Rise of Legal Disputes in the IT Services Industry
Legal disputes in the information technology (IT) services industry are on the rise as firms increasingly adopt platform-based and intellectual property-driven business models. The most recent case involves Mumbai-headquartered Hexaware Technologies, which is being sued by the United States-based firm Natsoft and its subsidiary Updraft for $500 million over patent infringement.
In its filing, Natsoft claims that Hexaware has misused confidential information and technology shared during their partnership to create competing platforms. Hexaware, in a regulatory filing, acknowledged the lawsuit, stating:
As per the information available on the website of the United States District Court, Northern District of Illinois, Eastern Division, we note that a complaint has been filed by Natsoft Corporation and Updraft LLC (‘Plaintiffs’) against the Company and its material subsidiary ‘Hexaware Technologies Inc’ in the United States District Court, Northern District of Illinois, Eastern Division, alleging infringement of certain patents and breach of contract. At present, the Company has not received any notice or formal communication from the US court or from the Plaintiffs in relation to the aforesaid proceedings.
This incident is not unprecedented; similar intellectual property (IP) infringement cases have emerged against Indian IT services firms in the past. For instance, Tata Consultancy Services (TCS), the largest services provider in India, was sued by Epic Systems Corporation in 2014, alleging that TCS had “stolen” its intellectual property. The lawsuit was filed against TCS and Tata America International Corporation.
Clash of the Titans
The recent lawsuit marks a significant clash in the industry. Natsoft’s allegations against Hexaware for the misuse of confidential information is indicative of the broader challenges faced by tech firms today. Additionally, Infosys is currently embroiled in a court battle with Cognizant over claims of stealing trade secrets.
Originally, the damages claimed in the TCS-Epic case amounted to $940 million, but in 2023, the United States Supreme Court upheld punitive damages of $140 million against TCS. Meanwhile, Infosys’s legal entanglement with Cognizant, which began in 2024, highlights ongoing tensions in the tech community. Analysts predict that IP disputes will continue to proliferate, especially in the age of artificial intelligence (AI).
Impact of AI on Litigation
Peter Bendor-Samuel, founder and executive chairman of Everest Group, observed that the rise of AI is prompting tech services firms to emphasize intellectual property, thereby increasing litigation between software and tech services companies. He noted, “AI is causing tech services firms to offer intellectual property, and hence litigation between software firms and tech services will increase. This means more tech services firms will sue other tech services firms.”
Additionally, Jaspreet Singh, partner and chief revenue officer at Grant Thornton Bharat, remarked that while patent litigation has historically centered around product-based tech giants, especially in the hardware, mobile, and semiconductor sectors, 2025 has seen a notable increase in lawsuits targeting IT services and consulting companies. These firms are increasingly offering proprietary digital platforms and cloud services.
The implementation of generative AI and large language models by legal teams has significantly accelerated the identification of potential infringements and prior art, broadening the scope of litigation activity. Moreover, as services firms continue to adopt patented technologies, there will be stronger patent-enforcement strategies in place.
The escalation of competition and the similarity of delivery platforms further contribute to the rising number of legal disputes in the IT services industry. As the landscape evolves, it appears that firms will need to navigate an increasingly complex web of intellectual property challenges.
