Appian Corporation (APPN) Announces Court Rejects Pegasystems (PEGA) Motion to Overturn $2B Jury Verdict

September 16, 2022 9:02 AM EDT

Appian (NASDAQ: APPN) announced today that the Circuit Court for Fairfax County, Virginia entered a final judgment awarding it $2.036 billion in damages from Pegasystems Inc. (NASDAQ: PEGA) for trade secret misappropriation. The Court also entered final judgment on the jury's verdict that Pegasystems violated the Virginia Computer Crimes Act. Appian had brought the case to trial in March 2022 to ensure the protection of its proprietary intellectual property, including its trade secrets, and received the jury's verdict after a 7 week trial on May 9, 2022. As a result of the jury's finding of willful and malicious appropriation of Appian's trade secrets, the Court also ordered Pegasystems to pay Appian $23.6 million in attorney's fees associated with the case. Finally, the Court ordered Pegasystems to pay Appian statutory post-judgment interest on the judgment at an annual rate of 6%, or approximately $122 million per year.

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Final judgement awards Appian $2.036 billion in damages from Pegasystems Inc. for trade secret misappropriation.

"We are pleased that the Court rejected Pegasystems' efforts to throw out the jury's verdict," stated Christopher Winters, General Counsel at Appian. "We think that the jury's verdict was sound, and the Court's rulings at trial were well founded. Appian only asked for damages representing Pegasystems' unjust enrichment at Appian's expense, which was supported by expert witness testimony including from a retired Gartner analyst. We did not seek or receive punitive damages. We will now move to the appellate phase of the litigation, where we are confident that we will prevail as well."

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 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 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.

Appian believes that the damages award is the largest award in Virginia state court history.

Pega has filed a notice of appeal. Pegasystems is not required to pay Appian the judgment, attorney's fees, or post-judgment interest until all appeals are exhausted. Appian cannot predict the outcome of any appeals or the time it will take to resolve them.

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