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Corporate espionage

is the sincerest form of flattery.

Corporate espionage

is the sincerest form of flattery.

Corporate espionage

is the sincerest form of flattery.

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.

Pega's recycled arguments in their appeal were rejected by a jury and by a highly respected Virginia trial judge. We are confident that Pega will fare no better before the Court of Appeals. Appian's formal response to Pega's appeal will be submitted in late March.

Quick Summary

Appian and Pegasystems are archrivals, the longstanding leaders in high-end Process Automation.

A unanimous jury found Pega violated the Virginia Computer Crimes Act by infiltrating Appian and misappropriating Appian trade secrets. The jury and judge called Pega's conduct “willful and malicious.” The jury awarded Appian $2.036 billion.

When did it happen? Pega started infiltrating Appian in 2012, when Pega was more than 10 times Appian’s size. The scheme continued for nine years. Even when Appian discovered the infiltration and filed a lawsuit about it in 2020, Pega continued spying into 2021.

Just Released: 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. Pega employees posed under false identities. Pega employees invented or co-opted family members' businesses to pose as Appian customers.
 

What Others Say

Update:

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.

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’."

Pega made repeated attempts to overturn the verdict. In the last one, they asserted there wasn't enough evidence. In declining to overturn the verdict, the judge said Appian “proved with very clear certainty” the damages caused by Pega’s misappropriation, reiterating that Appian’s evidence “was overwhelming.”

Appealing the judgment is Pega’s right, but in the meantime so much interest is accruing on the judgment ($122 million per year) that it negates Pega’s 2021 adjusted profits more than six times over.

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