Court reverses Appian's $2B espionage win against Pegasystems

This story was updated on July 30, 2024

In May 2022, a jury awarded Appian $2.036 billion in damages, finding Pegasystems had engaged in "willful and malicious" trade secret misappropriation. This week, that verdict was thrown out by a court of appeals in Virgina.

A developer who worked in Appian software under a government contract was accused of spying on the company from 2012 through 2014, sharing trade secrets with Pegasystems under an operation dubbed "Project Crush," according to Appian.

Pega contends that the contractor was "simply a standard user of the software like any other of the thousands of users of Appian software."

Appian claimed Pegasystems hired the developer to divulge details about its software and provide videos of the development environment. The project was outed by a former Pegasystems employee, leading Appian to sue and win the largest payout in the history of Virginia's court system.

Pegasystems referred to the developer internally as a "spy," according to a press release Appian issued announcing the verdict back in 2022.

"It's shocking in the stupidity," said Will McKeon-White, an analyst at Forrester, following the initial verdict. "You don't spy on people, and you don't put 'spy' in writing."

In addition to the espionage, Appian claimed Pegasystems employees used fake identities to access trial versions of Appian's software, a low-code system used to build apps and workflows. It also stated that Pegasystems CEO Alan Trefler accessed the system, using the alias Albert Skii.

Pegasystems asked the Virginia Court of Appeals to reverse the jury verdict and enter judgment for Pega, citing insufficient evidence that it misappropriated any trade secrets. On July 30, Judge Frank K. Friedman found the trial court "committed a series of errors that require us to reverse the judgment as to Appian's trade secret claims."

In the appeals court opinion, Friedman said the trial court "also abused its discretion by refusing to permit Pega to attempt to authenticate its software evidence and, as a consequence, by excluding Pega's software -- a principal means of demonstrating it did not steal secrets through [the government contractor] -- on the basis that it was on a different laptop than provided in discovery…We reverse the judgment as to the claims and remand for a new trial consistent with this opinion."

Pegasystems released a statement applauding the judgement.

"This ruling supports our view that the verdict was a result of a flawed trial on many fronts, including that we were prevented from showing that our software never adopted any Appian supposed trade secrets," a Pegasystems spokesperson said in a statement. "As we've said from the beginning, the overturned judgment had the structural integrity of a skyscraper of cards, so it is no surprise it has collapsed. We applaud the court for seeing through Appian's tactics to prevent the jury from hearing critical facts in this case." 

Details on a new trial have yet to be set.

Matthew Calkins, Appian's CEO, found out about the extent of Project Crush in spring 2020 -- nearly 10 years after the spying began -- when a former employee tipped him off. "I was amazed not only by the audacity of it, but by how long it had been running," he said in an interview with SearchSoftwareQuality back in 2022.

At the time, Calkins noted how emphatic the jury was about Pegasystems' inappropriate behavior.

"What I take away most strongly from this verdict is their certitude and condemnation," he said. In addition to the multi-billion-dollar award, the jury verdict found that Pegasystems had engaged in willful and malicious misappropriation of trade secrets.

Pegasystems wasn't required to pay the amount of the judgment until it had exhausted all appeals, according to the press release.

Appian plans to fight the appellate ruling.

"We will appeal the ruling to the Supreme Court of Virginia and will seek to reinstate the verdict. We remain confident that the evidence of misappropriation and our right to corresponding damages will be properly addressed by Virginia courts," an Appian spokesperson said.