Corporate espionage
is the sincerest form of flattery.
Corporate espionage
is the sincerest form of flattery.
Corporate espionage
is the sincerest form of flattery.
Quick Summary
Appian and Pegasystems are archrivals, the longstanding leaders in high-end Process Automation.
On May 9, 2022, a unanimous jury found Pega violated the Virginia Computer Crimes Act by infiltrating Appian. A unanimous jury also found that Pega misappropriated Appian trade secrets. The jury and judge called Pega's conduct “willful and malicious.” The jury awarded Appian $2.036 billion.
On July 30, 2024 the Virginia Court of Appeals—the state’s intermediate appellate court—issued an opinion vacating the $2 billion award in Appian’s favor for Pega’s willful and malicious misappropriation of trade secrets based on certain rulings of the trial court judge with which the Court of Appeals did not agree. The Court of Appeals remanded the cases back to the trial court for a new trial.
Appian has petitioned the Supreme Court of Virginia—the state’s highest court—for review of this decision and is hopeful that the Supreme Court will reinstate the jury’s verdict in full. A link to Appian’s Supreme Court petition can be found here. The Virginia Supreme Court has the final say on whether Pega is on the hook for the $2 billion verdict plus the $122 million per year in interest Pega would owe Appian dating back to the 2022 judgment.
See the Evidence: Trial Evidence and Transcript
Click here to view Appian's appeal brief, trial transcripts and more than 300 slides showing evidence presented to the jury.
How did Pega get access to Appian secrets? Pega employed a spy with inside access to Appian and had him secretly record videos of Appian’s platform.
In addition, in order to access Appian information, Pega employees posed under false identities, and Pega employees invented or co-opted family members' businesses to pose as Appian customers.
When did it happen? Pega started infiltrating Appian in 2012 through its spy, when Pega was more than 10 times Appian’s size. They lost access to their spy in 2014, but in 2017 moved onto using false identities to get access to Appian information. Even when Appian discovered the infiltration and filed a lawsuit about it in 2020, Pega continued spying into 2021.
Pega Declines to Appeal Computer Crimes Verdict
In their appeal to the Virginia Court of Appeals, Pega declined to contest the verdict against it for violating the Virginia Computer Crimes Act (VCCA). The VCCA punishes fraudulent activity involving unauthorized computer or network use, including instances of using false identities to access information online or take the information of another. Pega’s extraordinary and shocking behavior was presented to the jury during the course of the trial, leading to the VCCA verdict. Pega’s choice not to appeal the VCCA verdict means that this part of the judgment—finding that Pega engaged in fraudulent conduct in violation of the VCCA—will remain in effect against Pega.
Update: Appian’s Response to the Appeal Decision
The Court of Appeals overturned the jury's trade secrets verdict based on certain trial court rulings related to damages and evidence Pega sought to introduce at trial. Appian strongly disagrees with this ruling.
The Court of Appeals' decision on trade secret damages is out of step with how the majority of states handle the issue, and threatens to isolate and diminish the ability of Virginia corporations to defend themselves from trade secret misappropriation. The decision's reasoning cannot be reconciled with the fact that the trial court judge found that Appian "proved with very clear certainty" the damages caused by Pega's misappropriation of trade secrets and reiterated that Appian's evidence of causation was "overwhelming." The remainder of the Court of Appeals' opinion overrode a series of well-supported decisions made by the trial court about whether to admit certain pieces of evidence in the case.
Nothing in the Court of Appeals' decision eliminates the mountain of evidence presented at trial demonstrating that Pega hired a "spy" to gain information on Appian products. Nor does anything in the Court of Appeals' decision change the fact that Pega has been found liable for committing computer fraud in violation of the Virginia Computer Crimes Act, a finding Pega did not even bother to challenge on appeal. Appian maintains that the jury's verdict was supported by the evidence and aligned with the scope of Pega's wrongdoing, and Appian will defend that verdict in the Supreme Court of Virginia.
What Others Say
- The Economist magazine ran a full page story, “On Her CEO’s Secret Service.”
- The analyst Forrester notes “this verdict is affecting buying patterns.”
- Did Pega hide this dispute from their shareholders? Bloomberg investigates.
- When saying litigation is 'without merit' risks follow-on securities litigation.
