Appian surges almost 40%, Pegasystems plunges on trade-secret trial verdict

ipopba/iStock via Getty Images

It was easy to see who was the winner and who was the loser between Appian (NASDAQ:APPN) and Pegasystems (NASDAQ:PEGA) following a ruling in a Virginia court in a case involving trade secrets between the two application software rivals.

Appian (APPN) shares surged almost 40%, Tuesday, after a jury in the Circuit Court for Fairfax County, Virginia awarded the company $2.036 billion in damages from Pegasystems (PEGA) for trade secret misappropriation in violation of the Virginia Computer Crimes Act. In a statement, Appian (APPN) said the jury determined that Pegasystems (PEGA) had engaged in "willful and malicious" misappropriation of Appian (APPN) trade secrets.

Appian (APPN) said it brought the case to ensure the protection of its trade secrets and proprietary intellectual property. Chief Executive Matt Calkins was direct in with his opinion of the court's verdict.

"It is good news. It's also the right news," Calkins said in an interview with Seeking Alpha. "We're very pleased to see this outcome. It is justified and shows the length and gravity of [Pegasystems'] misdeeds."

At issue was Appian (APPN) charging Pegasystems (PEGA) with hiring an employee of a government contractor to give Pegasystems (PEGA) access to Appian (APPN) software. In a statement, Appian (APPN) said that Pegasystems (PEGA) "instructed its third-party contracting service to recruit someone who was not 'loyal' to Appian (APPN)" to gather the company's technological information.

Appian (APPN) said the contractor "worked as a developer in the Appian software under a government contract, [and] violated his employer's code of conduct and his employer's agreement with Appian by providing access to an Appian competitor."

Christopher Winters, Appian's (APPN) general counsel, said in a statement that the company was "grateful" with the jury's verdict, and that "the award of substantial damages to Appian is entirely appropriate given the nature and extent of what Pegasystems did."

As much as investors cheered the decision in Appian's (APPN) favor, they also showed how negatively they viewed the ruling toward Pegasystems (PEGA) and drove that company's shares down by more than 20% in reaction to the jury's verdict.

Pegasystems (PEGA) may appeal the verdict. The company didn't immediately return a request for comment.

Wedbush analyst Dan Ives said in report that while Pegasystems (PEGA) could appeal the verdict, the reaction from investors suggests that "[Wall] Street is reading this ruling as cemented rather than a very long process that could have a much different outcome possibly through appeal."

Last week, Appian (APPN) reported better-than-expected first-quarter results.