Beyond the courtroom, this dispute underscores a broader industry transformation, industry observers say. In recent years, Indian IT majors such as Infosys and Cognizant have faced legal challenges over alleged misuse of proprietary technology or breach of software licensing terms.
A $500-million lawsuit filed by the US-based Natsoft and Updraft Software against Hexaware Technologies in the United States has highlighted the growing intellectual property (IP) risks that Indian companies face as they transition from traditional outsourcing to platform-led and product-driven models.
Beyond the courtroom, this dispute underscores a broader industry transformation, industry observers say.
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“Indian IT companies are undergoing a significant shift from traditional outsourcing models to platform-based and IP-led services, including AI-driven solutions,” said DD Mishra, VP analyst at research and advisory firm Gartner. “This evolution is changing the risk landscape, elevating concerns around IP ownership, data security, and regulatory compliance.”
While top-tier companies have improved their IP governance, many others are still lagging, argued Mishra.
“To stay competitive, IT organisations must invest in comprehensive IP management policies, AI ethics frameworks, and legal expertise to navigate evolving global regulations,” he said.
This lawsuit represents part of a broader trend of rising IP disputes in the tech industry. In recent years, Indian IT majors such as Infosys and Cognizant have faced legal challenges over alleged misuse of proprietary technology or breach of software licensing terms.
Precedents
TCS was previously involved in a high-profile legal battle with Epic Systems, which ended with a significant damages award. Similar disputes have also been seen among non-Indian technology companies, such as Oracle and SAP, underscoring that IP litigation risks are a global phenomenon across the software industry.
Although the case is still pending, legal experts say, it points out how Indian companies are becoming more prone to litigation, especially in the US, which is both their biggest market and their most complex legal setting. This is due to their increased reliance on proprietary software tools and AI-driven platforms. The amounts at stake in such litigations can run into hundreds of millions of dollars, considering the punitive damages regime in the US.
“Patent infringement suits against Indian IT firms have been filed before,” said Ankit Sahni, partner, Ajay Sahni & Associates. “The US remains the jurisdiction of choice because the patents are granted there, the customers are largely American corporations, and the damages regime is more punitive. For Indian IT companies, the US is both the largest market and the highest-risk jurisdiction from an IP standpoint.”
Defenses in such circumstances usually include challenging the asserted patent’s validity, arguing non-infringement, or claiming independent development, according to Sahni. However, past business relationships may complicate these defenses. “A court evaluating an infringement claim would also heavily weigh any evidence of breach of faith and breach of contractual obligations,” he said, adding that the process often turns into a “battle of experts, source code analysis, and demonstrating whether the core functionality of the IT firm’s tool reads onto the patent claims.”
Increasingly Regular
Such cases are still relatively uncommon but are becoming increasingly apparent as Indian IT companies venture into AI, software modernisation, and platform development, according to Sudhir Raja Ravindran, attorney-at-law at Altacit Global. “Since most enterprise customers and patents are registered in the US, plaintiffs prefer US courts, where remedies like treble damages and attorneys’ fees can be awarded,” he said.
Litigation can have a range of effects, including postponing product launches, impacting client deliveries, and raising investor concerns, Ravindran explained. “Even settlements can involve disclosure obligations that weaken a firm’s IP portfolio in future negotiations,” he said, emphasising the need for Indian IT firms to institutionalise IP due diligence, maintain internal code registers, and establish contractual clarity with employees and contractors.
Experts believe that the Hexaware case serves as a reminder that innovation and IP risk now go hand-in-hand, and that committing a mistake can have severe legal and reputational repercussions. This is particularly true as Indian IT companies build and export proprietary technology at an increasing rate.
