Pegasystems, Inc. v. Appian Corp.

463 F.Supp.3d 152

PEGASYSTEMS, INC., Plaintiff/Counterclaim Defendant,

v.APPIAN CORPORATION, Defendant/Counterclaim Plaintiff,and Business Process Management, Inc., Defendant.

Civil Action No. 19-11461-PBS

United States District Court, D. Massachusetts.

Filed May 22, 2020

August T. Horvath, Pro Hac Vice, Foley Hoag LLP, New York, NY, David A. Kluft, Kristopher N. Austin, Nicole Kinsley, Foley Hoag LLP, Boston, MA, for Plaintiff/Counterclaim Defendant.

Adeel A. Mangi, Isaac J. Weingram, Pro Hac Vice, Michael Sochynsky, Pro Hac Vice, Terra Hittson, Jonah M. Knobler, Pro Hac Vice, Patterson, Belknap, Webb & Tyler LLP, New York, NY, Timothy H. Madden, Donnelly, Conroy & Gelhaar, LLP, Boston, MA, for Defendant/Counterclaim Plaintiff Appian Corporation.

David Michael Magee, Donovan Hatem, LLP, Boston, MA, for Defendant Business Process Management, Inc.

MEMORANDUM AND ORDER

Saris, D.J.

INTRODUCTION

Appian Corporation and Pegasystems, Inc. are competitors in the area of "business process management" software. In this false advertising case, the Court previously allowed in part and denied in part Appian's motion to dismiss Pegasystems’ claims. See Pegasystems, Inc. v. Appian Corp. ("Pegasystems I"), 424 F. Supp. 3d 214, 226-27 (D. Mass. 2019). The Court assumes familiarity with that opinion.

Pegasystems now moves to dismiss Appian's counterclaims, which allege violations of the Lanham Act, 15 U.S.C. § 1125(a)(1)(B) ; Mass. Gen. Laws ch. 93A ("Chapter 93A"); commercial disparagement; and defamation, in connection with four separate fact patterns. After review of the parties’ briefs, the Court ALLOWS IN PART and DENIES IN PART Pegasystems’ motion to dismiss [Dkt. 82]. The motion is allowed as to the IBM Whitepaper and PegaWorld 2019 Presentations but denied as to the Sinur Paper and LinkedIn Post.

FACTUAL BACKGROUND

The following facts come from the counterclaim complaint and must be taken as true at this stage. See Newman v. Lehman Bros. Holdings Inc., 901 F.3d 19, 23 (1st Cir. 2018).

I. IBM Whitepaper

In March 2011, Pegasystems posted on its website a publication titled "Pega BPM System z Benchmark Test Results" (the "IBM Whitepaper"). The paper provided the results of testing done in collaboration with IBM to determine if Pegasystems’ platform could be "effectively deployed across an entire corporate enterprise ... with a servicing population of approximately 10,000 users." Dkt. 71 at 22. The paper concluded that Pegasystems "met or exceeded all performance goals" for the testing. Id. at 23.

Appian's claims are based on the fact that the testing employed the IBM System z processor, "a $26-million machine — the highest-end and most expensive mainframe IBM sold in its class at the time." Id. Appian alleges that "extremely few (if any) Pegasystems customers would ever be using such a powerful supercomputer to run Pegasystems’ software." Id. Appian also alleges the paper currently misleads consumers because the testing was performed on a long-discontinued version of Pegasystems’ platform.

II. PegaWorld 2019 Presentations

Pegasystems hosts an annual conference called PegaWorld, attended by over 6,000 people. Appian alleges that at the 2019 conference, Pegasystems executives made "false statements ... designed to exaggerate narrow claims regarding Pegasystems’ products by third parties and to present them as statements relating to broader areas of wider relevance to customers." Dkt. 71 at 24. The allegedly false statements, which remain available by video on Pegasystems’ website, included:

• Stating that Pegasystems has "40,000+ certified professionals globally" when that number included professionals whose certification had expired or whose certification was for an older version of Pegasystems’ software. Id. at 28.

• Stating that independent analyst Gartner had "declared Pega as the Digital Process Automation leader for many years in a row" with a graphic taken from Gartner's Magic Quadrant for Intelligent Business Process Management Suites. Id. at 25.

• Stating that Pegasystems "get[s] accolades from analysts" while displaying the four charts below, three of which Appian alleges were "falsely and misleadingly captioned." Id. at 26.

