Virginia Jury Awards Appian $2 Billion in Trade Secrets Suit
On May 9, 2022, a Virginia jury awarded Appian Corporation more than $2 billion in damages in a lawsuit against Pegasystems, Inc. for trade secret theft after a seven-week jury trial. The landmark verdict is believed to be the largest verdict in Virginia state court history.
Appian accused the Massachusetts-based Pegasystems of misappropriating Appian’s trade secrets. Appian alleged that Pegasystems had hired a contractor who had worked for Appian to document the Appian development environment so that the company could create “competitive materials” based on Appian software. According to a press release by Appian, Pegasystems specifically recruited a contractor, Youyong Zou, who worked for Serco and was not “loyal” to Appian to gain access to Appian’s private systems. Over the course of several years, Pegasystems paid Zou over $23,000 to provide Appian development information, which Pegasystems then used to upgrade its business process management software. Pegasystems executives referred to Zou as a “spy” in internal communications.
Appian also contended that Pegasystems executives created false identities to gain access to Appian trial software. This access was then utilized to develop comparative intelligence briefs on Appian software to give Pegasystems a market advantage. Pegasystems’ CEO admitted to using an alias to obtain information from Appian. Another Pegasystems employee admitted to creating a fake persona and company to convince Appian to provide him with trial access to its software. Pegasystems’ scheme came to light in 2020, when a former Pegasystems employee notified Appian about Pegasystems’ actions.
The jury found Pegasystems guilty of misappropriation of trade secrets and computer fraud in violation of the Virginia Computer Crimes Act. The jury also found Zou guilty of misappropriation of trade secrets, but did not find that he willfully and maliciously appropriated trade secrets. Appian shares soared more than 30% after the verdict was released. Pegasystems released a statement that the company believed the verdict is not supported by evidence and that it planned to “vigorously pursue” post-trial remedies.
Although the idea of accessing competitors’ data to gain a competitive market advantage may be a tantalizing option for companies, it is fraught with serious legal issues and the potential for large jury verdicts like these. Companies who uncover potential misappropriation of trade secrets should immediately engage counsel to determine the severity of the misappropriation and determine the steps the company to take to mitigate the financial and public opinion fallout.