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Appian awarded billions in damages against Pegasystems Inc.

By Mitchell Hageman
Thu 12 May 2022

Appian has been awarded USD$2.036 billion in damages against Pegasystems Inc as the result of a jury verdict in the Circuit Court for Fairfax County, Virginia.

The verdict resulted in Pegasystems being held liable for trade secret misappropriation and violation of the Virginia Computer Crimes Act, resulting in the significant payout to Appian.

Appian brought the case to trial to ensure the protection of its proprietary intellectual property, including its trade secrets. The jury subsequently found Pegasystems' misappropriation of Appian's trade secrets to be willful and malicious.

"We are very grateful that the jury held Pegasystems accountable for its wrongful conduct," says Appian general counsel Christopher Winters. 

"We put forward strong evidence that Appian trade secrets were misappropriated by Pegasystems. The award of substantial damages to Appian is entirely appropriate given the nature and extent of what Pegasystems did."

During the seven-week trial, Appian put forward that Pegasystems hired an employee of a government contractor (the "Contractor") to provide Pegasystems with access to Appian's software in order to learn more about it and create a competitive strategy.

It was found that when hiring the Contractor, Pegasystems instructed its third-party contracting service to recruit someone who was not "loyal" to Appian. 

Appian gave evidence that the Contractor, who ultimately worked as a developer in the Appian software under a government contract, violated his employer's code of conduct and his employer's agreement with Appian by providing access to a competitor.

Appian also put forward that the Contractor passed trade secret information to Pegasystems, allowing its employees to build competitive features and train Pegasystems' sales team to better compete against Appian.

Pegasystems' founder and CEO Alan Trefler admitted during the proceedings that it was "inappropriate" for Pegasystems employees to have hired the Contractor, and that the Contractor "apparently did things for which he was not entitled."

It was also revealed that Pegasystems internally referred to the Contractor as a "spy". This person proceeded to help Pegasystems generate dozens of video recordings of the Appian development environment for use by Pegasystems in compiling competitive materials and evaluating improvements to its platform.

Appian put forward that Mr Trefler attended and participated in a meeting with the Contractor and received Appian's trade secrets supplied by the Contractor. Pegasystems then used videos and documents created in connection with the Contractor's efforts to train its sales force to better compete against Appian. 

The effort was later labelled "Project Crush" within Pegasystems. At one point, a Pegasystems employee reviewing the materials exclaimed that "we should never lose to Appian again!"

Appian submitted that Pegasystems' product development team reviewed materials provided by the Contractor and changed the course of Pegasystems' product engineering to take advantage of the Appian technology they saw. 

Specifically, Appian put forward documents and testimony that Pegasystems made use of the trade secrets gleaned from the Contractor to make improvements with respect to, among other things, ease of use, and social and mobile capabilities in the Pegasystems platform.

Appian also presented undisputed evidence that Pegasystems employees used false identities to obtain access to Appian information and trial versions of Appian's software to be used for competitive purposes. Mr Trefler admitted to using an alias, "Albert Skii" to obtain access to Appian information, and others reportedly used aliases and partner credentials under license.

Trefler admitted he did not think it was appropriate "for people to access other company's systems through aliases" and that the Pegasystems employees who gained access to Appian trial software "shouldn't have done it."

Appian believes the damages awarded are the largest in Virginia state court history. The company may also be entitled to further award of attorney's fees under Virginia law.

The jury's verdict and the court's entry of judgment are subject to appeal by Pegasystems. The company is not required to pay Appian the amount awarded by the jury until all appeals are exhausted and the judgment is final.

Appian was represented in the case by Patterson Belknap Webb & Tyler, led by Adeel Mangi, Muhammad Faridi, and Jeff Ginsberg, and by Holmes Costin & Marcus, led by Ellen Marcus and Sheila Costin. 

John McNichols, of Williams and Connolly, also appeared in the case on behalf of Appian. Christopher Geyer, Appian's Deputy General Counsel for IP & Litigation, played a lead role in developing the case and managing the litigation in-house.

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