In a major ruling issued on July 30, 2024, the Supreme Court of Virginia in Pegasystems Inc. v. Appian Corp., 904 S.E.2d 247 (Va. 2024), reversed a $2.036 billion judgment in favor of Appian Corporation against its competitor Pegasystems Inc., holding that Appian failed to identify its trade secrets with reasonable particularity and did not present sufficient evidence of misappropriation. The ruling marks one of the most consequential trade secret decisions in Virginia history, and it underscores a central truth in trade secret law: a plaintiff cannot prevail on a theory of misappropriation without clearly articulating what the trade secrets are and how they were used.
As Charles Gideon Korrell notes, the Court’s opinion offers a clear message to plaintiffs: broad categories, functional descriptions, or circumstantial suspicion are not enough. To meet their burden under the Virginia Uniform Trade Secrets Act (VUTSA), plaintiffs must provide specific, credible evidence tying concrete trade secrets to the alleged misappropriation.
Background: A Contractor Between Two Worlds
Appian and Pegasystems are direct competitors in the enterprise software space, each offering low-code platforms for building business process applications. In 2012, Youyong Zou, a developer contracted to work with Appian through an outside staffing agency, was also hired by Pegasystems to provide consulting services. Appian alleged that this dual engagement enabled Pegasystems to exploit confidential knowledge about Appian’s proprietary software—knowledge Zou acquired while working on internal Appian projects.
At trial, Appian contended that Pegasystems used information from Zou to improve its competing product. A jury found in Appian’s favor and awarded over $2 billion in damages. The trial court denied Pegasystems’ post-trial motions, including for judgment notwithstanding the verdict.
But on appeal, the Supreme Court of Virginia found that Appian’s evidence did not meet the legal standard required to support its trade secret claims, and that the jury’s verdict could not stand.
The Court’s Analysis: Trade Secrets Must Be Specifically Identified
Central to the Court’s ruling was Appian’s failure to identify the specific trade secrets it claimed were misappropriated. The Court reiterated the principle that “a plaintiff must identify a trade secret with sufficient specificity so that it can be determined whether such information exists, whether it was misappropriated, and whether it is legally protectable.” (citing Collelo v. Geographic Services, Inc., 727 S.E.2d 55 (Va. 2012)).
Rather than presenting discrete technical data, formulas, or uniquely designed processes, Appian relied on broad categories and functional descriptions—for example:
- Appian’s “tempo” user interface
- The system’s performance debugging tools
- Code deployment and rollback capabilities
- Object type structure for application development
The Court found that these categories failed to describe what exactly was secret and how it differed from generally known or readily ascertainable information. The fact that a system included common enterprise software functions like performance testing or object design was not enough to show that those features embodied protected trade secrets.
“While Appian claims that these categories encompassed proprietary design decisions and architectural choices,” the Court explained, “it never described those decisions in a manner that would allow the court—or Pegasystems—to meaningfully evaluate their content.”
As Charles Gideon Korrell points out, this is a significant clarification for trade secret plaintiffs: “Functional descriptions are insufficient if they don’t map to specific technical content that the plaintiff can show was kept confidential and has independent value.”
The Burden of Proof and Sufficiency of the Evidence
Under VUTSA, a plaintiff bears the burden of proving:
- That the information qualifies as a trade secret;
- That the defendant misappropriated the trade secret; and
- That the misappropriation caused harm.
On all three fronts, the Court found Appian’s showing deficient.
1. Existence of a Trade Secret
Appian’s evidence never established precisely what the alleged trade secrets were. It relied heavily on expert testimony and high-level product comparisons, but the Court concluded that this did not substitute for actual definitions of the protected content.
The Court emphasized that expert witnesses cannot supply missing specificity post hoc:
“While expert opinion may help the jury understand the nature and importance of a trade secret, it cannot substitute for the plaintiff’s foundational obligation to identify the secret in the first place.”
Appian failed to differentiate between what was commonly known in the industry and what was uniquely developed by Appian. There was also little evidence that the company took reasonable steps to maintain secrecy beyond standard access controls and contractual obligations.
2. Misappropriation by Use
Even assuming trade secrets had been defined, the Court found the evidence of misappropriation lacking. Appian’s theory hinged on Zou’s dual role and timing overlaps between his work on Appian’s system and Pegasystems’ product development. But the Court held that circumstantial overlap alone cannot prove use.
No source code, design documents, or system architecture from Appian was shown to be present at Pegasystems. No direct evidence tied any particular Appian functionality to a corresponding feature at Pegasystems. While some internal Pegasystems strategy documents mentioned Appian, those materials reflected general competitive awareness—not evidence of secret appropriation.
In short, “Appian’s evidence invited the jury to speculate that misappropriation occurred”, but “speculation is not a substitute for proof.”
3. Causation and Damages
Because Appian failed to establish the existence and use of a trade secret, its damages case collapsed as well. The expert damages model was based on the assumption that misappropriation had occurred. With that assumption unsupported, the entire verdict lacked legal grounding.
As Charles Gideon Korrell observes, “Courts cannot defer to juries on questions where the foundational legal requirements—like what constitutes a trade secret—were never met.”
Broader Implications for Trade Secret Litigation
The Virginia Supreme Court’s ruling in Pegasystems v. Appian sends a strong message:
- High-dollar verdicts will not stand if the plaintiff cannot define its secrets.
- Expert opinion and jury sympathy cannot cure legal deficiencies in proof.
- Competitive access alone is not enough to support an inference of misappropriation.
For companies pursuing trade secret claims, this case is a vivid illustration of the need to:
- Define the trade secret precisely in discovery and trial filings;
- Separate protectable content from general industry knowledge;
- Connect specific use to specific information, not just general competition;
- Document efforts to maintain secrecy, not just rely on standard boilerplate.
For defendants, this decision reinforces a key defense strategy: press hard on the plaintiff’s ability to articulate its secrets with clarity and show evidence of misuse. If they can’t, the case may not survive appellate scrutiny.
Conclusion
In reversing one of the largest trade secret verdicts in state history, the Virginia Supreme Court has clarified and elevated the standard for proving misappropriation. Trade secret litigation, particularly among competitors in the software and technology industries, demands precision—not just in engineering, but in pleading and proof.
As Charles Gideon Korrell aptly puts it: “This case is a master class in how even blockbuster verdicts will fall if the legal fundamentals aren’t met. In trade secret cases, clarity is king.”