Tata to Pay Epic in Long-Awaited Trade Secrets Resolution

On November 21, 2023, the U.S. Supreme Court dismissed the appeal of India-based Tata Consultancy Services against a $140 million punitive damages order that a district court had issued in a trade secrets dispute with Epic.

In the lawsuit initiated in 2014 and amended in 2015, Epic accused a TCS employee of impersonating a Kaiser Foundation Hospitals employee to access Epic's proprietary system. This occurred while the employee installed the software at a Kaiser facility in Portland, Oregon.

Through creating this account, TCS employees downloaded over 6,000 files from the U.S. and India, allegedly aiding in developing TCS's competing software, Med Mantra.

The lawsuit stated that TCS seemingly prepared a "comparative analysis" spreadsheet to contrast Med Mantra with Epic's software for competing in the U.S. EHR systems market.

In 2016, a Wisconsin federal jury awarded Epic an initial $940 million in one of the U.S.'s most significant trade secret verdicts. This sum comprised $240 million in compensatory damages and $700 million in punitive damages.

In August 2020, the Seventh Circuit deemed the punitive damages "constitutionally excessive" and advised the district court to limit them to a maximum of $140 million.

Facing this legal setback, TCS announced it would absorb a $125 million impact in its third-quarter earnings. The company plans to record approximately $125 million as an exceptional item in its financial statements for the third quarter and nine months ending December 31, 2023.

The Wisconsin federal court jury convicted TCS and its subsidiary on seven charges, including trade secret misappropriation, contract breach, unfair competition, and unfair enrichment.

In conclusion, despite the recent legal challenges and the significant verdict against TCS, Epic's Electronic Medical Record (EMR) implementation thrives. However, this legal outcome might influence Epic's considerations regarding the engagement of additional offshore implementation partners. As offered by companies like TCS, third-party support presents a cost-effective option for healthcare provider organizations during EMR implementation. This legal precedent, therefore, raises intriguing questions about the future involvement of such companies in the marketplace and whether there will be further obstacles to their participation, potentially reshaping the dynamics of the healthcare IT sector.