UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
Current Report
Pursuant to Section 13 or 15(d)
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Emerging growth company
If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
| Item 8.01. | Other Events. |
Pegasystems Inc. (the “Company”) today sent to its employees the email attached as Exhibit 99.1 with respect to the lawsuit styled Appian Corp. v. Pegasystems Inc. & Youyong Zou.
Note Regarding Forward-Looking Statements
The statements contained in this Form 8-K that are not purely historical may be “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995.
Words such as expects, anticipates, intends, plans, believes, will, could, should, estimates, may, targets, strategies, intends to, projects, forecasts, guidance, likely, and usually, or variations of such words and other similar expressions identify forward-looking statements, which are based on current expectations and assumptions.
These forward-looking statements are based on the Company’s current expectations and beliefs concerning future developments and their potential effects on the Company. While the Company’s expectations, beliefs and estimates are expressed in good faith and the Company believes there is a reasonable basis for them, there can be no assurance that future developments affecting the Company will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond the control of the Company) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by such forward-looking statements. These risks and uncertainties include, but are not limited to: unfavorable outcomes of existing or future litigation or dispute resolution proceedings; risks and other uncertainties associated with assumptions and estimates used to prepare financial statements; and other risks and uncertainties discussed under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021 filed on February 16, 2022, under the heading “Risk Factors” in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2022 filed on April 28, 2022, under the heading “Risk Factors” in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2022 filed on July 27, 2022, under the heading “Risk Factors” in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2022 filed on October 26, 2022, and in other reports that we file with the Securities and Exchange Commission from time to time. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable laws.
The forward looking statements in this Form 8-K represent our view as of February 7, 2023.
| Item 9.01 | Financial Statements and Exhibits |
| Exhibit No. |
Description | |
| 99.1 | Email to employees of Pegasystems Inc. sent February 7, 2023 | |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL) | |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Pegasystems Inc. | ||||||
| Dated: February 7, 2023 | By: | /s/ KENNETH STILLWELL | ||||
| Kenneth Stillwell | ||||||
| Chief Operating Officer and Chief Financial Officer (Principal Financial Officer) | ||||||
Exhibit 99.1
Team Pega,
I wanted to update everyone on an important milestone in the Appian case.
Yesterday we filed our appeal (https://www.pega.com/february-2023-appeal/) with the Court of Appeals of Virginia. This allows us to share – in detail – the reasons we feel this unprecedented ruling is indefensible. As legal documents go, I think you’ll find it to be a compelling and, at times, shocking read – one that’s free from Appian’s theatrics. We’ve continually expressed confidence in the strength of our appeal, and you’ll see why after reading the document and summary below.
Feel free to share this information with any clients or partners who may still have questions. We think anyone reading this will come to the same unmistakable conclusion we did – that the case contains little more than sensationalism, and the judgment is the result of factual and legal errors and must be overturned.
These documents, and our past communications about the lawsuit, are available on www.pega.com/appian-lawsuit-statement. This marks a critical step in righting this wrong, and we’ll continue to update you on any major developments as we move through the process.
Thanks,
Ken
Ken Stillwell | Chief Operating Officer and Chief Financial Officer | Pegasystems Inc.
Appian v. Pegasystems: Summary of Pega’s Appeal
Case background
Appian sued Pega in a Virginia county court for misappropriating ‘trade secrets’ between 2012-2014. Back in 2012, Pega’s then head of competitive intelligence (now in that same role at Appian) engaged a consultant to demonstrate Appian’s widely available product. Appian claimed these common demonstrations included ‘trade secrets’ and that Pega copied some of the features into its own products to save Pega from suddenly becoming ‘obsolete and irrelevant’ in 2013.
But as Pega’s appeal makes clear, not only were most of these ‘secrets’ readily observable to outsiders, they were already present in Pega’s products. Nonetheless, numerous errors by the court fueled a jury finding in favor of Appian with the largest award in Virginia court history.
Below is a summary of some of the key errors in this egregious judgment detailed in Pega’s appeal filing:
Appian’s claims don’t qualify as ‘trade secrets’
Appian made its platform and accompanying features available to thousands upon thousands of people without any confidentiality requirements and often without even knowing their identities. The company also gave explicit permission to software resellers – so many that it lost count – to freely demonstrate to anyone they wished. Potential customers were also free to take unlimited screenshots and videos of these demos and to share them however they liked. In doing so, Appian
failed the basic threshold requirement of keeping a ‘trade secret’ secret, forfeiting the right to legal protection. By allowing the verdict to stand despite the absence of any trade secrets, the trial court committed a fundamental error in interpreting the law.
The court improperly stopped the jury from hearing crucial evidence
The trade secret mistake was just one of numerous errors. For example, Pega was also prevented from demonstrating earlier versions of its own software. This would have let jurors see for themselves that Pega long before had the features Appian claimed were copied. In addition, the court stopped the jury from learning that most of Pega’s business is unrelated to Appian’s claims.
The court flipped the law on proving damages on its head
Compounding these errors, the court adopted an unprecedented (and incorrect) approach to how the jury should consider damages. Virginia’s trade secrets law requires Appian to prove the alleged misappropriation caused the damages Appian sought. Instead, the court only required Appian to point to the amount of Pega’s total revenue over an eight-year period – and then moved the burden to Pega to prove that revenue was not subject to any damages. This wrongly presumed every penny of Pega’s revenue during that time was driven by Appian’s ‘secrets,’ even though much of it came from other product lines wholly unrelated to this case.
The language of the law is clear, and by ignoring it, the court improperly enabled a sky-high award.
The trial court’s judgment should be overturned
A correct interpretation on any of these issues should have been enough to rule in Pega’s favor. Pega asks the Court of Appeals to overturn the judgment and either rule in Pega’s favor or order a new trial on some or all issues. Written exchanges on the appeal are expected to be completed in the next 90 days, with oral arguments anticipated in summer 2023 and a written opinion issued some months later. Any potential appeal by either party to the Supreme Court of Virginia would follow. The full brief can be found here (https://www.pega.com/february-2023-appeal/).
Document and Entity Information |
Feb. 07, 2023 |
|---|---|
| Cover [Abstract] | |
| Entity Registrant Name | PEGASYSTEMS INC |
| Amendment Flag | false |
| Entity Central Index Key | 0001013857 |
| Document Type | 8-K |
| Document Period End Date | Feb. 07, 2023 |
| Entity Incorporation State Country Code | MA |
| Entity File Number | 1-11859 |
| Entity Tax Identification Number | 04-2787865 |
| Entity Address, Address Line One | One Main Street |
| Entity Address, City or Town | Cambridge |
| Entity Address, State or Province | MA |
| Entity Address, Postal Zip Code | 02142 |
| City Area Code | (617) |
| Local Phone Number | 374-9600 |
| Written Communications | false |
| Soliciting Material | false |
| Pre Commencement Tender Offer | false |
| Pre Commencement Issuer Tender Offer | false |
| Security 12b Title | Common Stock, $.01 par value per share |
| Trading Symbol | PEGA |
| Security Exchange Name | NASDAQ |
| Entity Emerging Growth Company | false |