- Wealth PMS
TCS has been fined $940 million – around Rs. 6300 cr. at current USD to INR levels – for stealing documents belonging to Epic Systems. This includes punitive damages of $700 million, above a regular fine of $240 million.
Let’s simplify the case for you:
The jury seems to have agreed. They have ordered that TCS Pay $940 million as damages.
The idea is that a) TCS Downloaded Documents it shouldn’t have. This is something even TCS seems to agree with. And then b) TCS used those documents to build Med Mantra. There isn’t concrete evidence this happened, except for a “Epic-MedMantra comparison” file which was transferred between TCS employees.
According to TCS, the judge has said even though the verdict went against TCS, he is likely to reduce the damages (which can be done if a judge finds the damage excessive).
Assume TCS has to pay Rs. 6300 cr. – this is about 1/3rd of the cash balance it had (Rs. 17,413 cr. in cash) on December 2015. (Source) This won’t kill it, but it will hurt.
However, the situation opens up for other situations:
Oh yes: This could be a one-off, and just get forgotten like everything else is nowadays. This should really be the base case, because anything else is conjecture at the moment.
As someone who has worked in India’s IT industry I believe that the whole system of “IP protection” of customer data isn’t often taken very seriously, and a “deep discovery” will unearth documents that show how shoddy the system is. This is the time when the IT players need to step up and really show proof of how well they protect customer data – otherwise like the US FDA for Indian pharma, we are going to see IT companies get rapped on their knuckles big time.
TCS defends itself saying, okay, we downloaded documents, but we didn’t misuse them, so don’t fine us so much. This isn’t defensible – the reason those documents were confidential were that TCS shouldn’t have access to them even to read them and get ideas about their competitive projects. How do you even know that someone hasn’t really read those documents and thought of some features for MedMantra? And then to discourage such things happening in the future, there will be punitive damages. If not $940 million, it will likely be in the order of 100s of millions of dollars (my estimate is $500 million).
TCS announces results on Monday (post market) and everyone’s going to be looking for one answer: How bad is this thing?
Disclosure: Author’s family owns shares in TCS. No other relationship with the company.