The TriZetto Group, a healthcare software company, has been awarded almost $70 million in compensatory damages due to copyright infringement and trade secret theft by Syntel Inc. This brings the total award for TriZetto to $370 million.
This was a reduction from the original award of $885 million by another jury in 2020. That jury unanimously found that Syntel had stolen more than 100 of TriZetto’s trade secrets and infringed TriZetto’s copyrights.
The district court later cut that award to $570 million.
However, as Reuters reported, in 2023 the Second Circuit vacated the award for trade secret theft under federal law and ordered the lower court to reconsider based on other grounds.
On remand, as JDSupra reported,
the District Court vacated the jury’s additional damages awards. In its view, a reasonable royalty for trade secret misappropriation or copyright infringement “is not an appropriate measure of damages because it does not restore the plaintiff to the position it would have been in but for the infringement.”
The District Court also vacated the Copyright damages award because there was a lack of evidence that $59 million was a reasonable licensing fee for a use that earned $27 million in revenue and less than $1 million in profit.
As Law360 reported,
The technology at issue is TriZetto’s software called Facets, which is used to adjudicate and process healthcare claims. Syntel argued that TriZetto should recover no more than about $9 million in lost profits, and that its competitor’s damages calculations were flawed and excessive and “untethered to its actual losses.” Syntel also said in a pretrial memorandum that TriZetto suffered no real harm from the misappropriation of its secrets and that it was “wasting judicial resources in a quixotic quest for a windfall.”
As Reuters noted,
Cognizant’s award under federal trade-secret law was largely based on its estimate that Syntel saved $285 million on research and development for its software by using the secrets, an amount the court doubled in punitive damages. The appeals court said Cognizant did not suffer harm that would justify the “avoided costs” award, such as losing the value of its trade secrets.
Syntel had argued that “avoided costs ma[d]e no sense here” because (i) TriZetto’s expert presented evidence that it had lost $8.5 million in compensable profits; and (ii) “Syntel did not take or destroy the value” of the product incorporating the trade secrets, which was still generating “hundreds of millions of dollars a year” for TriZetto.
The Second Circuit agreed, noting that the federal Defend Trade Secrets Act (DTSA) doesn’t permit double counting of damages for actual loss and unjust enrichment.
The DTSA allows for:
- ‘damages for actual loss caused by the misappropriation;’ and
- ‘damages for any unjust enrichment caused by the misappropriation . . . that is not addressed in computing damages for actual loss.’”
(Emphasis added by court.)
In vacating the damages award, the Second Circuit held that “[b]eyond its lost profits … TriZetto suffered no compensable harm supporting an unjust enrichment award of avoided costs.”
As Law360 explained,
The dispute goes back to January 2010, when Syntel and TriZetto allegedly started working together. The companies entered into an agreement under which Syntel provided TriZetto with software application and product development, infrastructure, consulting and customer support, as well as other services, according to the complaint.
After Cognizant acquired TriZetto in 2014, it and Syntel stopped working together, per the suit. Under their agreement, Syntel was entitled to receive about $3.4 million in transition rebates from TriZetto, Syntel said. But TriZetto refused to pay up and “unabashedly and admittedly” violated the nonsolicitation and nonhiring provision of the companies’ agreement, Syntel claimed.
The case started in 2015, when Syntel sued TriZetto, accusing it of breach of contract and seeking more than $6 billion in damages. TriZetto filed counterclaims for trade secret theft and copyright infringement.
Since the litigation started, Syntel was acquired by Altos.
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