TCS asked to cough up $210 mn to DXC Tech in U.S.; stock down

IT services major Tata Consultancy Services (TCS) has been ordered to pay $210 million to end-to-end IT services company DXC Technology after the Texas, U.S.-based court sided with DXC (earlier known as Computer Sciences Corporation (CSC)) over a “source code and documentation” case.

The TCS stock is trading 0.28% down at ₹3,448 on the BSE today.

The jury agreed that TCS without consent disclosed or used the source code and confidential documentation by "improper means", awarding CSC $140 million in damages along with $70 million for TCS's unjust enrichment due to its misappropriation of the source code and confidential documentation for certain software platforms.

“TCS willfully and maliciously misappropriated CSC's source code and confidential documentation for the VANTAGE-ONE/Wealth Management Accelerator and CyberLife software platforms,” the jury said in its deliberations. The complaint against the company was filed in 2019. In its complaint, CSC had said: "Defendants are therefore improperly accessing and using CSC’s proprietary software to develop the TCS product and steal CSC’s customers."

CSC had said it was a “leading worldwide provider of business solutions software. CSC owns the VANTAGE-ONE/Wealth Management Accelerator (“Vantage”) and CyberLife software platforms, which are two of the most developed and sophisticated software platforms to administer and process annuities and life insurance premiums in the United States”.

The complaint added that “the Vantage and Cyberlife software systems were created through decades of continuous development and hundreds of millions of dollars of investment by CSC and its predecessors. The software systems are large and complex.”

TCS had planned to enter the U.S. market for the administration and processing annuities and life insurance policies during the same period. “However, they have no software platform of their own that is capable of administering and processing such policies,” the complaint stated.

“Defendants are experiencing difficulty in the development of their own system and are under pressure to complete development as soon as possible. Plaintiff CSC had pleaded for the relief and judgement in its favour, seeking preliminary and permanent injunctions against the company, its respective affiliates, employees, agents and all those acting in concert.”

TCS, meanwhile, last week had said it will make provisions worth $125 million in Q3 earnings in the wake of a similar lawsuit by another company Epic Systems. “The EPIC Systems Corporation matter, 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 USD 140 million passed by the District Court of Wisconsin. The company intends to make the balance provision of approximately USD 125 million in its financial statements as an exceptional item, for the third quarter and nine months ending December 31, 2023."

TCS’ consolidated Q2 net profit surged as much as 8.7% year-on-year (YoY) to ₹11,380 crore as against ₹10,465 crore in the same period last year. The revenue from operations of the IT major stood at ₹55,309 crore in the September quarter this year, up 10% (YoY) as against ₹59,692 crore in the same period last year.