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The Court of Appeals of Virginia on Tuesday overturned Appian Corp.'s monumental $2 billion trade secrets judgment against Pegasystems Inc. The appellate court identified multiple errors by the trial court, warranting a new trial for the largest jury award in state history.

Errors in Unjust Enrichment Damages

The trial court's decision to allow Appian to use Pegasystems' total sales over a specific period to demonstrate unjust enrichment damages was deemed erroneous. The appeals panel highlighted that Pegasystems was improperly barred from proving that a significant portion of its sales occurred in markets where it did not compete with Appian. Moreover, the appellate court noted that the trial court misstepped by relieving Appian of its burden to establish a causative link between the alleged misappropriation and any damages incurred, a critical component in trade secrets cases.

Appian $2 billion trade secrets : Exclusion of Key Evidence

In another significant error, the trial court prohibited jurors from hearing about the number of individuals who had access to Appian's platform. Pegasystems contended this information was vital to determining whether Appian had adequately safeguarded its trade secrets. "This complex trial ventured into uncharted legal waters and culminated in a multi-billion dollar damages award which we now reverse," said Judge Frank K. Friedman, writing for the panel.

Implications for Trade Secrets Litigation

The case has garnered considerable attention from trade secrets practitioners, both for its substantial verdict and the numerous legal issues it raises. Pegasystems expressed satisfaction with the appellate court's decision. "We are extremely pleased by today's decision throwing out an award we believe was never rational," the company stated. A representative for Appian did not immediately respond to a request for comment.

Appian $2 billion trade secrets : Background of the Case

Appian initiated the lawsuit in 2020, accusing Pegasystems of misappropriating over a dozen trade secrets. The allegations centered on a government contractor who had access to Appian's software due to his involvement in a project for another company.

Appian $2 billion trade secrets : Legal Representation

Pegasystems is represented by Monica T. Monday and Michael J. Finney of Gentry Locke and E. Joshua Rosenkranz, Christopher J. Cariello, Eric A. Shumsky, Jeremy Peterman, James A. Flynn, and Jonas Wang of Orrick Herrington & Sutcliffe LLP. Appian's legal team includes Ellen D. Marcus and Sheila M. Costin of Homes Cosin & Marcus PLLC, John M. McNichols of Williams & Connolly LLP, Adeel A. Mangi, Jeffrey S. Ginsberg, Muhammad U. Faridi, Abhishek Bapna, Matthew B. Weiss, and Margaret O'Neil of Patterson Belknap Webb & Tyler LLP, and Robert W. Loftin and Jonathan Y. Ellis of McGuire Woods LLP.