TCS to take $125 million hit to Q3 earnings for alleged stealing of Epic's intellectual property

Tata Consultancy Services (TCS), India's largest IT services company, has announced a $125 million provision as an 'exceptional item' in its upcoming third-quarter results due to a trade secret lawsuit filed by Epic Systems, a US-based company. The lawsuit, initiated in 2014, accused TCS and Tata America International Corp of misappropriating intellectual property while contracted to implement Epic's healthcare software.

Despite TCS appealing the verdict, the US Supreme Court recently rejected their appeal on November 20. The District Court of Wisconsin had upheld an order, including $140 million in punitive damages. TCS, initially found guilty in 2016, was initially ordered to pay $940 million in damages to Epic Systems. However, after subsequent hearings, the fine was later reduced to $420 million, comprising $280 million in punitive damages and $140 million in compensatory damages.

The punitive damages were considered excessive, leading TCS to appeal to the US Court of Appeals, 7th Circuit, Chicago. Subsequently, the trial court was instructed to reassess the punitive damages, resulting in a reduction to $140 million by the US District Court for the Western District of Wisconsin in July 2022.