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Supreme Court of Virginia Affirms New Trial Order in $2B Trade Secrets Case
Appian Corp. v. Pegasystems, Inc., Record No. 240736 (Va. Jan. 8, 2026)
The Supreme Court of Virginia affirmed the Court of Appeals’ decision that ordered a new trial in a case in which a jury had awarded over $2 billion in damages for misappropriation of trade secrets.
Appian and Pegasystems (Pega) were direct competitors in the business process management (BPM) software industry. Between 2012 and 2014, Pega engaged in corporate espionage by hiring Youyong Zou, a consultant who had legitimate access to Appian’s platform through his employer Serco, to serve as what Pega internally called their “spy.” Zou provided Pega with confidential information including video tutorials demonstrating Appian’s software architecture, confidential documentation from Appian’s password-protected forum, and detailed analysis of Appian’s product strengths and weaknesses. Pega went to great lengths to conceal Zou’s identity, even referring to him internally as “Matt” (a reference to Appian’s CEO Matt Calkins) to avoid being “outed.”
Pega used this stolen information to improve its own software platform (particularly version 7.1), incorporate similar features, and exploit Appian’s weaknesses in competitive sales situations. The espionage came to light in 2020 when John Petronio—the former Pega employee who had orchestrated the scheme—was hired by Appian and disclosed the activities to Appian’s counsel.
Appian sued Pega for misappropriation of trade secrets under the Virginia Uniform Trade Secrets Act (VUTSA) and other claims. After a seven-week trial, the jury found for Appian and awarded over $2 billion in damages against Pega. The circuit court denied Pega’s motions to strike and set aside the verdict.
Pega appealed to the Court of Appeals, which affirmed that the evidence was sufficient to support the misappropriation finding. but reversed the judgment and ordered a new trial based on four errors: (1) erroneous jury instruction shifting the burden of proof on damages to Pega, (2) improper exclusion of evidence about Pega’s non-BPM revenue based on a discovery response, (3) refusal to allow Pega to authenticate its software evidence, and (4) instructing the jury that the number of people with access to Appian’s secrets was irrelevant. Appian appealed to the Supreme Court, which affirmed the Court of Appeals’ judgment, upholding both the sufficiency of the evidence and the finding of reversible trial errors requiring a new trial.
Sufficiency of the Evidence. The Supreme Court affirmed that the evidence was sufficient to support the jury’s finding that Pega misappropriated Appian’s trade secrets, rejecting Pega’s cross-assignments of error challenging the denial of its motions to strike and set aside the verdict. Pega had argued that Appian failed to identify its trade secrets with sufficient specificity, that the alleged information did not qualify as trade secrets under VUTSA, and that Appian did not take reasonable efforts to maintain secrecy. The Court held that, viewing the evidence in the light most favorable to Appian as required when reviewing a jury verdict, rational jurors could have concluded that Pega misappropriated trade secrets.
The Court found that Appian adequately identified the information it claimed as trade secrets through expert testimony from Dr. Marshall and Dr. Cole, which specified: (1) functions of Appian’s platform that Pega allegedly copied, (2) knowledge about weaknesses in Appian’s platform that Pega exploited, and (3) confidential documentation like user manuals that helped Pega copy strengths and exploit weaknesses. While not as specific as particular lines of code, this evidence was sufficient to identify the valuable information at issue. The Court also found sufficient evidence that the information had economic value and was not readily ascertainable by proper means, noting that Pega’s own actions—hiring what it called a “spy,” concealing his identity, using aliases to access Appian’s systems, and stating it “should never lose against Appian” after obtaining the information—demonstrated the information’s value and that it could not be obtained through legitimate means.
Regarding Appian’s efforts to maintain secrecy, the Court rejected Pega’s argument that Appian forfeited trade secret protection by sharing information with thousands of users without express contractual confidentiality agreements. The Court reaffirmed that VUTSA does not require absolute secrecy and that information can be disclosed “to a licensee, an employee, or a stranger, if the disclosure is made in confidence, express or implied.” The statute requires only “efforts that are reasonable under the circumstances to maintain its secrecy,” not “bank vault” or “armed guard” protection. The jury could reasonably find Appian’s efforts were adequate based on evidence that Appian Forum’s terms of use limited what users could do with the information, many documents were labeled “confidential,” Appian relied on confidentiality agreements its customers had with their employees, and free trial users were subject to “clickwrap” terms limiting misuse. The Court noted that the elaborate and improper methods Pega needed to employ to access the information itself supported the conclusion that Appian had taken reasonable steps to maintain secrecy. The Court emphasized this was a factual determination properly left to the jury, and while the evidence did not compel this result, it was sufficient to support the verdict.
Jury Instruction #14. The Supreme Court held that Jury Instruction #14 was an erroneous statement of Virginia law and that the circuit court erred in giving it. The instruction had directed the jury that while Appian bore the burden of establishing Pega’s sales, Pega had the burden of proving “any portion of the sales not attributable to the trade secret or trade secrets and any expenses to be deducted in determining net profits.” This effectively shifted part of the burden of proof on damages from the plaintiff to the defendant.
The Court held that this burden-shifting framework violated the fundamental common law principle that a plaintiff bears the entire burden of proving both harm and that the defendant’s wrongful act proximately caused the damages sought. Because Code § 1-200 provides that English common law remains in effect unless explicitly altered by the General Assembly, and because VUTSA contains no language demonstrating a clear legislative intent to shift the burden of proof on damages, the common law rule applies. The Court found this particularly evident in VUTSA’s language stating that royalty damages are available “[i]f a complainant is unable to prove a greater amount of damages by other methods,” which presumes the plaintiff bears the burden of proof.
