Pegasystems Inc. v. Appian Corporation

UNITED STATES DISTRICT COURT

DISTRICT OF MASSACHUSETTS

________________________________________

)

PEGASYSTEMS INC., )

)

Plaintiff, )

) Civil Action

v. ) No. 19-11461-PBS

)

APPIAN CORPORATION and BUSINESS PROCESS )

MANAGEMENT, INC., )

)

Defendants. )

______________________________ )

MEMORANDUM AND ORDER

September 30, 2022

Saris, D.J.

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

1 The Court assumes familiarity with its prior opinions in this

case. See Pegasystems, Inc. v. Appian Corp., 424 F. Supp. 3d 214

(D. Mass. 2019) (“Pegasystems I”); Pegasystems, Inc. v. Appian

Corp., 463 F. Supp. 3d 152 (D. Mass. 2020) (“Pegasystems II”).

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

2 BPM.com took down the report in July 2019, and Appian removed

it from its website on or around January 17, 2020.

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 not disclose that Pegasystems commissioned the paper.

The document highlighted the “advantages” and “challenges” of both

companies. It concluded that “Appian has a highly appealing tool

from a visual and pricing perspective” but its approach leads to

“far greater total cost of ownership (TCO),” while “Pega does cost

more, but it supports these two critical strategies [i.e., reuse

and end-to-end processes] perfectly to keep the overall TCO much

lower over time.” Id. at 8. The report ended, “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.

Appian points to several claims in the Sinur Paper that it

views as false, including:

•

“While Appian has shown success in departmental

implementations, there is little evidence of cross

organizational process implementations. There is almost no

evidence of transformational implementations that have

enabled an organization to transform its business

incrementally on a large scale with deep business change.

In addition, there is not a significant mass of

professional support that would help an organization scale

to transformational efforts with only 600 consultants.”

Id. at 5.

•

“Appian’s vertical focus has been primarily in government.

In the past few years, Appian has started to develop

inroads in other verticals, including mid-sized banks,

healthcare, and utilities. Many of these implementations

are aimed at the functional level.” Id. at 4.

•

“Many of Appian’s implementations remain in the cloud once

in production.” Id.

Pegasystems hosted the Sinur Paper on its website from

approximately March 2014 to January 2019. It encouraged its sales

force to direct clients to the Sinur Paper.

Pegasystems also used statements in the Sinur Paper in other

marketing materials. In March 2016, Pegasystems created a document

called the “Appian vs. Pega 7 BPM Comparison Chart” (the

“Competitive Comparison Chart”) for use with prospective client

Intel Corporation, which was considering both companies for its

enterprise BPM platform. The Competitive Comparison chart quoted

many of the statements that Appian challenges from the Sinur Paper

and attributed them to Sinur. Similarly, in May 2018, Pegasystems

created a document titled “Pega vs. Appian Technology Assessment”

(the “Technology Assessment”) that linked to the Sinur Paper and

quoted many of its claims about Appian’s ability to scale.

Pegasystems used the Technology Assessment to compete for an

opportunity with the Social Security Administration that the two

companies were vying for.

4. Pega 7 vs. Appian Comparison

The Pega 7 vs. Appian Comparison is a Pegasystems-branded

slide deck that Caton created in January 2015. It listed several

software capabilities and their benefits, then stated whether the

two companies had these capabilities; in all cases, the deck listed

Pegasystems as having the capabilities but in many cases Appian

did not. For example, the deck described Pegasystems as having,

and Appian as lacking, a “[c]ollaborative, concurrent development

environment” which “[s]peeds development by ensuring developers

can work on different aspects of an application simultaneously,

while having access to end user feedback mechanisms within the

development environment to ensure user feedback is incorporated

quickly and accurately.” Dkt. 575-86 at 74.

Pegasystems circulated the Pega 7 vs. Appian Comparison

externally on at least five occasions, ending in June 2016. It

also circulated the deck to its sales team.

5. LinkedIn Post

Appian also challenges a LinkedIn post that Pegasystems

Senior Vice President and Chief Marketing Officer Tom Libretto

made in connection with this lawsuit. On December 5, 2019, this

Court denied Appian’s motion to dismiss Pegasystems’ Complaint in

part, allowing Pegasystems’ claims to proceed. See generally

Pegasystems I. In the immediate aftermath of the decision,

Libretto wrote on LinkedIn:

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. 599-1 at 175.

The post then linked to an article on the website

universalhub.com that summarized the Court’s ruling. Libretto and

Pegasystems management encouraged salespersons to share the post

and to use it when competing against Appian.

