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TCS fined Rs 1,600 crore by US court for misappropriation of trade secrets



TCS fined Rs 1,600 crore by US court for misappropriation of trade secrets

A United States District Court has slapped Tata Consultancy Services (TCS) with a total penalty of about $194.2 million (approximately Rs 1,600 crore) in multiple charges alleging misappropriation of its trade secrets.

In a suit filed five years ago by Computer Sciences Corporation (CSC)/ DXC Technology Company (DXC), “The court ordered that the company is liable to CSC for $56,151,583 in compensatory damages and $112,303,166 in exemplary damages,” the IT giant informed in a regulatory filing.

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“The court also assessed that the company is liable for $25,773,576.60 in prejudgment interest through June 13, 2024, it added in the filing as it received the adverse judgement passed by United States District Court, Northern District of Texas, Dallas Division on Friday.

TCS went on to say that the judgement has no major adverse impact on its financials and operations.

Under the terms of the court orders, TCS is liable for misappropriation of trade secret under the Defend Trade Secrets Act of 2016 of the US law.

The Tata group company asserted that it has strong arguments in the matter and intend to defend its position through review petition/appeal to the appropriate Court.

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TCS response is awaited on the matter. About the case

In 2019, DXC predecessor Computer Sciences Corp filed a lawsuit against TCS claiming that it licensed its software to Transamerica subsidiary Money Services Inc. TCS had won a $2-billion deal from Transamerica in 2018. The lawsuit alleged that Tata rebadged 2,200 Transamerica employees in 2018 and used their access to CSC’s software to gain knowledge of its source code and other proprietary information to build a competing life insurance platform. The lawsuit further stated that TCS’ deal was for third-party administration and not for accessing the source code of its proprietary systems, which were later used to improve the TCS BaNCS software.

In November 2023, the US court jury in a verdict, said that TCS had misused confidential information about DXC’s Vantage-One and CyberLife software for managing life insurance and annuity policies to create a competing platform. It advised that TCS owed DXC $70 million for misappropriating its trade secrets and an additional $140 million because its misuse was “willful and malicious.”

A year ago in June 2023, the US-based insurer Transamerica had ended its 10-year deal with TCS, two years ahead of schedule.

In Q3FY24 ending December 2023, TCS had taken a $125 million provision after it lost a lawsuit and claim from Epic Systems.

On Friday, TCS shared ended at Rs 3,831.95 apiece, weaker by 1.17% from the previous close on the BSE. The announcement came late after market hours.

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