade secret case. TCS has stated that it would appeal the decision, and the value of damages is expected to be reduced substantially.

In 2014, Epic Systems sued TCS in the Wisconsin Court for trade secret misappropriation, breach of contract, unfair trade practice, and unjust enrichment among others. Epic Systems hired services of TCS to deploy its medical software at Kaiser Foundation Hospitals. While working at the Hospitals, personnel of TCS allegedly downloaded thousands of documents and other information that form part of trade secrets of Epic Systems. TCS has a medical software, Med Mantra, that competes with the software of Epic Systems. After a jury trial, it was held that TCS misappropriated trade secrets along with breaching the contract with Epic Systems. The jury granted damages of 240 million dollars as compensation and 700 million dollars as punitive damages.

The damages amount is unheard of in trade secret cases, and is definitely deterring for a software services company based out of India. TCS is among the highest patent filers in the country, and it is more than surprising to note that it misappropriated trade secrets of a client to develop a competing software. While the nexus may largely be circumstantial, the facts definitely indicate breach of contract and non-compete non-compliance.

At the ground level, this could simply be an awareness problem that hit TCS very badly. The personnel could have downloaded the software without complete awareness of their illegal acts, and once the act is proved, the nexus with the use of the trade secrets in the competing software can be easily presumed. This case is a definite wake up call for Indian companies, which are not very serious about confidentiality.

Reference

Epic Systems Corporation v. Tata Consultancy Services Limited and Tata America International Corporation, Western District of Wisconsin, case number 14-cv-748-wmc.

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