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Appian awarded over $2b after claiming Pegasystems stole its data

Low-code platform providers' legal tussle ends with 'largest damages award in Virginia state court history'

Appian has been awarded more than $2 billion in damages from Pegasystems for "trade secret misappropriation."

It's an eyewatering sum, and came in a verdict received from a jury in the Circuit Court for Fairfax County, Virginia following a seven-week trial.

Appian is all about building apps and workflows rapidly with its low-code platform. The Pega platform is similarly concerned with speedy software building with a low-code approach. However, it appears that one party was a bit too interested in the other, resulting in a violation of the Virginia Computer Crimes Act and a misappropriation of Appian's trade secrets.

According to a Pegasystems Form 8-K filing with the SEC, Appian was awarded one dollar for the Computer Crimes Act violation. For the trade secrets claim, $2.04 billion was awarded, along with Appian's attorney fees.

The case concerned the hiring of an employee of a government contractor by Pegasystems, Appian alleged, "to provide Pegasystems with access to Appian's software as a part of an effort to learn how to better compete against Appian." The engagement of the employee (Youyong Zou), according to Pegasystems' 8-K, was between 2012 and 2014. The lawsuit was filed on May 29, 2020.

This individual, according to Appian, passed on secret information while working as a developer of its software under a government contract. This violated both the government contractor's code of conduct and an agreement not to provide access to an Appian competitor.

The person (referred to by Appian as the "Contractor") helped Pegasystems "generate dozens of video recordings of the Appian development environment for use by Pegasystems." The upshot was that the Pegasystem's sales team could be better prepared and Pegasystem's platform could be tweaked using the materials.

"The effort," Appian said, "was later labeled 'Project Crush' within Pegasystems" – vaguely unfortunate, since one of Pegasystems' slogans reads "Software to crush business complexity."

Appian also said it "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."

"Mr Trefler himself [the Pegasystems CEO] admitted to using an alias, 'Albert Skii' to obtain access to Appian information," Appain added..

Pegasystems vows to fight on

Unsurprisingly, Pegasystems is not about to take the verdict lying down. "We strongly disagree with the claims and the verdict, and believe the verdict is not supported by the facts of the case or the law and is the result of significant error," said Pega's VP of Corporate Communications, Lisa Pintchman.

"We plan to vigorously pursue our post-trial remedies and will certainly appeal what we believe is an unjust result. We believe we have meritorious defenses that have strong grounds to overturn this, although the appeals process could potentially take years to complete."

The company popped a very similar statement into the Form 8-K filing with the US Securities and Exchange Commission.

Pintchman went on: "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."

The $2.036 billion award is the largest in Virginia state court history and Christopher Winters, General Counsel at Appian, said "We are very grateful that the jury held Pegasystems accountable for its wrongful conduct."

"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."

Judging by the response of Pegasystems, this one looks set to run a good while longer. ®

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