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Thursday, 12 May 2022 13:02

Appian Awarded US$2.036 billion in damages against Pegasystems Featured

By Staff Writer

Low-code platform company Appian has been awarded US$2.036 billion in damages from software provider Pegasystems in the Circuit Court for Fairfax County, Virginia for trade secret misappropriation.

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

“We are very grateful that the jury held Pegasystems accountable for its wrongful conduct,” said Appian general counsel Christopher Winters, in a lengthy statement issued by Appian.

“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 presented evidence that Pegasystems hired an employee of a government contractor (the “Contractor”), to provide Pegasystems with access to Appian’s software as a part of an effort to learn how to better compete against Appian. In hiring the Contractor, Pegasystems instructed its third-party contracting service to recruit someone who was not “loyal” to Appian. Appian provided evidence that the Contractor, who 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 an Appian competitor.

Appian put forward evidence that the Contractor passed trade secret information to Pegasystems to enable its employees to build competitive features and train Pegasystems’ sales team to better compete against Appian.

During the proceedings, Alan Trefler, Pegasystems’ Founder and CEO, admitted 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.”

The Contractor, referred to as a “spy” internally at Pegasystems, helped 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 evidence that Trefler attended and participated in a meeting with the Contractor and received Appian’s trade secrets supplied by the Contractor. The videos and documents created in connection with Contractor’s efforts were then used by Pegasystems to train its sales force to better compete against Appian. The effort was later labeled “Project Crush” within Pegasystems. At one point, a Pegasystems employee reviewing the materials exclaimed that “we should never lose to Appian again!”

Appian also submitted that Pegasystems’ product development team reviewed the 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.

In addition, Appian presented undisputed evidence that Pegasystems employees used false identities to obtain access to Appian information and trial versions of Appian’s software, which were then used for competitive purposes. Trefler himself admitted to using an alias, “Albert Skii” to obtain access to Appian information. One Pegasystems employee admitted to creating a fake persona and a company to fool Appian into providing him with access to Appian’s software platform. Other Pegasystems employees obtained access to Appian’s software through Pegasystems’ partners in India, using credentials provided to those partners under license. Trefler admitted that 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 that the damages award by the jury is the largest award in Virginia state court history.

Appian CEO Matthew Calkins stated “Appian will never hesitate to defend itself and its intellectual property from competitors where it believes they have acted illegally. I am proud of our legal team for their outstanding work on this case. It was a masterful performance and the jury’s verdict is the result of their efforts.”

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

Appian said it cannot predict the outcome of any appeals or the time it will take to resolve them.

Pegasystems issued a statement on its website in response to the Appian lawsuit:

“In the lawsuit filed by Appian Corp on May 29, 2020 against Pegasystems in state court in Virginia, Pega strongly disagrees with the claims and the recent verdict, which are not supported by the facts of the case or the law and are the result of significant error. We have strong grounds to overturn this result, and we are actively pursuing all legal options. As a reminder, the appeals process could potentially take years to complete, and no judgement would be payable until this process has ended.

“This verdict has no impact on our products or what we are able to sell and service. In the meantime, we will continue to focus on helping our clients address their most pressing digital transformation challenges so they’re ready for what’s next.”

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