Pegasystems Inc. v. Appian Corp.

633 F.Supp.3d 456

PEGASYSTEMS INC., Plaintiff, v. APPIAN CORPORATION and Business Process Management, Inc., Defendants.

Civil Action No. 19-11461-PBS

United States District Court, D. Massachusetts

Signed September 30, 2022

August T. Horvath, Pro Hac Vice, James M. Gross, Pro Hac Vice, Mital B. Patel, Pro Hac Vice, Foley Hoag LLP, New York, NY, Kristopher N. Austin, Nicole Kinsley, Foley Hoag LLP, Boston, MA, Mark S. Puzella, Orrick, Herrington & Sutcliffe LLP, Boston, MA, Richard G. Baldwin, Nystrom Beckman & Paris LLP, Boston, MA, for Plaintiff.

Adeel A. Mangi, Isaac J. Weingram, Pro Hac Vice, Michael Sochynsky, Pro Hac Vice, Sara A. Arrow, Pro Hac Vice, Andrew M. Willinger, Pro Hac Vice, Bonita L. Robinson, Pro Hac Vice, Jason R. Vitullo, Pro Hac Vice, Steven A. Zalesin, Pro Hac Vice, 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 Appian Corporation.

David Michael Magee, Karl Fisher, Armstrong Teasdale LLP, Boston, MA, for Defendant Business Process Management, Inc.

MEMORANDUM AND ORDER

Saris, District Judge

INTRODUCTION¹

Plaintiff Pegasystems Inc. sued Defendants Appian Corporation and Business Process Management, Inc., accusing them of false advertising and commercial disparagement arising from an online report that portrayed Pegasystems unfavorably in the marketplace. Appian filed parallel counterclaims against Pegasystems accusing it of false advertising and commercial disparagement in its marketing materials. After protracted discovery, Defendants moved for summary judgment on Pegasystems' claims and Pegasystems cross-moved for partial summary judgment on its claims and moved for summary judgment on Appian's counterclaims. After hearing, the Court ALLOWS IN PART and DENIES IN PART Defendants' motions for summary judgment, DENIES Pegasystems' cross-motion for partial summary judgment on its claims, and ALLOWS IN PART and DENIES IN PART Pegasystems' motion for summary judgment on Appian's counterclaims.

FACTUAL BACKGROUND

The following facts are undisputed except where stated. Pegasystems and Appian are publicly traded companies that compete in the business process management ("BPM") software field. BPM software applications allow enterprises to automate and optimize their business processes and functions. Pegasystems and Appian typically sell their BPM platforms for millions of dollars to large corporations or government agencies. The industry is competitive, with many vendors besides Pegasystems and Appian all competing in the BPM software space.

Defendant Business Process Management, Inc. ("BPM.com"), led by Nathaniel Palmer, operated the BPM.com website, which reported on the BPM industry.

This case concerns various marketing materials that Appian and Pegasystems promulgated about each other, purportedly containing falsehoods.

A. Appian Marketing Materials - The BPM.com Report

Pegasystems challenges the BPM.com Report, an Appian document that Pegasystems alleges constituted false advertising. Appian hired BPM.com to prepare the Report in 2018, and it was published on both the BPM.com and Appian websites on or around May 16, 2019.² Appian paid BPM. com $55,000 under the contract for the report. The contract provided that BPM. com would conduct market research and produce a white paper that would "clearly identify and articulate[ ] the value delta of Appian over Pega." Dkt. 575-64 at 5. The process of shaping the market survey and drafting the white paper was iterative between BPM.com and Appian, and the parties hotly contest whether the survey methodology was sound.

The BPM.com Report presented survey responses from customers of various BPM vendors, most notably Appian, Pegasystems, and IBM. The report published findings about each vendor across four areas: (1) total cost of ownership ("TCO"); (2) project team breakdown and total FTEs (i.e., full-time equivalents); (3) time to market/speed of application delivery; and (4) enterprise platform vs. departmental silos. The report's results and associated commentary portrayed Appian more favorably than its competitors, including Pegasystems. For example, the report stated that "Pega customers reported spending on average 11 times more than Appian customers, and nearly twice that of IBM customers." Dkt. 575-6 at 11. It also said that "Appian customers reported delivery on average in one-fifth the amount of time cited by Pega customers, and nearly 3 times faster than IBM customers." Id. As to FTEs, the BPM.com Report warned that "Pega customers required about 5 times more FTEs on average than Appian customers (who cited the lowest TCO)." Id. And with regard to enterprise-wide deployments, the report touted Appian for having "the most responses for enterprise-wide deployments (59% of all deployments)." Id.

