In Epic Systems Corp. v. Tata Consultancy Services Ltd., Epic Systems Corp. (“Epic”) filed a case in the U.S. District Court for the Western District of Wisconsin accusing Tata Consultancy Services Ltd. (“TCS”) of stealing documents and confidential information related to software applications performing billing, insurance benefits management, and referral services for health care companies.

In 2016, a federal jury ruled in Epic’s favor on all claims, ordered TCS to pay $140 million for uses of the comparative analysis, $100 million for uses of “other” confidential information, and $700 million in punitive damages. We reported on the jury verdict here and permanent injunction here. The district court later struck the compensatory award for “other uses” and reduced the punitive damages award from $700 million to $280 million because of a Wisconsin statute capping punitive damages at two times compensatory damages. See Wis. Stat. § 895.043(6).

Shortly thereafter, both TCS and Epic appealed the verdict – TCS challenged the punitive damages decision and Epic appealed the decision to vacate the $100 million award relating to uses of “other” confidential information. On August 20, 2020, the Seventh Circuit issued an opinion which reduced the punitive damages amount, but upheld the jury’s $140 million verdict. The Seventh Circuit held that TCS gained an advantage in its development and competition from its use of the comparative analysis and stolen information and that “the jury would have a sufficient basis to award Epic $140 million in compensatory damages” based on TCS’s use of Epic’s information to make a comparative analysis. In addition, the Seventh Circuit concluded that Epic did not provide “more than a mere scintilla of evidence in support of its theory that TCS used any other confidential information” such that the $100 million award could not stand.

Finally, the Seventh Circuit ruled that punitive damages are available even when compensatory damages are imposed but found that the Due Process Clause of the Fourteenth Amendment imposes constitutional limitations on punitive damages which “may be imposed to further a state’s legitimate interests in imposing punishment for and deterring illegal conduct, but violate due process when the award is ‘grossly excessive’ in relation to those interests.” The Seventh Circuit agreed that Epic suffered a competitive harm due to TCS’s theft of trade secrets which was “intentional and deceitful….” and that the wrongful conduct spanned several years. The Seventh Circuit ultimately concluded “based on the substantial compensatory award and the circumstances of this case – that 2:1 ratio exceeds the outermost limit of due process guarantee” and remanded with instructions to reduce the punitive damages award to at most $140 million.

Trade secrets can be a company’s most valuable assets, and this case is a reminder that courts and juries recognize the value of trade secrets and are willing to award and uphold large compensatory damages awards and in some cases hundreds of millions of dollars in punitive damages.