Appian receives verdict from Fairfax County, Virginia jury holding
Pegasystems liable for trade secret misappropriation and
violation of the Virginia Computer Crimes Act
MCLEAN, Va., May 10, 2022 /PRNewswire/ -- Appian (NASDAQ:
APPN) announced today that it has received a verdict from a jury in
the Circuit Court for Fairfax County,
Virginia, awarding it $2.036 billion in damages from
Pegasystems Inc. (NASDAQ: PEGA) for trade secret misappropriation.
The jury also found that Pegasystems violated the Virginia Computer
Crimes Act. The jury further 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," stated Christopher Winters, General Counsel at 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 Mr. 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. Mr. 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. Mr. 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's 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 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 managed the litigation from an in-house
perspective.
The jury's finding that Pegasystems' conduct was willful and
malicious may entitle Appian to a further award of attorney's fees
under Virginia law.
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 cannot predict the outcome of any
appeals or the time it will take to resolve them.
About Appian
Appian is the unified platform for
change. We accelerate customers' businesses by discovering,
designing, and automating their most important processes. The
Appian Low-Code Platform combines the key capabilities needed to
get work done faster, Process Mining + Workflow + Automation, in a
unified low-code platform. Appian is open, enterprise-grade and
trusted by industry leaders. For more information, visit
www.appian.com.
Forward-Looking Statements
This press release includes
forward-looking statements. All statements contained in this press
release other than statements of historical facts, including
statements regarding Appian's ability to collect on the judgment
and to receive attorney's fees, the outcome of any appeal, and the
timing of such matters, are forward-looking statements. The words
"anticipate," "believe," "continue," "estimate," "expect,"
"intend," "may," "will," and similar expressions are intended to
identify forward-looking statements. These forward-looking
statements are subject to a number of risks and uncertainties,
including the risks and uncertainties set forth in the "Risk
Factors" section of Appian's Annual Report on Form 10-K for the
year ended December 31, 2021 filed
with the Securities and Exchange Commission on February 17, 2022 and other reports that Appian
has filed with the Securities and Exchange Commission. Appian
is under no duty to update any of these forward-looking statements
after the date of this press release to conform these statements to
actual results or revised expectations, except as required by
law.
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