Hexaware faces $500 million patent lawsuit

American IT services firm Natsoft Corp. has sued Hexaware Technologies Ltd for breach of contract and patent infringement, seeking $500 million in damages from the latter, in one of the biggest patent cases against an Indian IT firm. The amount sought by Natsoft as damages is a little more than a third of Hexaware’s full-year revenue last year.

Privately held Natsoft filed the lawsuit against India's tenth-largest IT company in an Illinois district court on 23 September, stating the latter used application modernization software whose work was covered by nine patents developed by Updraft, an IT services company that Natsoft acquired in 2024.

For Hexaware, a $500 million fine translates to almost four times its net profit of ₹1,174 crore ($132 million) for the last fiscal year. Hexaware, which follows a January-December financial calendar, ended last year with $1.43 billion in revenue, up 14% on a yearly basis.

In its complaint, Natsoft accused Hexaware of using its patents to sell and advertise its own software products for software modernization purposes and Gen AI applications. Application modernization is the practice of updating older software for newer computing approaches, including newer languages, frameworks, and infrastructure platforms.

“A March 2024 public report on Hexaware’s application modernization services recognized “Updraft” as a “partner” providing tools relating to Hexaware’s application modernization services,” read Natsoft’s complaint.

Natsoft has charged Hexaware on 13 counts, including breach of contract and patent infringement. Apart from seeking damages, it also requested the court to disallow Hexaware from using and marketing any of the patents currently under investigation.

“An award of damages under 35 U.S.C. § 284 of $500 million or an amount to be proven sufficient to compensate Plaintiffs for Defendants’ infringement, including but not limited to, damages for lost profits and in no event less than a reasonable royalty, together with interests and costs, including an enhancement of damages of up to three times for Defendants’ willful infringement,” read the complaint.

However, Hexaware claims not to have received any complaint.

“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,” said Hexaware in a filing to the stock exchanges on Thursday.

Emails sent to Hexaware and Natsoft went unanswered.

Natsoft stated that Hexaware advertised these software products on its website without seeking permission and without providing compensation for the same.

Natsoft’s allegations

Natsoft stated that its affiliate had invested $100 million in developing these tools, which were now allegedly being marketed and sold by Hexaware.

“Updraft took about 5-6 years to develop initial versions of these tools, and it consistently continued developing these tools since its initial patent filings in 2011, with further development and improvement ongoing. In total, to date, Updraft has spent over $100 million in development costs, employing hundreds of employees across multiple countries. Updraft employees collectively spent thousands of hours developing the tools,” said Natsoft.

“Defendants (Hexaware) did not seek permission from Plaintiffs (Natsoft) to market Plaintiffs’ technology in this fashion, nor did Defendants compensate Plaintiffs for doing so. On information and belief, by naming Plaintiffs in their marketing literature, Defendants intentionally took advantage of Plaintiffs’ reputation as a leader in the legacy-modernization field to engage clients that otherwise would have sought out Plaintiffs’ tools from Plaintiffs,” said Natsoft in its complaint.

It even charged Hexaware with knowledge of such deliberate advertising.

“Plaintiffs initially notified Defendants of, among other things, their infringement of Updraft patents based on RapidX in a letter dated February 24, 2025, sent via email and USPS Priority Mail. Plaintiffs specifically named each of the patents-in-suit by number. Thus, Defendants knew of each of the patents-in-suit, and Plaintiffs’ contention that Defendants’ RapidX infringed such patents, no later than February 24, 2025,” read the complaint.

RapidX is Hexaware’s AI platform, used for modernising legacy software and code. The company named two other platforms, including Amaze and Tensai/ATOP, that Hexaware deploys for clients.

When contacted, Hexaware reportedly cited other uses of those application modernization softwares to counter a specific function falling under Natsoft’s patent.

Legal battles

According to Phil Fersht, chief executive of HFS Research, “The case is a reputational and operational distraction for Hexaware."

"Hexaware needs to be proactive in communicating clearly with clients, employees, and investors that it has the situation under control. Legal issues need to be managed in parallel with reassuring stakeholders that business continuity is unaffected. The company must also double down on execution and delivery to show the market that it is resilient and still focused on growth. How they manage the narrative now will matter as much as the case outcome itself," Fersht added.

Natsoft is represented by Maxson Mago & Macaulay, LLP, and Shelhoff Canfield & Chin LLC.

This is not the first time a David has gone up against Goliath in a similar case. After years of legal battles and appeals, a US court ruled that Tata Consultancy Services Ltd was to pay $140 million to Epic Systems in 2023, following the discovery that some TCS employees had stolen Epic's software.

Cognizant and Infosys are still engaged in a court battle on misappropriation of trade secrets and anti-competitive behaviour pertaining to both companies’ healthcare software products.

For Hexaware, this case comes at a time when it is facing its own troubles. Not only did Hexaware slip two spots in Indian IT’s pecking order in less than a year, but it is also experiencing lower revenue and project delays from two of its top accounts, including Fannie Mae and Freddie Mac.