IP Law Daily, TRADE SECRETS—Va. Sup. Ct.: JMOL denied in $2B business process management software dispute, but new trial ordered, (Jan 9, 2026)

By Ravindra Kumar Singh, B.L.

Virginia Supreme Court affirmed Court of Appeals’ determination that the trial court committed multiple reversible errors.

The Supreme Court of Virginia has affirmed the judgment of the Court of Appeals that had nullified a Fairfax County jury’s award of $2.036 billion in damages to software developer Appian Corporation for a competitor’s misappropriation of trade secrets related to Appian’s proprietary platform features and internal product weaknesses. The court found there was sufficient evidence for a reasonable juror to find that the Virginia Uniform Trade Secrets Act (VUTSA) was violated, but the state supreme court agreed that the trial court committed several critical errors during the trial. These errors included shifting to Pega the burden of proving damages, excluding critical defense evidence, and preventing Pega from authenticating and introducing software evidence. Although the state high court agreed with the intermediate appellate court that the trial court did not err in denying the defendant’s motions to strike and to set aside the verdict as a matter of law, the supreme court also agreed with the appellate court that the trial court’s evidentiary errors and instruction missteps necessitated a retrial (Appian Corp. v. Pegasystems Inc., No. 240736 (Va. Sup. Ct. Jan. 8, 2026)).

Background. Appian Corporation is a Virginia-based software developer specializing in “low-code” business process management (BPM) platforms, which automate complex workflows for enterprises. Its chief competitor in the BPM space is Massachusetts-based Pegasystems Inc. (“Pega” for short), a long-established vendor in the same market. Both companies frequently compete for large commercial and government technology contracts and have been described as “aggressively direct competitors.”

In early 2012, Pega hired a government contractor, Youyong Zou, through a staffing firm to perform a covert competitive analysis of Appian’s platform. Zou, employed by Serco (a licensed Appian partner), had privileged access to Appian’s secure developer portal, “Appian Forum.” Appian asserted that Pega used this insider relationship to gain unauthorized access to Appian’s confidential documentation, system architecture, and software tutorials.

Appian alleged that Pega, through Zou’s access, misappropriated trade secrets relating to Appian’s proprietary platform features and internal product weaknesses. Five product features were cited by Appian’s expert Dr. Richard Marshall as having been replicated in Pega’s software based on Zou’s input: (1) Smart services enabling low-code automation of complex actions; (2) Ease of editing processes without re-navigating the UI; (3) Custom data types for structuring grouped information; (4) “Out-of-the-box” mobile compatibility across devices; and (5)A unified social interface integrating collaboration with workflow.

Additionally, Appian expert Dr. Eric Cole identified seven internal platform “weaknesses” that Pega exploited in its marketing and sales strategies, including issues with reporting tools, process model locking, and checkpoint configuration—information Pega acquired through Zou’s internal access.

Appian initiated litigation in 2020 in Fairfax County Circuit Court, asserting trade secret misappropriation under VUTSA and other related claims. The jury found in Appian’s favor after a seven-week trial and awarded approximately $2.036 billion in damages against Pega and $5,000 against Zou.

Pega appealed. The Court of Appeals of Virginia rejected Pega’s contention that Appian failed to establish misappropriation of any trade secret as a matter of law. However, it agreed with Pega that the trial court erred in several ways, requiring it to reverse the entire judgment. Specifically, the appellate court held that the trial court had: (1) instructed the jury (Instruction #14) that Pega bore the burden of disproving damages attributable to the misappropriation; (2) erroneously excluded damages rebuttal evidence due to discovery disputes; (3) prevented Pega from authenticating and introducing versions of its software; and (4) instructed the jury (Instruction #13-1) to disregard evidence of how many users had access to Appian’s software. Appian then appealed to the Virginia Supreme Court.

Sufficiency. The Supreme Court began its analysis by rejecting Pega’s cross-appeal that Appian had failed to prove the existence or misappropriation of a trade secret under the VUTSA. Applying MicroStrategy Inc. v. Li, 268 Va. 249 (2004), the Court reiterated that the existence of a trade secret and whether it was misappropriated are fact questions properly reserved for the jury.