Appian encouraged its sales team to use the BPM.com Report, particularly when competing against Pegasystems. Appian further promoted the BPM.com Report by emailing it to customers and partners, sharing it through social media, and using a third-party marketing company to publicize the report.

B. Pegasystems Marketing Materials

In its counterclaims, Appian challenges a series of Pegasystems documents that Appian asserts amounted to false advertising (the "Pegasystems Marketing Materials").

1. Scalability White Paper and Slide Deck

In March 2012, then-Pegasystems employees John Petronio and Michael Caton (who both now work for Appian) developed the Scalability White Paper. The paper was titled "Appian Scalability Limitations." Dkt. 575-86 at 46. The Scalability White Paper noted that some BPM initiatives fail because organizations do not understand the importance of scalability. The paper summarized its findings as follows:

This paper outlines the differences between the BPM solutions from Pega and Appian, a privately-held, "pure play" BPM vendor. While Appian has a number of capabilities that will demonstrate well in a pilot project, when faced with real-world scalability challenges, we believe Appian to have many limitations that threaten an organization's success. Pega's solution is far more scalable for enterprises.

Id.

The Scalability White Paper compared Pegasystems favorably to Appian across several factors that bear on each platform's scalability. In making these comparisons, the Scalability White Paper made several claims that Appian asserts are false, including:

• "Appian lacks basic backend performance/tuning tools." Id. at 49.

• "There is no way to have more than one person working on a process at one time." Id. at 51.

• "Because Appian requires a great deal of JavaScript, especially for the user interface, it is not truly model-driven." Id. at 54.

In contrast, the paper concluded that "Pega is a platform for modernization. It is agile and adaptive, can handle complexity to not only perform under load but [also to] allow organization[s] to automate processes and tasks. Furthermore, it will allow organizations to leverage existing investments in enterprise applications." Id. at 62.

The Scalability Slide Deck accompanied the Scalability White paper, and was titled "Why Appian is Not the Choice for Enterprise BPM." It contained just one substantive slide, which purported to score both Pegasystems and Appian across ten factors related to scalability. Pegasystems outscored Appian for each factor, with Pegasystems averaging a 9.50/10 and Appian averaging a 4.16/10. The deck does not reveal how Pegasystems arrived at these scores.

Pegasystems shared the Scalability White Paper externally at least six times before September 3, 2015, and the Scalability Slide Deck at least once in May 2012. Appian asserts that Pegasystems likely shared these documents externally on additional occasions that were not in the summary judgment record.

2. Technical Competitive Brief

While still employed at Pegasystems, Petronio and Caton created the original version of the Technical Competitive Brief, a document titled "Understanding Appian," in August 2012. As with the Scalability White Paper, the Technical Competitive Brief maligned Appian's scalability. A May 2014 version of the Technical Competitive Brief stated that Appian:

[L]acks the ability to reuse and manage versions. It has no tools for capturing objectives, testing and troubleshooting performance. It lacks key capabilities needed to scale and manage running systems. It lacks depth with integration, decision management and analytics. In short, Appian lacks the power to manage enterprise challenges and complexities.

Dkt. 596-105.

The various versions of the Technical Competitive Brief make several additional claims about Appian's scalability that are similar to those in the Scalability White Paper. See id.

Pegasystems shared the Technical Competitive Brief externally on at least thirty occasions to a total of fifteen organizations between its publication and November 2017. Pegasystems also circulated both the Scalability White Paper and the Technical Competitive Brief to its internal sales force to provide salespersons with talking points.

3. Sinur Paper

Pegasystems and Appian were competing over projects at Bank of America in early 2014. Around that time, Pegasystems hired Jim Sinur, a researcher and influencer within the BPM community, to draft a report comparing Pegasystems' and Appian's platforms. Pegasystems paid Sinur $5,000 to draft the Sinur Paper. Pegasystems provided Sinur with the contents of the Technical Competitive Brief before he began drafting the paper and conveyed to Sinur that Pegasystems wished to portray Appian's platform as less scalable than Pegasystems'. Upon receiving Sinur's initial draft, Pegasystems personnel edited the document after concluding that it was too slanted toward Pegasystems and would (correctly) appear to be a Pegasystems-commissioned piece.

The final Sinur Paper was dated February 24, 2014, and titled "Appian and Pegasystems - Head to Head Comparison." Dkt. 596-71 at 3. It did...