U.S. Court of Appeals Vacated Cognizant’s $570 Million Trade-Secret Case Win Against Syntel

U.S. Court of Appeals Vacated Cognizant’s $570 Million Trade-Secret Case Win Against Syntel

The New York-based 2nd U.S. Circuit Court of Appeals has vacated a $570 million award Cognizant Technology Solutions Corp had won against rival software provider Atos SE’s Syntel Inc for theft of its trade secrets related to Healthcare Insurance Software.

The U.S. Appeal Court held that Cognizant was not entitled to the damages under the federal trade secret law and ordered a Manhattan federal court to reconsider based on other grounds.

However, the Court affirmed that Syntel was liable for misusing the trade secrets that belonged to Cognizant’s TriZetto Healthcare.

The case dates back to 2015, when Syntel’s unit first sued Cognizant and TriZetto, alleging Cognizant’s acquisition of TriZetto resulted in a breach of Syntel’s contract with TriZetto.

Retaliating to the same, Cognizant countersued Syntel for taking trade secrets related to its Facets software, used by healthcare insurance companies to automate administrative tasks, during its work with TriZetto and using them to develop a competing product.

Cognizant had successfully defended itself against Syntel’s claim, and the jury awarded it $854 million in damages against Syntel for misusing its trade secrets in 2020. The District Court later cut the award to $570 million.

Nonetheless, the 2nd Circuit affirmed that Syntel was liable for misappropriating more than 100 Cognizant trade secrets, however, it took issue with the legal theory that had justified Cognizant’s damages.

A considerable portion of the amount awarded to Cognizant by the Federal Court under trade-secret law was due to Cognizant's estimate that Syntel would have saved $285 million in research and development for its software by using the secrets, which the Court then doubled in punitive damages.

According to the Appeals Court Cognizant had not suffered harm that would justify the ‘avoided costs’ award, such as losing the value of its trade secrets.

U.S. Circuit Judge Richard Wesley wrote for a three-judge panel, “TriZetto’s valuable trade secrets are still that—valuable and secret.”

Besides winning $142 million for its claims for trade secrets under New York law, Cognizant also won $59 million for claims for copyright infringement, which did not factor in to the jury's total damages award.

The Appeals Court directed the Manhattan Court to reconsider those awards in the wake of its latest decision.