A Good Day For Appian Corp., A Bad Day For Pegasystems

On May 10, a Virginia jury awarded a huge $2.04 billion verdict for compensatory damages in a trade-secrets suit brought by Appian Corp. (APPN) against Pegasystems, Inc. (PEGA). Competitors in the enterprise cloud business process management (BPM) solutions industry, the two companies have similar market caps: more than $3.5 billion for Appian and more than $4 billion for Pegasystems.

However, recent revenues paint a somewhat different picture. Regulatory filings from 2021 show plaintiff Appian posting a mere 31% of Pegasystems’ annual revenue, at $369.3 million versus $1.21 billion. Pegasystems also posted a smaller net loss for that same year, at $63 million to Appian’s $88.6 million.

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Lisa Pintchman, a spokeswoman for defendant Pegasystems, said the company “will certainly appeal” a verdict that resulted from “significant error” and was not supported by either the facts or the law. The company also will ask the trial judge to set aside the verdict, which constitutes just under 50% of its total market cap.

In the case that was filed in 2020, Appian attorney Adeel A. Mangi of Patterson Belknap Webb & Tyler LLP convinced a jury that Pegasystems recruited a contractor they openly called “our spy” to share trade secrets gathered from Appian’s enterprise software. The case also alleged additional acts of subterfuge that involved executives from Chief Executive Officer Alan Trefler on down.

In defending the case, Pegasystems attorney Robert Frank Jr. of Choate, Hall & Stewart LLP argued that less than 20% of the sales claimed as unjust enrichment even involved competition between the two companies. Frank also mocked Appian’s assertion that a two-page marketing document that included alleged trade secrets had swayed prospective customers like Bank of America,, the U.S. Air Force, or the U.S. Census Bureau.

The Appian award more than doubled the initial $940 million verdict (since greatly reduced) in another recent intellectual property case (Epic Sys. Corp. v. Tata Consultancy Servs. Ltd.). Such enormous awards seem to be trending, especially in the area of corporate espionage. Trade secrets attorney Robert B. Milligan of Seyfarth Shaw LLP pointed out the gravity of large awards for software licensing companies because trade secrets often form the basis for a company’s revenue and value. “The fact that it’s getting to this magnitude shows that trade secrets protections are gaining traction,” Milligan said.