Partner
Here’s What Happened:
Pegasystems, Inc. provides enterprise software. Appian Corp. also provides enterprise software. Both companies provide software platforms that enable businesses to generate programs and automate internal business processes.
Appian accused Pegasystems of hiring a “spy” to access Appian’s software systems and determine the strength and weaknesses of Appian’s software. Pegasystems paid the consultant for approximately 200 hours of work over a 2 ½ year period. Pegasystems had over 100 hours of videos showing Appian’s platform features. According to Appian, Pegasystems used this knowledge to bolster its own software.
Appian filed a trade secret misappropriation lawsuit against Pegasystems. Over Pegasystems’ objection, the trial court instructed the jury that Appian could prove its damages by establishing Pegasystems’ sales over the relevant time frame. Then the burden shifted to Pegasystems to prove sales that weren’t attributable to the trade secret misappropriation. During discovery, the trial court ruled that Pegasystems’ evidence of its profits from other product lines was insufficient.
The jury returned in a verdict in Appian’s favor and awarded a hefty $2 billion in damages.
Pegasystems appealed to the Virginia Court of Appeals.
The Appellate Court reversed. The Court held that the trial court erred in instructing the jury. The trade secret misappropriation statute clearly states that the plaintiff has to prove damages that were caused by the misappropriation. So shifting the burden to Pegasystems was wrong. The Court also reversed the trial court’s discovery ruling on the insufficiency of Pegasystems’ evidence.
The case was remanded to the trial court for a new trial.
WHY YOU SHOULD KNOW THIS: Recoverable damages have to have some relationship with the misconduct. Since Pegasystems had hours of videos of Appian’s platform features, Appian should be able to determine which of its product lines were affected by trade secret misappropriation.
One more thing. Pegasystems went a step too far to what could be described as corporate espionage. The size of the jury verdict may have reflected that.
Cited Authority: Pegasystems Inc. v. Appian Corp., Record No. 1399-22-4, (Va. Ct. App. Jul. 30, 2024).