Earlier this week, a Virginia jury awarded software company Appian Corp. more than $2 billion in damages after finding that competitor software company Pegasystems Inc. had misappropriated its trade secrets. The complaint alleged that Pegasystems engaged in corporate espionage and trade secrets theft in an effort to better compete with Appian. Pegasystems hired Youyong Zou, an employee of a government contractor and former developer for Appian. In exchange for payment, Zou provided Pegasystems with copies of Appian’s confidential software and documentation in violation of confidentiality restrictions that barred him from sharing Appian’s trade secrets. In 2020, Appian filed suit against both Pegasystems and Zou.
During the seven-week jury trial, counsel for Appian argued that Pegasystems utilized Appian’s trade secrets to improve the ease of use, social capabilities, and mobile capabilities of the Pegasystems platform. Pegasystems’ Founder and CEO testified that it was inappropriate for Pegasystems to have hired Zou and that Zou had engaged in unauthorized activities. Counsel for Appian stated in closing arguments that Pegasystems had engaged in “shady and arrogant” conduct by using fake identities to gain access to Appian’s company information and trial versions of Appian’s software. In his own closing arguments, counsel for Pegasystems stated that Appian purportedly filed suit in order to compensate for lost profits after failing to compete with Pegasystems’ superior product.
The Fairfax County Circuit Court jury found that both defendants had misappropriated Appian’s trade secrets. However, the jury awarded Appian $2,036,860,045 in damages against Pegasystems and only $5,000 in damages against Youyong Zou after finding that only Pegasystems had engaged in willful and malicious misappropriation. In addition, the jury found that Pegasystems had engaged in computer fraud in violation of Virginia’s Computer Crimes Act and awarded Appian $1 in damages against Pegasystems.
Pegasystems says it is considering an appeal for what is estimated to be the largest damages award in Virginia state court history. This case is one we will monitor closely as the appeals process unfolds.
For further information, please contact:
Mark A. Klapow, Partner, Crowell & Morning