‘Theft’ case may leave Brand TCS bruised

Varun Aggarwal Mumbai | Updated on April 30, 2019

Tata Consultancy Services is facing yet another lawsuit in the US, this time for allegedly stealing trade secrets that could severely dent the firm’s image in its largest market.

Last week, Computer Sciences Corp (CSC), a former client of TCS, alleged in a lawsuit that TCS America has been stealing its trade secrets.

In its filing with the US District Court of Northen District of Texas-Dallas Division, CSC has claimed that TCS is using its trade secrets to build a competing software platform, as part of TCS BaNCS, in the life insurance market.

“Defendants (TCS) are unfairly competing with CSC in the US in the life insurance and annuities administration and processing market. Rather than invest the substantial time and resources to compete legitimately and develop the complex software system required to administer and market US policies, the defendants are accessing and using CSC’s software source code and documentation, and its confidential, proprietary and trade secret information to do so,” said CSC in a preliminary statement filed with the court.

“Unless TCS is stopped from proceeding with these unjust efforts, they will be able to develop and launch a life insurance and annuities platform that is based on business and software solutions brazenly stolen from CSC,” noted CSC in the statement.

Reacting to the development, a TCS spokesperson said: “TCS is aware of CSC’s court filing. Our legal team is reviewing the allegations and will respond appropriately. TCS BaNCS is a comprehensive product, with several successful implementations globally. TCS will strongly defend its position before the court.”

TCS faced a similar lawsuit five years ago, from software firm Epic Systems. TCS was asked to pay Epic $940 million, which was later reduced to $440 million. TCS is still contesting the claims.

“IT firms need to be at an arm’s length from their software divisions, and create a separate legal entity for them. Not only does the software unit require to be a separate legal entity, but the company should also ensure that the employees and management are totally independent. Unless, that happens, such allegations cannot be ruled out,” said Sanchit Gogia, CEO of Greyhound Research.

Could set precedent

Industry watchers said that in the short term, those opposed to the outsourcing model could use the TCS case to make a case for captive expansion, rather than using third-party vendors. But in the long term, discerning clients can always see through the case. The noise levels would be higher than the actual impact.

“Overall, this will have some impact on the Indian IT industry, as many IT service providers are developing their own products and platforms. It will raise IP concerns in the minds of customers with competing products,” said Pareekh Jain, CEO at Pareekh Consulting.

The lawsuit has been filed against TCS America. CSC had licensed its software to its customer Money Services Inc (MSI) in 1994. In 2014, MSI onboarded TCS to manage IT services.

MSI is now owned by Transamerica, with whom TCS announced a $2-billion third party administration deal in 2018. TCS also rebadged 2,200 Transamerica employees post the deal. CSC claims that the current employees who had access to the CSC code were involved in the breach.

Published on April 30, 2019

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