US jury slaps $940 million fine on Tata in trade secret case

  • Yashwant Raj and Ramsurya Mamidenna, Washington/Mumbai
  • Updated: Apr 17, 2016 22:47 IST
Tata Consultancy Services

A United States federal jury fined India’s largest software exporter Tata Consultancy Services (TCS) Rs 6,200 crore ($940 million) on Friday for what it said was stealing trade secrets owned by competing American firm Epic Systems.

TCS denied the charge, saying it did not misuse or derive any benefit from alleged downloading of Epic System’s software. The Indian firm said it will defend its position “vigorously in appeals to higher courts”.

The jury decision in a Wisconsin court against TCS and its subsidiary Tata America International Corp is yet another hurdle for the $109 billion Tata Group, grappling with a probe into fraud charges against its British steel company, Tata Steel UK.

This comes days after the conglomerate said it plans to sell Tata Steel UK due to prolonged losses.

The decision is also likely to hurt the Tata brand that was ranked as India’s leading and the world’s 65th most valuable in 2015 by Forbes.

“In the short term, the indictment can impact outsourcing as companies will now be reluctant to share trade secrets. This needs to be treated as a wake-up call for Indian companies to implement stringent compliance norms,” said Pawan Duggal, cyber law expert and advocate, Supreme Court.

The decision comes a day before TCS is scheduled to announce its fourth quarter earnings where analysts expect the company to report a 2.6% rise in quarterly net profit to Rs 6,273 crore. TCS said the development will not have any impact on its earnings.

The jury decision calls for Tata Group to pay Rs 1,600 crore ($240 million) for the allegedly stolen software and about Rs 4,600 crore ($700 million) in punitive damages.

Healthcare software major Epic sued Tata in 2014, alleging the Indian company “wrongfully accessed” the American firm’s proprietary database and downloaded data containing documents, confidential information and trade secrets.

The alleged infringement happened while TCS was doing consulting work for a common client, US health insurance major Kaiser Permanente.

Epic Systems says its software UserWeb contains the healthcare records of around 169 million patients and is used by an estimated 281,000 physicians worldwide.

“Much of the data wrongfully taken from Epic, if used improperly, would provide an unfair development and design advantage for TCS’s competing medical management software called Med Mantra,” the American firm alleged.

Court records showed Tata unsuccessfully moved the court to dismiss Epic’s case.

“The jury indictment is significant but not surprising. The US has a distinct focus on protection of intellectual property,” said Duggal.

A TCS statement said the trial judgment will be entered in the case in six to eight weeks, following which parties can file an appeal within 30 days after the judgment is filed.

“While TCS respects the legal process, the jury’s verdict on liability and damages was unexpected as the company believes they are unsupported by the evidence presented during the trial,” said the TCS statement.

On April 8, the UK Serious Fraud Office started a probe into Tata Steel UK’s speciality steels unit on charges of a lapse in procedures. Tata Steel said the probe was initiated after Tata Steel UK itself apprised the Serious Fraud Office of the results of an internal audit.

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