The Court found that the evidence—including Pega’s concealment of Zou’s identity, use of aliases, internal references to him as an “Appian spy,” and reliance on confidential documentation—was sufficient for a rational jury to conclude that Pega acquired and used protected trade secrets. The fact that Zou had access through a partner company under confidentiality terms, and that the materials were marked “confidential” and subject to clickwrap agreements, further supported the jury’s conclusion.

Burden of proof on damages. The Court agreed with the Court of Appeals that Jury Instruction #14 misstated Virginia law by shifting the burden of proving damages to the defendant. The instruction had stated that Appian bore the burden of showing Pega’s sales but that Pega had the burden of proving what portion of those sales were not attributable to misappropriation.

The Court held that such burden-shifting was inconsistent with Virginia’s common law principles, which require the plaintiff to establish both causation and quantum of damages. Citing Wicks v. City of Charlottesville, 215 Va. 274 (1974), and Banks v. Mario Indus., 274 Va. 438 (2007), the Court found that VUTSA does not modify this rule. It rejected Appian’s reliance on Restatement (Third) of Unfair Competition § 45 cmt. f, emphasizing that Virginia adheres to traditional burden-allocation principles unless the legislature clearly abrogates them—which it did not.

Discovery disputes. The Supreme Court also affirmed that the trial court had abused its discretion in precluding Pega from offering evidence that a substantial portion of its revenue was from products unrelated to BPM platforms. The trial court had interpreted Pega’s response to Interrogatory #18 as a waiver of any such defense. However, the Court noted that the interrogatory only sought revenues tied to specific software versions (6.3 and 7.0), not Pega’s entire product line.

The Court found that the exclusion of testimony from Pega’s CEO and damages expert about non-competing products was improper and prejudicial, particularly where Appian had been on notice through expert disclosures that Pega contested the scope of damages.

Software authentication. The Court next addressed the trial court’s refusal to allow Pega to authenticate versions of its software using a substitute laptop. The original laptop provided in discovery had become inoperable during the trial. Pega offered to authenticate identical software versions through a senior developer, but the trial court summarily denied any authentication attempt.

The Supreme Court ruled this exclusion was an abuse of discretion. The key issue was whether the software sought to be shown was identical to the software produced in discovery. The trial court’s categorical bar, without allowing a foundational showing, exceeded the permissible range of discretionary trial management as described in Palmyra Assocs., LLC v. Comm’r of Highways, 299 Va. 377 (2020).

Instructions on user access. The Court held that Instruction #13-1, which told the jury that the number of users with access to Appian’s software was irrelevant, was legally incorrect. Under Code § 59.1-336, the “secrecy” of the alleged trade secret is a required element. The number of persons with access could “cast light” on whether reasonable steps had been taken to maintain secrecy. Thus, the instruction improperly removed a key factual consideration from the jury’s deliberations. In the court’s words, “On a commonsense level, the more people who learn of a secret, the less likely it is that it will remain a secret. Therefore, the total number of people with the information may shed light on whether the information can be learned from publicly available sources.”

The Court clarified that while secrecy need not be absolute (per Dionne v. Southeast Foam, 240 Va. 297 (1990)), the reasonableness of protective measures—including user access numbers—is a fact-sensitive inquiry and cannot be disregarded wholesale by instruction.

Conclusion. Thus, the Supreme Court of Virginia affirmed the judgment of the Court of Appeals. The original $2.036 billion judgment stands vacated due to significant errors in the original trial. The case now returns to for a new trial on Appian’s VUTSA claim.

The case is No. 240736.

Judge: Russell, W.

Attorneys: Adeel A. Mangi (Patterson Belknap Webb & Tyler LLP) for Appian Corp. E. Joshua Rosenkranz (Orrick, Herrington & Sutcliffe LLP) for Pegasystems, Inc.

Companies: Appian Corp.; Pegasystems, Inc.

MainStory: TopStory TradeSecrets TechnologyInternet VirginiaNews GCNNews