SCOTUS denies Epic’s attempt to preserve full trade-secrets payout
The U.S. Supreme Court denied a petition from Epic this week regarding an appeals court’s decision to cut the electronic health record vendor’s total damages in a trade secrets case involving Tata Consultancy Services.
After initially being awarded $940 million – $700 million in punitive damages – by a U.S. district court jury, Epic has seen that number steadily whittled down by both state federal courts.
“TCS’s conduct, while reprehensible, was not egregious, multiplying the substantial compensatory award – calculated on the basis of TCS’s benefit rather than Epic’s loss – is unnecessary to reflect Epic’s uncertain economic harm,” said a three-judge panel of the Seventh Circuit Court of Appeals in its 2020 decision.
Epic declined to respond to requests for comment.
WHY IT MATTERS
Epic filed a petition for a writ of certiorari in April 2021. The Supreme Court issued its denial after inviting Solicitor General Elizabeth Prelogar to file a brief in October 2021.
Prelogar did so in February 2022, saying in an amicus curiae that, although her office felt the appeals court’s analysis was incomplete, there was no conflict in the circuits the decision has limited significance.
Thus, she opined, the petition should be denied.
The Supreme Court did not offer any statement on the denial of the petition, although Justice Amy Coney Barrett did not participate in the consideration.
THE LARGER TREND
Epic’s initial $940 million settlement – which it was awarded after accusing Tata Consultancy Services employees of downloading technical documents during a hospital consultation, then using the information to create a competing product – was one of the most substantial trade-secrets awards to date. But over time, that award has been reduced.
A Wisconsin court in 2017 halved the total amount to $480 million – including $280 million in punitive damages – in accordance with a state law.
Then the Seventh Circuit said that the punitive damages were “constitutionally excessive,” suggesting that they should amount to no more than $140 million – or a 1:1 ratio to the compensatory award.
“We therefore remfor the district court to amend its judgment reduce punitive damages to, at most, $140 million,” said the appeals court in its decision.
ON THE RECORD
“We agree with the district court that there is sufficient evidence for the jury’s $140 million verdict based on TCS’s use of the comparative analysis, but not for the $100 million verdict for uses of ‘other information,'” said the Seventh Circuit panel in 2020. “We also agree with the district court that the jury could punish TCS by imposing punitive damages.
“But the $280 million punitive‐damages award is constitutionally excessive,” the panel added, “so we remto the district court with instructions to reduce the punitive damages award.”