The Court rejected Appian’s arguments based on the Uniform Trade Secrets Act (UTSA) and the Restatement (Third) of Unfair Competition. The Court noted that the General Assembly deliberately deviated from UTSA’s language when drafting VUTSA, particularly by adding language tying royalty damages to the plaintiff’s inability to prove damages by other means. While acknowledging the policy arguments favoring burden-shifting—such as the difficulty plaintiffs face in obtaining defendants’ internal financial information—the Court held that any such change to common law principles must come from the legislature, not the courts.
Damages Evidence. The Supreme Court held that the circuit court abused its discretion by preventing Pega from introducing evidence that a portion of its revenue came from non-BPM platform products based on Pega’s response to Interrogatory #18. The circuit court had ruled that Pega’s discovery response meant it had “essentially given up” any defense that it earned significant revenue from products unrelated to the alleged trade secret misappropriation. However, the Supreme Court found that the evidence Pega sought to introduce did not actually contradict its interrogatory response.
Interrogatory #18 specifically requested revenue information “relating to Pega 6.3, Pega 7.0 and any subsequent version broken out by year and version of the software.” Pega had objected that it did not track revenue by software version and produced its overall SEC filings. The Court agreed with the Court of Appeals that this response addressed only the inability to break down revenue by different versions of a single product (the BPM platform), not an assertion that Pega sold no other products or did not track revenue by product lines. The Court emphasized that “reporting that Pega does not track revenue by software versions is not tantamount to asserting that Pega sells no other products or that Pega does not track revenue by product or by lines of business.”
The Court rejected Appian’s argument that it first learned of Pega’s other revenue sources at trial, noting that Pega’s damages expert had submitted a report before trial breaking out revenue by various products. While acknowledging that circuit courts have considerable discretion in managing discovery compliance, the Court concluded that under these specific circumstances—where the interrogatory response was not contradicted by the proffered evidence—the circuit court’s decision to effectively deny Pega the ability to present its damages defense “exceeded the outermost limits of the range of choice available” and therefore constituted an abuse of discretion.
Software Authentication. The Supreme Court held that the circuit court abused its discretion by precluding Pega from attempting to authenticate and introduce its software evidence at trial. Pega had produced its software on a laptop during discovery and identified it on the pretrial exhibit list as “Pega Laptop Containing Version 6.3 and subversion (Physical Object)” and “Pega Laptop Containing Version 7.1 and subversions (Physical Object).” When Pega attempted to use the software at trial, the original discovery laptop proved inoperable, and Pega sought to use a different laptop containing the same software versions. The circuit court sustained Appian’s objection and required Pega to use only the original laptop, which ultimately did not work, and then refused to allow Pega to authenticate the software on a different laptop.
The Court rejected the argument that Pega’s exhibit identification was limited to the specific physical laptop rather than the software it contained. Given the express language identifying the software versions and the centrality of that software to the case, the Court found “the only fair reading of the identification is that the laptop was the medium on which the software was stored and had been produced in discovery, not that the laptop—as opposed to the software it contained—was the sole exhibit.” The Court noted that in an era of electronically stored information, treating the physical storage medium as the exclusive exhibit could lead to “disastrous results,” such as when a thumb drive is dropped and broken at trial.
The Court emphasized that Pega had offered to have Stephen Bixby, its development lead, authenticate the software by testifying that what Pega sought to use at trial was identical to what had been produced in discovery. Rather than allowing this authentication attempt, the circuit court categorically refused to permit it, stating it would not have “a trial within a trial.” The Court held this was unreasonable, noting that neither Appian nor the circuit court would have been required to accept Bixby’s testimony at face value. Appian could have cross-examined him, and the court could have rejected the authentication if unconvincing. By denying Pega any opportunity to establish that the software versions were identical to what had been produced, “without allowing Pega any chance to demonstrate that it was the exact software that had been produced in discovery,” the circuit court’s decision exceeded the bounds of reasonable discretion.
Evidence Concerning the Number of People with Access to Appian’s Software. The Supreme Court held that the circuit court erred in giving Jury Instruction #13-1, which told the jury that “[t]he numbers of users of the Appian platform and Appian Forum licensees are not relevant to any issue in this case, and any evidence as to those numbers should be disregarded.” This instruction was given after the circuit court had granted Appian’s motion in limine to exclude evidence regarding the total number of people who had access to Appian’s alleged trade secrets. The Court found that the circuit court abused its discretion by erroneously concluding that this admissible, relevant evidence was irrelevant.
The Court emphasized that the evidentiary bar for relevance is “exceedingly low” under Virginia law—evidence is relevant if it has “any tendency to make the existence of any fact in issue more probable or less probable than it would be without the evidence.” Applying this standard, the Court held that the number of people with access to Appian’s purported trade secrets could shed light on whether the information qualified as a trade secret under VUTSA. While sharing information with others does not necessarily eliminate trade secret protection, the total number of people who know the information is relevant to determining whether sufficient secrecy has been maintained. As the Court explained, “on a commonsense level, the more people who learn of a secret, the less likely it is that it will remain a secret.”
More specifically, the Court noted that the number of people with access bears directly on whether Appian took “efforts that are reasonable under the circumstances to maintain its secrecy,” as required by Virginia’s trade secrets statute. A rational factfinder could conclude that certain protective efforts might be reasonable if only five people know the information but inadequate if 30,000 people know it. The Court clarified, however, that while the number of people is relevant, it is “not dispositive”—trade secrets can be disclosed to many people and still receive protection if the disclosures were “made in confidence, express or implied,” while disclosure to just a handful without appropriate confidentiality measures could eliminate protection.