TCS Faces $125 mn Hit in Epic Systems Lawsuit Amid Soft IT Demand

Tata Consultancy Services (TCS) has disclosed its decision to allocate a $125 million provision in its forthcoming third-quarter results due to an ongoing trade secret lawsuit filed by U.S.-based Epic Systems, Reuters news report said.
TCS NetherlandsThe legal dispute initiated in 2014 by Epic Systems accused the IT services provider of unlawfully appropriating its intellectual property during TCS’s contracted implementation of Epic’s healthcare software.

TCS’s appeal against a verdict from the District Court of Wisconsin was rejected by the U.S. Supreme Court, prompting this provision announcement, according to the company’s statement.

Originally, Epic had secured a substantial $940 million award against TCS in 2016 through a Wisconsin federal jury, marking one of the most significant trade secret verdicts in U.S. legal history.

However, this amount was subsequently reduced to $420 million in the following year, comprising $140 million in compensatory damages and $280 million in punitive damages, under a Wisconsin law allowing punitive damages up to double the compensatory amount.

Following an appeal by TCS, the punitive damages were further decreased to $140 million in 2022. Despite TCS’s subsequent appeal against these punitive damages, the denial of the petition by the U.S. Supreme Court on Nov. 20 solidified the $140 million punitive damages amount.

TCS noted in its appeal to the Supreme Court that it had already paid the compensatory “unjust enrichment award” following the first appeal, along with associated interest and costs.

This provision to settle the lawsuit coincides with a subdued demand for IT services due to a challenging economic landscape, with high inflation leading clients in pivotal markets like the U.S. and Europe to tighten their expenditure over the past year.

Notably, industry leaders such as Infosys and Wipro adjusted their revenue forecasts downward last month, while TCS reported lackluster second-quarter results amid the prevailing market conditions.