Pega's Spy
In 2012 Pega hired a spy to infiltrate Appian. Most people wouldn't use a staffing agency to hire a spy, but Pega did. Pega’s job request required that the candidate “have access to Appian” software and wanted “to make sure they aren’t loyal to Appian” so it would not get “back to Appian.”
The staffing agency found and hired an Appian insider to divulge Appian trade secrets. For years this person was referred to inside Pega as “our spy.” He conducted many competitive briefings with his identity concealed.
The spy briefed Pega CEO Alan Trefler in person.
Pega's Video Library
Over the course of several years, Pega compiled an extraordinary library of videos detailing Appian trade secrets. In them, the spy would walk through Appian features, expose secrets, and divulge inside information.
Pega created dozens and dozens of videos about Appian, collectively running for 23 hours and 51 minutes. Who watched the videos? Pega executives, salespeople, and engineers, among others. (Eventually, the jury also watched them.)
The spy revealed Appian’s technical superiority. Even Pega’s Chief Product Officer admitted Appian “excels in terms of ease of use and performance.”
Pega's Platform Changes
Several significant Pega features that debuted over the past decade were inspired by or essentially copies of Appian features.
The same year they began infiltrating Appian, Pega hired a Gartner analyst to discuss strategy. (The analyst had nothing to do with the espionage.) At the trial, this same analyst testified: “The information provided by [the spy] about the Appian platform and its architecture and design enabled Pega to maintain its competitive position and meet industry demands as they evolved. Without [this] Pega would have become obsolete and irrelevant.” (Italics added for emphasis)
Pega’s Marketing Materials
Not only did Pega change their platform, they used the information from their spy to create a plethora of marketing materials, which they updated repeatedly as they obtained new information. Pega distributed these materials to customers to try to compete more favorably against Appian.
Pega executives felt the inside information was incredibly valuable. Leon Trefler, brother of the CEO and senior executive in the sales organization, urged his colleagues to use the materials developed with illicit access to Appian when their teams were “competing against Appian anywhere.” In his words, if Pega used them, they “should never lose against Appian!” Another member of sales management called the information “critical” and “excellent.”
Approximately 200 people affiliated with Pega sent or received Appian trade secrets.
Who is Albert Skii?
“Albert Skii” isn’t a real person. It’s an alias used by Pega CEO Alan Trefler to access Appian information. Alan used several aliases, including “Albert Skii,” “A Ewe,” and maybe “Paul Foon.” They all link to Alan's personal email address, and he refused in court to deny they were him.
Many Pega employees used false identities to obtain Appian information.
Pega used false business identities as well. They invented a fake consulting firm to pose as a legitimate business and gain access to Appian. Two Pega employees used their wives' businesses -- a spa and an office services company -- to pose as Appian customers. (Neither of them told their wife about it.)
After the lawsuit was filed, Pega continued wrongfully accessing Appian’s platform. Pega’s own expert witness in the litigation admitted he falsely represented his identity to gain access to Appian software in violation of the license terms.
This was not one employee gone rogue. From the top of the organization to the bottom, many inside Pega were doing it. Even a Pega intern gained improper access to Appian software, but unlike the CEO, at least he used his real name.
Pega's Code of Conduct
Pega's own Code of Conduct clearly prohibits the actions that gave rise to the lawsuit. That Code of Conduct forbids "misrepresenting your identity in hopes of obtaining confidential information," while requiring Pega employees to "never use illegal or questionable means to acquire a competitor's trade secrets or other confidential information."
Pega's employees acted otherwise. Many gained improper access to Appian software using false identities, false businesses, or false partner credentials. Pega's CFO seems to think using false identities is part of a modern social movement: "We live in a world where people choose their own names, their own identities. They self-identify. I don't think it's my job to decide how they represent themselves."
Appian has an online contract that governs use of its software, which Pega employees accepted but repeatedly violated. In his testimony, the Pega CEO called it a "pretty garbage contract." (Pega has a similar contract to protect its software, that he agreed was "important.")
Pega's Response
No Pega leaders were disciplined for improperly accessing Appian. (Pega's CEO claimed in testimony that one employee in India had been disciplined, but he was unable to identify that person.) He said using false identities to infiltrate a competitor is "'inadvisable' [but] I don't think it rises to 'questionable'."
Switching to Appian is easy.