Specifically, Appian alleges that the second chart from the left is labeled "Digital Process Automation" but came from a report on "Software For Digital Process Automation For Deep Deployments"; the third chart is labeled "Real-Time Decisions & AI" but came from a report on "Real-Time Interaction Management"; and the fourth chart is labeled "End-to-End Work Management" but came from a report on "Intelligent Business Process Management." Id. at 26-27.

III. Sinur Paper

On February 24, 2014, Jim Sinur published a six-page paper titled "Appian and Pegasystems – Head to Head Comparison" (the "Sinur Paper"). The paper was published exclusively on Pegasystems’ website. It was removed from the website in January 2019.

The paper features a short biography of Sinur, in which he is described as "an author and independent thought leader in applying business process management (BPM) to innovative and intelligent business operations (IBO)." Dkt. 71-1 at 8. The biography also references Sinur's prior experience at Gartner, a global research and advisory firm.

The paper does not explain its objective or methodology, beyond one reference to what Sinur "saw" "[w]hile at Gartner." Id. at 7. For both Pegasystems and Appian, the paper discusses each platform's advantages, challenges, and two case studies. In its "Final Summary," the paper recommends:

If you are picking one over the other, you need to look at the nature of the processes you will attempt over time. If they are strategic, pick Pega. If you happen to own both tools, use Appian for tactical standalone processes that will not grow in performance needs and use Pega for strategic and wide impact processes.

Id.

In March 2014, a Pegasystems executive tweeted a link to the paper along with text reading, "Great comparison of @pega vs @appian via @JimSinur shows why our technology is better business software." Dkt. 71 at 21-22. Also in March 2014, a blog post by an Appian competitor, Bizagi, called the paper "a tongue-lashing from an industry analyst and thought leader, Jim Sinur" and noted that "[t]he report claims to ‘look objectively at the strengths and weaknesses of both vendors.’ " Id. at 21.

Appian alleges on information and belief that the Sinur Paper was commissioned by Pegasystems and that Pegasystems "influenced its content." Dkt. 71 at 18.¹ The Sinur Paper nowhere discloses a commission.

IV. LinkedIn Post

Soon after the publication of this Court's opinion denying in part Appian's motion to dismiss, a Pegasystems executive published a post on LinkedIn (the "LinkedIn Post") that read, "We all encounter examples of business ethics we find questionable ... patent trolls, paid content promoted as ‘unbiased truth,’ and sometimes just blatant lies. I'm proud to work for a company that is not afraid to undertake the unpleasant action of litigating against those whose actions we believe are unlawful and unethical. If you're thinking about Appian, you should read this first ..." Dkt. 71 at 29-30.

The post then shared a link to a third-party blog. The linked post, by the Boston-area community news blog Universal Hub, discussed this Court's motion-to-dismiss decision and wrote that "Pegasystems ... [had] shown enough proof" of its claims against Appian to "make its case to a jury." Dkt. 88 at 11. The LinkedIn Post was reposted or "echoed" by seven other Pegasystems’ employees on LinkedIn. Dkt. 71 at 30.

MOTION TO DISMISS STANDARD

In analyzing whether a complaint states a claim under Rule 12(b)(6), the Court sets aside conclusory statements and examines only the pleader's factual allegations. See Ashcroft v. Iqbal, 556 U.S. 662, 679, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ " Id. at 678, 129 S.Ct. 1937 (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id.

DISCUSSION

The Court assumes familiarity with its prior Order in Pegasystems I and does not repeat the legal standards applicable to the counterclaims under the Lanham Act, Chapter 93A, or commercial disparagement, except as necessary.

I. IBM Whitepaper

In connection with the IBM Whitepaper, Appian brings claims under the Lanham Act and its Chapter 93A corollary. Pegasystems argues Appian's claims regarding the IBM Whitepaper fail because the paper contains no false or misleading statements.

Appian asserts it is "false or misleading" for Pegasystems to claim that the IBM Whitepaper showed the Pegasystems platform could be scaled "across an entire corporate enterprise" of "approximately 10,000 users" when the test used a computer too expensive for most businesses to afford, the IBM System z processor. See Dkt. 71 at 22-23. However, that caveat is obvious from the paper's title and from the website's description of the paper, "IBM and Pega System z Benchmark Shows Near Linear Scalability." Id. at 23 (emphasis added). Any potential customer reading the paper would immediately know that the System z processor was used to conduct the test. Appian does not allege that the test results were misreported or that the paper asserted they could be achieved on another, less expensive computer system. Particularly given the technically savvy consumer base for the products at issue, a limitation contained in the title of the paper cannot give rise to a Lanham Act false advertising claim.

Appian also alleges the IBM Whitepaper was false or misleading because it remained available on Pegasystems’ website long after the Pegasystems version that was tested...