Atos Defeats $201 Million Damages Award on Remand in Trade Secrets Dispute

Paul, Weiss achieved a major victory when the U.S. District Court for the Southern District of New York vacated a $201 million damages award against Atos SE in a long-running trade secrets litigation with Cognizant Technology and its subsidiary, health care IT service provider TriZetto Group, Inc. After Atos faced an adverse $855 million damages award following trial in 2020, three Paul, Weiss victories in subsequent proceedings have now zeroed out that amount.

Integrated technology services provider Syntel and TriZetto, which develops software used by health care insurance companies, had a contractual agreement that Syntel terminated after TriZetto was acquired by Syntel competitor Cognizant in 2014. Syntel, later acquired by Atos, sued TriZetto and Cognizant in 2015, alleging that TriZetto breached its contractual duties, including, among other things, failing to pay rebates required under the contract and misappropriating confidential information. In response, TriZetto and Cognizant made a series of counterclaims, including trade secrets misappropriation under the federal Defend Trade Secrets Act (DTSA) and New York law, and copyright infringement.

Paul, Weiss took over the case from prior counsel on the eve of trial and after the district court had entered a preclusion order against our client for alleged discovery misconduct, which presented a substantial obstacle at trial, as the practical effect was a directed verdict on two trade secrets. In large part due to the preclusion order, the jury awarded TriZetto $285 million for trade secrets misappropriation under the DTSA, as well as $142 million for damages under the New York trade secrets claim and $59 million under the federal copyright claim. To avoid double counting, the jury limited total compensatory damages to $285 million. The jury also awarded punitive damages, for a total damages award of $855 million.

In post-trial briefing, we were able to have the combined damages reduced to $570 million. Then, on appeal to the Second Circuit, we successfully argued that upholding a compensatory damages award based on Syntel’s allegedly avoided development costs is impermissible under the DTSA in this case. The Second Circuit agreed, vacating the DTSA damages award and remanding the case for the district court to consider appropriate damages on TriZetto’s New York trade secrets claim and the federal copyright claim.

On remand, U.S. District Judge Lorna Schofield entered a judgment as a matter of law vacating the $201 million in damages the jury had awarded on these two claims. The judge found that the $142 million award under TriZetto’s New York trade secrets claim “bears no reasonable relation to the actual harm TriZetto suffered.” As the court noted, “damages must be congruent with the actual losses incurred by the plaintiff. Avoided development costs do not necessarily correlate to that injury.” In this case, “trial evidence showed that Syntel’s misappropriation did not diminish the value of the trade secrets or impair TriZetto’s ability to use them. 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.” Accordingly, an award of $142 million under New York law “would entitle TriZetto to a windfall far in excess of any injuries demonstrated at trial and is vacated.”

The court also vacated the $59 million award under the copyright claim. “TriZetto’s statement … apparently concedes that if a royalty award on the New York Claim is rejected, a similar royalty award on the Copyright Claim would likewise be rejected,” Judge Schofield noted. “The Court agrees.” The judge further noted that the alleged infringing in this case was limited and resulted in a profit of merely $823,899. “No reasonable fact finder would conclude that $59,100,000 is a reasonable licensing fee for this use.”

The Paul, Weiss team includes litigation partners Jaren Janghorbani, Crystal Parker and Kannon Shanmugam, and counsel Jonathan Hurwitz.