TCS Penalty: Slap of US$194M by US District Court

TCS Penalty of a US$194.2 million (approximately Rs 1,600 crore) fine by a US District Court for allegedly stealing trade secrets. This decision was made in the lawsuit CSC filed in a US district court against TCS and later merged with DXC Technology accusing TCS of flouting laws and stealing trade secrets from it.

TCS informed the court’s order to SEBI as provided in the BSE document of the company. It said that it would seek to oppose the court’s ruling by filing an appeal and for a review.

"Pursuant to Regulation 30 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, we hereby inform you that the Company has received an adverse judgment passed by United States District Court, Northern District of Texas, Dallas Division, details of which are provided in Annexure A."

Specifics from TCS's BSE filing regarding TCS penalty.

Providing specifics on the lawsuit brought by CSC regarding the TCS Penalty, the BSE filing states, In a suit filed by Computer Sciences Corporation (CSC)/DXC Technology Company (DXC) against the company, alleging misappropriation of its trade secrets:

- The court found the company responsible for paying CSC US$56,151,583 in damages for trade secrets taken and US$112,303,166 for exemplary damages.

- The court determined that the company must pay US$25,773,576.60 in interest up until June 13, 2024, before the case is decided.

- Additionally, the court granted some restrictions and other measures against the Company.

“The court ordered that the company is liable to CSC for US$56,151,583 in compensatory damages and US$112,303,166 in exemplary damages,” in a document submitted to authorities, the Mumbai-based software services firm disclosed.

The Tata Group company responded to the court ruling by saying that it would not have a major impact on its operations or financial situation. TCS stated that it has strong defenses in the case and that it intends to defend its position by requesting a review or filing an appeal with the appropriate court.

 "The Company believes that it has strong arguments against the judgement and is taking necessary steps to protect its interest through review/appeal. The Company believes that the Judgement has no major adverse impact on its financials and operations," the BSE filing said.

What is the trade secret case against TCS

In 2019, CSC, which would eventually merge with DXC, filed a lawsuit against TCS, claiming it had unlawfully exploited its software after obtaining a license from it for a subsidiary of Transamerica. TCS had won a US$2 billion deal with Transamerica the year before. The lawsuit alleged that TCS took advantage of the software access given to 2,200 Transamerica employees, who were then transferred to TCS, to gain insights into CSC’s software features and develop a competing insurance platform. The judiciary found out that TCS had gotten hold of and used the proprietary data from the insurance management system of DXC and was thus imposed to pay the penalty of 70 million for the unauthorized use of confidential data and an extra 140 million for the intentional violation of rights.

Moreover, Transamerica ended its ten-year contract with TCS early in June 2023. After suffering a legal setback and a lawsuit from Epic Systems, TCS had to set aside US$125 million in the December quarter.