US Court Upholds $194 Million Penalty Against TCS in Trade Secrets Case

US Court Upholds $194 Million Penalty Against TCS in Trade Secrets Case

A US appeals court has dealt a significant blow to Tata Consultancy Services (TCS), upholding a $194.2 million penalty in a high-stakes trade secrets lawsuit filed by Computer Sciences Corporation (CSC), now part of DXC Technology.

Court Ruling and Injunction Update

In a November 21 regulatory filing, TCS confirmed the appellate court affirmed the damages originally imposed by the US District Court. However, the court vacated the permanent injunction that had restricted TCS from using certain CSC materials.

The case now returns to the Northern District of Texas, Dallas Division, which must reassess the injunction according to the Fifth Circuit’s guidance.

Background of the Legal Dispute

The legal battle began in 2019 when CSC accused TCS of misappropriating trade secrets. CSC alleged that TCS gained improper access to its licensed insurance software through former Transamerica employees who joined TCS under a $2 billion outsourcing deal.

The company claimed this access enabled TCS to develop a competing insurance platform.

Breakdown of the $194 Million Penalty

The ruling follows TCS’s earlier disclosure on June 14, 2024, when the District Court found the company liable for $194.2 million. This amount comprises:

• $56.15 million in compensatory damages
• $112.3 million in exemplary (punitive) damages
• $25.77 million in prejudgment interest through June 13, 2024

TCS’s Challenge and Court’s Response

TCS had contested the exemplary damages as “legally excessive” and sought either reversal or reduction. The Fifth Circuit rejected this argument, leaving the full damages award unchanged.

However, the appellate court’s decision to vacate the injunction provides temporary relief to TCS. The previous ban on TCS’s future use of BaNCS material has been lifted pending the District Court’s fresh review.