TCS to make Rs 1,218 cr provision for claims in Epic Systems case

The matter relates to a US grand jury order that slapped two Tata Group companies — TCS and Tata America International Corp.—with a $940 million fine in a trade secret lawsuit | Photo: Shutterstock
Tata Consultancy Services will be making a precautionary provision of Rs 1,218 crore in a trade secret theft lawsuit involving medical software company Epic Systems.

India's largest software company will make a provision of Rs 1,218 crore as an exceptional item in the upcoming results to be announced on October 7 as a provision in the books for a legal claim in the Epic Systems matter.

In August, an appeals court in the US upheld that the punitive damages of $280 million against TCS in the lawsuit were ‘excessive’. The court halved the damages to $140 million.

"TCS is legally advised that it has the correct and the strongest possible arguments in its favour and the order and reduced damages are not supported by facts presented during the trial", according to its exchange filing.

In September 2020, TCS filed a petition seeking re-hearing on both compensatory and punitive damages. EPIC has also filed a petition seeking re-hearing on the decision of the Appeals Court invalidating award of punitive damages exceeding the quantum of compensatory damages. "The provision in the books for the legal claim is being made as a matter of prudence", TCS said.

The matter relates to a US grand jury order that slapped two Tata Group companies — TCS and Tata America International Corp.—with a $940 million fine in a trade secret lawsuit filed against them by the Wisconsin-based health care software firm in 2016.

The tussle dates back to a 2014 lawsuit when Epic alleged that the software firm (TCS) had relocated its employees as consultants at Kaiser Permanente Sunnyside Medical Center in Portland. The employees were tasked to implement Epic’s health care software. Epic alleged that these employees downloaded around 6,000 documents and 1,600 unique files containing “detailed information on features and functionalities of its software” by creating a fake ID. This may have been used to benefit the IT firm’s own health care software, Med Mantra, it added.

However, the punitive damages were reduced to $420 million from $940 million by a US court in October 2017. In January 2018, TCS said it made a $440 million letter of credit available to Epic Systems.

In a seperate filing, TCS informed that it will also consider share buyback proposal during its board meet to accept second-quarter results on Wednesday. The quantum of shares to be repurchased was not disclosed. The board will also consider an interim dividend during the meeting. The company has cash reserves of around Rs 73,993 crore as of March 2020.

This will be TCS's third buyback in four years. In 2018, it bought Rs 16,000-crore worth shares or 7.61 crore equity shares. This constituted 1.99 per cent of its total paid-up equity capital then.

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.

We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel