Trade Secret Misappropriation: Lessons from Computer Sciences Corp. v. Tata Consultancy Services

Companies face substantial liability for trade secret misappropriation. Jury awards this year have reached staggering amounts: This year, a jury awarded $452 million to a medical device company, which was later reduced to $59.4 million in exchange for a permanent injunction. Walmart was found liable for trade secret misappropriation, and the jury awarded the plaintiff $224 million. In July, after a California jury awarded the plaintiff $605 million in damages for the misappropriation of trade secrets by Phillips 66, a California Superior Court awarded the plaintiff an additional $195 million in exemplary damages for “abusive behavior.” On November 21, 2024, the U.S. Court of Appeals for the Fifth Circuit in Computer Sciences Corp. v. Tata Consultancy Services Ltd., __ 5^th Cir. __, 2025 WL 3249148 (5^th Cir. 2025), affirmed $56 million in compensatory damages, $112 million in punitive damages, a permanent injunction, and a 10-year monitorship against TCS—notably, TCS’s second major trade secret verdict following a prior $140 million compensatory and $700 million punitive award (later reduced to $140 million) in Epic Systems Corp. v. Tata Consultancy Services Ltd., 980 F.3d 1117 (7th Cir. 2020).

The Computer Sciences decision provides critical guidance on trade secret handling under the Defend Trade Secrets Act (DTSA), clarifies what constitutes “willful and malicious” misappropriation, and establishes that exemplary damages may be awarded even where the plaintiff suffers no harm beyond lost profits.

Factual Background

Between 1994 and 2005, Computer Science Corporation (CSC) licensed software to Transamerica. In 2013, Transamerica hired TCS as a third-party consultant for maintenance services on CSC’s platforms. In 2016, TCS secured a $2.6 billion contract to update Transamerica’s software and hired 2,200 Transamerica employees, including those familiar with CSC’s platforms. TCS was allowed to continue maintenance on CSC’s platforms until it completed developing its own BaNCS platform.

CSC became concerned with this arrangement and, in 2018, sent several letters to Transamerica expressing concern about its intellectual property and warning against unauthorized use, and that it was violating the agreements between Transamerica and CSC. Transamerica assured CSC that TSC was not “using CSC’s software” except “for the limited purpose of serving Transamerica and to fulfill its obligation to Transamerica.” TCS also assured Transamerica that it was not using CSC’s intellectual property in building its own platform for Transamerica, designated as “BaNCS.” In March 2019, a CSC employee was mistakenly copied on an email chain with TCS employees, who were sharing excerpts of the CSC source code and technical manuals. The email chain revealed that the TCS team was trying to determine how the CSC’s platform operated, and which CSC considered a trade secret. This discovery led to CSC’s lawsuit against TCS in August 2019 under the DTSA.

Jury Verdict and District Court Ruling

After an eight-day trial in November 2023, the jury found TCS willfully and maliciously misappropriated CSC trade secrets, including source code and technical manuals. The jury recommended $70 million in compensatory damages and $140 million in exemplary damages. The district court reduced these to $56 million and $112 million respectively, entered a permanent injunction barring TCS from using CSC’s trade secrets or the BaNCS platform developed for Transamerica, prohibited TCS employees with trade secret access from working on TCS software for the U.S. market for 18 months, and imposed a 10-year monitorship.

Fifth Circuit Decision: TCS Misappropriation was ‘Willful and Malicious’

On appeal, the Fifth Circuit first agreed with the district court that TCS had acquired the trade secrets by improper means, that it disclosed and used the trade secrets with CSC’s express or implied consent, and that such disclosure and use were not on behalf of and solely for the benefit of Transamerica.

Next, TCS argued that the district court erred in finding that “TCS knew or had reason to know that its access and use were unauthorized, or at least, in finding that TCS’s misappropriation was willful and malicious,” which is the standard for imposing exemplary damages under the DTSA. In determining this issue, the Fifth Circuit applied the standard advanced by the parties before the district court, under which willful and malicious misappropriation of trade secrets could be found based on intentional misappropriation resulting from the “conscious disregard” of the rights of the owner of the trade secret. Using this standard, the Fifth Circuit found that the district court did not clearly err in finding that TCS knowingly misappropriated CSC’s information or that TCS’s misappropriation was “willful and malicious.” In particular, the Court focused on TCS’s misrepresentations that its employees were not using “any third-party intellectual property or proprietary information to build requirements and/or functionality.” Furthermore, the Court noted that TCS employees shared CSC trade secrets marked as “confidential information” with the TCS team developing the BaNCS platform. Thus, according to the Fifth Circuit, the district court “had ample basis to find that TCS’s conduct was intentional and showed conscious disregard” for CSC’s rights to their information.”

Compensatory Damages and Injunctive Relief

TCS argued the district court erred by imposing both unjust enrichment compensatory damages and an injunction, claiming they were duplicative. The Fifth Circuit rejected the Second Circuit’s holding in Syntel Sterling Best Shores Mauritius Ltd. v. The TriZetto Group, 68 F.4th 792 (2d Cir. 2023), that a trade secret holder can never recover unjust enrichment damages under the DTSA where it suffers no harm beyond lost profits. The Fifth Circuit held that this interpretation contradicts the DTSA’s express language and that the focus should instead be on the interplay between the permanent injunction and an award of unjust enrichment damages.

The court established a two-part analysis: first, whether the misappropriator was unjustly enriched in a manner not captured by measuring the secret holder’s actual loss and; second, whether the unjust enrichment damages measurement overlaps with either the “actual loss” damages measurement or injunctive relief. Where a misappropriator has been precluded from benefitting from the trade secrets by virtue of an injunction, there is no longer any unjust benefit. Imposing both an injunction and an unjust enrichment damages award in those circumstances would be duplicative and therefore punitive.”

The Fifth Circuit found that there was an overlap between requiring TCS to pay the costs it avoided in developing BaNCS by using CSC’s trade secrets since CSC is being compensated for the very same harm that the injunctive remedy already prevents by barring TCS from using CSC’s trade secrets for the future version of that platform. The Court found that here there was not a complete overlap because a portion of the injunction is not duplicative as it prevents further use of the trade secrets. At the same time, the unjust enrichment damages measured only the amount of TCS’s unjust enrichment from its past use of the trade secrets to redevelop BaNCS. In other words, the unjust enrichment damages award required TCS to pay for the cost of redeveloping BaNCS, while the injunction prohibited TCS from accessing the redeveloped version of BsNCS. Instead of vacating the entire unjust enrichment award, the Court ordered the district court to eliminate the overlap by eliminating the injunction’s “prohibition on TCS’s use of ‘Post-Misappropriation BaNCS Material,’ while maintaining the bar on TCS’s access to and use of CSC’s trade secrets.

Exemplary Damages

The district court reduced the jury’s $140 million exemplary damages award to $112 million, applying the DTSA’s authorization of exemplary damages up to twice the compensatory damages. TCS argued Supreme Court precedent limits punitive damages to a 1:1 ratio. The Fifth Circuit rejected this, finding the single most important factor is the reprehensibility of defendant’s conduct. The court cited TCS’s malicious and deceitful conduct: knowingly misappropriating trade secrets, refusing to contact CSC despite notices, misrepresentations to Transamerica, providing CSC source code to related foreign TSC entities, and failing to discipline employees. The Fifth Circuit affirmed the 2:1 ratio.

The Critical Importance of Clean Room Procedures

TCS’s misconduct warranted substantial exemplary damages. While each violation was serious, the decision highlights TCS’s failure to use a clean room in developing the BaNCS platform. A clean room is a development process designed to limit liability risk when developing new products while exposed to outside information to which the company lacks rights. The clean room is intentionally kept free from trade secrets and confidential information. The Fifth Circuit noted that TCS employees shared CSC materials marked “confidential information” with the BaNCS development team. The absence of clean room procedures was undoubtedly a key factor in the substantial exemplary damages award. While implementing clean rooms may be time-consuming and expensive, companies would be remiss not to do so when developing products while having access to competitors’ confidential information. Had TCS implemented clean room procedures for BaNCS development, the exemplary damages award likely would have been significantly lower, even considering TCS’s other misconduct.

A Warning

Computer Sciences Corp. v. Tata Consultancy Services serves as a stark warning about the consequences of trade secret misappropriation. The decision clarifies that willful and malicious misappropriation includes intentional conduct showing conscious disregard for the owner’s rights, and that exemplary damages may reach twice the compensatory amount when justified by the defendant’s reprehensibility. Companies entrusted with competitors’ confidential information must implement rigorous safeguards, particularly clean room procedures, to avoid accusations of misuse. The $168 million judgment against TCS—combined with its prior $140 million verdict—demonstrates that courts will impose severe penalties for trade secret theft, especially where companies fail to establish appropriate protective measures and maliciously and willfully misappropriate trade secrets.