A New York federal judge on Wednesday vacated roughly $200 million in damages awards Cognizant affiliate TriZetto won in a trade secret misappropriation and copyright infringement suit against Syntel, ruling that the awards were improperly calculated.
U.S. District Judge Lorna G. Schofield axed the remaining compensatory damages judgments in the dispute, specifically tossing a $142 million award tied to trade secret misappropriation and a $59.1 million award tied to copyright infringement.
TriZetto Group Inc. secured an approximately $285 million compensatory damages award after a jury found that Syntel misappropriated trade secrets and infringed copyrighted software related to TriZetto, a popular insurance administrative platform.
In Wednesday's order, the judge found that the trade secret award amount "bears no reasonable relation to the actual harm TriZetto suffered."
That amount represented a "reasonable royalty" that Syntel would have paid to TriZetto for using its trade secrets, but in this case, a reasonable royalty isn't the appropriate measure of damages, Judge Schofield said, because it doesn't put TriZetto back into the position it would have been in had it not been for the infringement.
"Syntel's misappropriation did not injure TriZetto beyond its actual loss of $8.5 million in lost profits," Judge Schofield said. "The trial evidence showed that Syntel's misappropriation did not diminish the value of the trade secrets or impair TriZetto's ability to use them."
She added, "The permanent injunction entered after trial prevents Syntel's continued use or destruction of TriZetto's trade secrets, some of which are now worth more than they were at the time of the misappropriation."
That means the $142 million in damages awarded would be a "windfall far in excess of any injuries demonstrated at trial," Judge Schofield ruled.
As for the copyright infringement damages, TriZetto has conceded that a copyright claim royalty wouldn't be awarded in addition to a trade secrets royalty because that, "in some sense, would be double counting," according to the decision.
"TriZetto's statement also apparently concedes that if a royalty award on the New York [trade secrets claim] is rejected, a similar royalty award on the copyright claim would likewise be rejected," Judge Schofield said. "The court agrees."
For the same reasons a reasonable royalty is improper for the trade secrets award, it's also improper for the copyright one, she added.
Judge Schofield also said that the infringing use by Syntel was limited and involved servicing a single client, work from which the company earned $27 million in revenue, of which just $824,000 was profit.
"No reasonable fact finder would conclude that [$59 million] is a reasonable licensing fee for this use," she said.
At the same time, Judge Schofield granted TriZetto's motion for $14.5 million in attorney fees, holding that the claims in the case are all "sufficiently intertwined" to allow for fees for work related to the copyright claim under the Defend Trade Secrets Act's fees provision.
She also said she'd wait to enter an amended judgment until the end of April, so the parties could "discuss a possible resolution."
The dispute centers on a January 2010 agreement between Syntel and TriZetto under which Syntel agreed to provide TriZetto with software and product development, infrastructure, consulting and customer support services, among other things. The deal ended in 2014, when Cognizant acquired TriZetto, according to the suit. When that happened, Syntel said it was entitled to $3.4 million in transition rebates from TriZetto, but TriZetto refused to pay.
Syntel, which has since been acquired by Atos SE, then sued Cognizant and TriZetto, alleging breach of contract. Cognizant and TriZetto responded with counterclaims accusing Syntel of ripping off TriZetto's Facets Core Administration platform, which is used for processing insurance claims, and stole its secrets.
After a six-day jury trial in October 2020, a seven-member jury unanimously found that Syntel had misappropriated more than 100 of TriZetto's trade secrets and infringed the company's data dictionary source code.
The jury awarded TriZetto and Cognizant $285 million in damages, plus $569.7 million in punitive damages, according to the verdict. But Judge Schofield eventually issued a remitter and cut the punitive damages to $285 million while keeping in place the $285 million compensatory award.
The awards made their way to the Second Circuit, which threw out the damages judgment in May 2023. The three-judge panel also refused to disturb the jury's finding that Syntel was liable for trade secret misappropriation but instructed the lower court to consider the damages awards on the two causes of action it didn't consider: the trade secret misappropriation claim and the federal copyright claim.
Counsel for the parties didn't immediately respond to requests for comment late Wednesday.
Syntel is represented by Jaren Janghorbani, Crystal Lohmann Parker and Kripa Raman of Paul Weiss Rifkind Wharton & Garrison LLP.
Trizetto is represented by Michael W. De Vries, Justin Singh, Andrew Morrill, Adam R. Alper, Gianni Cutri, Patricia Carson, Leslie M. Schmidt, Joshua L. Simmons, Ryan Kane and Jason M. Wilcox of Kirkland & Ellis LLP.
The case is Syntel Sterling Best Shores Mauritius Ltd. et al. v. The Trizetto Group Inc. et al., case number 1:15-cv-00211, in the U.S. District Court for the Southern District of New York.
Read more at:
https://www.law360.com/technology/articles/1813523/trizetto-s-200m-jury-awards-t hrown-out-in-syntel-dispute?copied=1
