Does Cognizant have the upper hand in legal battle against Infosys?

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Teaneck-based information technology firm Cognizant’s subsidiary, Cognizant TriZetto on August 23 alleged that Infosys has stolen trade secrets related to its healthcare insurance software. The allegation was made in the Texas federal court. Infosys soon rebutted this, saying it would vigorously defend the lawsuit in court.

Cognizant completed the acquisition of TriZetto in November 2014, forming Cognizant TriZetto Software Group, Inc.

The allegedly stolen software applies TriZetto’s proprietary medical claims processing to a proprietary database structure, which reduces the administrative expenses associated with claims processing. Additionally, the complaint document  says that TriZetto’s products and services provide solutions to the highly complex medical claims and payments processing problem in healthcare and improve healthcare operations.

Moneycontrol has reviewed a copy of the complaint filed by Cognizant. The complaint states that a similar case was filed earlier against a company named Syntel Sterling Best Shores Mauritius. According to the document, this case went in favour of TriZetto.

The outcome of court cases like these depends on the facts and circumstances of each case, however, Cognizant can rely on earlier cases, a subject matter expert said, requesting anonymity.

The rivalry between Cognizant and Infosys is well known. Infosys had sent a letter to Cognizant late last year lodging its protest against the poaching of its key executives. Ravi Kumar S, an Infosys veteran, who took charge as Cognizant's Chief Executive Officer, in January 2023, hired over 20 executive vice presidents and four senior vice presidents, many of whom were from Wipro and Infosys, Moneycontrol had then reported.

Let's take a look at some of the claims made by Cognizant, in the trade secrets case.

Employees stole data

Cognizant, in the document, said it made certain Infosys employees sign Non-Disclosures and Access Agreements (NDAA), that “narrowly and strictly” defined the details of Infosys’s authorised access to TriZetto’s proprietary information and trade secrets for specified reasons. “Yet, in contravention of those agreements, Infosys has misappropriated TriZetto’s trade secrets and stolen its confidential information to develop or enhance its own competing software and service offerings for its own financial gain, thus causing severe and irreparable harm to TriZetto,” the document read.

The competing software being spoken here is called Helix, a platform-powered and artificial intelligence-first suite offered by Infosys.

Moneycontrol has reached out to Cognizant and Infosys for comment on the story, which will be updated as and when they respond.

What is Cognizant guarding?

TriZetto offers healthcare industry customers a suite of software products as well as consulting, IT, and business process services. These products and services are used by hospitals, physicians, and insurance companies. TriZetto’s healthcare products include its “Facets” and “QNXTTM” software, among others, to automate claims processing, billing, etc.

By maintaining the secrecy of its various offerings, TriZetto ensures competitors would need to make “investments of time and money to develop a competing version” of the said software.

What does Cognizant do to protect confidentiality?

Cognizant’s TriZetto goes to lengths to protect confidential information from public disclosure. These include requiring TriZetto employees who have access to such information to sign confidentiality agreements, and restricting physical and digital access to only authorised users.

These are followed by other standard security layers such as computer and server passwords, security access cards, confidentiality agreements, letters notifying departing employees to return all property belonging to TriZetto, distribution of information on a need-to-know basis, and non-compete and non-solicitation agreements with its high-level employees.

When is confidential data disclosed to third parties?

TriZetto discloses confidential information to customers or vendors for specific business purposes, such as enabling a vendor to provide services to companies that are mutual clients of TriZetto and the vendor.

However, recipients of technical confidential information should not be involved in the development, testing, or marketing of competitive software.

Who had access to the confidential information?

TriZetto said, relevant to the case, five customers entered into an NDAA with the company who were also clients of Infosys. In connection with the relationship that TriZetto and Infosys had with each of them, TriZetto entered into separate NDAAs which gave certain Infosys employees access to certain TriZetto confidential information.

“…Infosys abused its access to TriZetto Confidential Information and Trade Secret Information and exceeded the scope of its permissible access pursuant to the NDAAs, and then engaged in an illicit scheme… for improper purposes,” Cognizant said in the complaint.

How many times did Infosys-Cognizant sign agreements?

In the last decade, the two companies have signed at least seven NDAAs, TriZetto claimed.

