US Supreme Court rejects Indian IT company's appeal in Epic trade secrets case

The U.S. Supreme Court on Monday rejected India-based Tata Consultancy Services' appeal against a $140 million punitive damages order passed by a district court relating to a trade secrets dispute with Epic.

The dispute with electronic health records giant Epic goes back to 2014. In a lawsuit filed nine years ago, Epic alleged the information technology services provider and its subsidiary Tata America International Corporation stole its intellectual property.

Epic had originally secured a $940 million award against TCS from a Wisconsin federal jury in 2016 in what was one of the biggest trade secret verdicts in U.S. history. The total damages included $240 million in compensatory damages and $700 million in punitive damages.

Since then, state and federal courts cut those numbers down to $280 million in total damages.

In August 2020, the Seventh Circuit claimed the punitive damages were “constitutionally excessive” and recommended the district court reduce punitive damages to a $140 million maximum.

By rejecting TSC's appeal, the U.S. Supreme Court upheld the order of $140 million in punitive damages, the company wrote in a regulatory filing (PDF) Tuesday.

"… the United States Supreme Court on November 20, 2023 rejected the company’s petition to file an appeal against the orders passed by the US Court of Appeals, 7th Circuit, which confirmed the punitive damages award of $140 million passed by the District Court of Wisconsin," the company wrote.

The company also said it would take a $125 million hit in its third-quarter earnings due to the legal action.

TSC intends to make the balance provision of approximately $125 million in its financial statements an exceptional item for the third quarter and nine months ending Dec. 31, 2023, it wrote.

In the original lawsuit, filed in 2014 and amended in 2015, Epic claimed that a TCS employee posed as a Kaiser Foundation Hospitals employee to create an account on Epic’s proprietary system while working to help install that software at a Kaiser facility in Portland, Oregon.

The creation of that account then allowed TCS employees in the U.S. and India to download more than 6,000 files to inform the development of the IT company’s competing software, called Med Mantra, Epic alleged.

TCS apparently created a “comparative analysis” spreadsheet comparing Med Mantra with Epic’s software in an attempt to compete in the U.S. EHR systems market, according to the lawsuit.

The federal court jury in Wisconsin found TCS and its subsidiary guilty on seven claims including misappropriation of trade secrets, breach of contract, unfair competition and unfair enrichment.

Tata maintained that it “did not misuse or derive any benefit from downloaded documents from Epic System’s user-web portal,” according to a statement issued after the 2016 decision.

Last year, the Supreme Court denied a petition filed by Epic to reverse a reduction in damages in an attempt to hold onto the initial $940 million award.