TriZetto’s said this confidential information is not readily available from public sources and the company derives economic value from its secrecy.

“Despite its promises to TriZetto, Infosys necessarily and intentionally exceeded the limits of access permitted in the NDAAs and created its own repository of Test Cases, thus allowing Infosys to obtain economic advantages through the misappropriation,” the document read.

A test case is a dedicated set of instructions for executing a particular capability within a software program.

How exactly did Infosys the contract?

TriZetto entered into an NDAA with Infosys twice in 2018, and once each in 2020 and 2022.

All these contracts had similar confidentiality provisions and restrictions that limit Infosys’ access and use of TriZetto’s confidential information and trade secrets.

The company alleged that Infosys created one or more connector tools to extract data from TriZetto software and create a massive repository of test cases, “which Infosys now deceptively touts as its own.”

Cognizant said Infosys has gained an unfair advantage in competing against TriZetto, and such an amount should be determined at trial.

The company said the development of a test case requires access to that specific product and also requires a significant amount of time and money, without which Infosys could not have created these test cases.

Cognizant said that a jury and Court of Appeal have already confirmed that the test cases are trade secrets.

Did Cognizant inform Infosys earlier?

Yes, TriZetto said it wrote a letter to Infosys terming the latter’s conduct as misuse and misappropriation. However, “Infosys refused to stop its misuse and misappropriation.”

Therefore, the threat of continued “misappropriation and misuse” continues, TriZetto said. Moreover, TriZetto also said it does not know the full scope of Infosys’s misuse and misappropriation of confidential information and trade secrets.

Has Infosys marketed the products/services?

Cognizant said Infosys advertised the “Infosys Business Assurance Store” as a “repository . . . of 1 million test cases” that was developed by Infosys Validation Solutions (IVS), which is Infosys’ testing unit.

Cognizant said Infosys would not have been able to develop this repository without access to and use of TriZetto’s confidential and trade secret information. 

“Infosys is now utilising, offering, selling and distributing to third parties, including TriZetto’s current and potential Facets® and QNXTTM customers,” Cognizant alleged.

The company further said that while Infosys removed the said advertisement from its website, it refused to confirm the pausing of test cases.

First notice by Cognizant

On May 31, 2024, TriZetto provided Infosys with a written notice of an audit that was previously agreed upon, but had not been conducted because the latter refused to cooperate with TriZetto.

In particular, TriZetto sought information from Infosys for emails since November 19, 2018 which relate to TriZetto. In addition, it also asked for a list of all Infosys-affiliated individuals who have had access to Cognizant’s confidential information and the identity of all central locations within Infosys containing the confidential information.

“The requested information would have allowed TriZetto to determine who at Infosys had access to TriZetto Confidential Information and whether the access and use of such information by Infosys was consistent with the NDAAs,” the company said.

Infosys’ response

Responding to the requests, Infosys said it had complied with the NDAAs and ignored TriZetto’s specific questions, and failed to provide any of the requested information. This is despite the fact that Infosys was required to do so under the NDAAs, Cognizant TriZetto said in the document.

Cognizant’s subsidiary further said that money damages alone will not fully correct the harm done by Infosys’ misappropriation.

Therefore, TriZetto now seeks injunctive relief from Infosys, its agents, employees, and all related persons having such confidential information.

Precedents

In a similar case involving TriZetto earlier, the company said a federal jury concluded that TriZetto’s test cases are trade secrets despite arguments otherwise from trade secret defendant Syntel Sterling Best Shores Mauritius Ltd.

Like Infosys, Syntel was a third-party vendor who was granted limited access to TriZetto’s confidential information.

It is said that Syntel gained access to TriZetto’s confidential information the same way that Infosys did - by way of a confidentiality agreement. The evidence at trial showed that Syntel had breached the contract and created its own repository of test cases that were TriZetto’s proprietary software.

The jury also found that TriZetto’s test cases were protectable trade secrets and Syntel’s creation of a repository test cases were trade secret misappropriation

On appeal, even the Second Circuit affirmed the jury’s finding that TriZetto’s test cases are trade secrets, the company said in the document. A Second Circuit is one of the 13 Courts of Appeal in the US.

The matter is in court and it remains to be seen whether the Cognizant’s subsidiary is able to prove its allegations.