PROCEDURAL BACKGROUND

Pegasystems filed its initial Complaint against Appian and

BPM.com on July 3, 2019, and an Amended Complaint (Dkt. No. 55) on

December 4, 2019. The Amended Complaint brings claims of False

Advertising under the Lanham Act, 15 U.S.C. § 1125 (Count I);

violations of Mass. Gen. Laws ch. 93A §§ 2 and 11 (Count II); and

common law commercial disparagement or injurious falsehood (Count

IV), all based on the BPM.com Report. The Court dismissed an

additional claim for common law false advertising and unfair

competition (Count III). See Pegasystems I, 424 F. Supp. 3d at

225–26.

Appian’s operative pleading is its Amended Answer and

Counterclaims, which it filed on June 22, 2021 (Dkt. No. 335).

The Amended Counterclaims include claims for violation of the

Lanham Act (Counterclaim I), violations of Mass. Gen. Laws ch. 93A

§§ 2 and 11 (Counterclaim II), common law commercial disparagement

or injurious falsehood (Counterclaim III), and defamation

(Counterclaim IV) based on the Pegasystems Marketing Materials,

with Count IV relating only to the LinkedIn Post.

DISCUSSION

A. Legal Standard

Summary judgment is appropriate if “the movant shows that

there is no genuine dispute as to any material fact and the movant

is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56.

An issue is genuine for summary judgment purposes when “a rational

factfinder could resolve it in either direction.” Boudreau v.

Lussier, 901 F.3d 65, 71 (1st Cir. 2018) (cleaned up). A fact is

material “when it has potential of changing a case’s outcome.”

Doe v. Trs. of Bos. Coll., 892 F.3d 67, 79 (1st Cir. 2018). In

general, the moving party may satisfy its initial burden by

“affirmatively produc[ing] evidence that negates an essential

element of the non-moving party’s claim” or “point[ing] to

evidentiary materials already on file . . . that demonstrate that

the non-moving party will be unable to carry its burden of

persuasion at trial.” Carmona v. Toledo, 215 F.3d 124, 132 (1st

Cir. 2000). The burden then shifts to the nonmoving party to “set

forth specific facts showing that there is a genuine issue for

trial.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256 (1986).

This requires production of “evidence that is significantly

probative,” Borges ex rel. S.M.B.W. v. Serrano-Isern, 605 F.3d 1,

5 (1st Cir. 2010) (cleaned up), and not based upon “conclusory

allegations, improbable inferences, and unsupported speculation,”

Medina-Munoz v. R.J. Reynolds Tobacco Co., 896 F.2d 5, 8 (1st Cir.

1990). With respect to each motion for summary judgment, the court

“view[s] the facts in the light most favorable to the non-moving

party, drawing all reasonable inferences in that party’s favor.”

Barbour v. Dynamics Research Corp., 63 F.3d 32, 36 (1st Cir. 1995).

B. Analysis

The core issue in this case is whether Appian and BPM.com on

the one hand, and Pegasystems on the other hand, engaged in false

advertising under the Lanham Act and Mass. Gen. Laws ch. 93A and

the common law tort of commercial disparagement.

The Lanham Act makes liable any person who communicates any

“false or misleading description of fact, or false or misleading

representation of fact, which . . . in commercial advertising or

promotion, misrepresents the nature, characteristics, qualities,

or geographic origin of his or her or another person’s goods,

services, or commercial activities.” 15 U.S.C. § 1125(a)(1)(B).

A plaintiff bringing a Lanham Act false advertising claim must

prove that:

(1) the defendant made a false or misleading description

of fact or representation of fact in a commercial

advertisement about his own or another’s product;

(2) the misrepresentation is material, in that it is

likely to influence the purchasing decision; (3) the

misrepresentation actually deceives or has the tendency

to deceive a substantial segment of its audience;

(4) the defendant placed the false or misleading

statement in interstate commerce; and (5) the plaintiff

has been or is likely to be injured as a result of the

misrepresentation, either by direct diversion of sales

or by a lessening of goodwill associated with its

products.

Cashmere & Camel Hair Mfrs. Inst. v. Saks Fifth Ave., 284 F.3d

302, 310–11 (1st Cir. 2002).

The elements of a false advertising claim under Chapter 93A

are the same as under the Lanham Act, and thus, on a motion for

summary judgment, “claims under the Lanham Act and Chapter 93A

rise and fall together.” Spruce Envtl. Techs., Inc. v. Festa Radon

Techs., Co., 248 F. Supp. 3d 316, 321 (D. Mass. 2017).

To establish a commercial disparagement claim, a plaintiff

must prove that the defendant:

(1) published a false statement to a person other than

the plaintiff; (2) “of and concerning” the plaintiff’s

products or services; (3) with knowledge of the

statement’s falsity or with reckless disregard of its

truth or falsity; (4) where pecuniary harm to the

plaintiff’s interests was intended or foreseeable; and

(5) such publication resulted in special damages in the

form of pecuniary loss.

HipSaver, Inc. v. Kiel, 984 N.E.2d 755, 763 (Mass. 2013).

A commercial disparagement claim differs from a Lanham Act or

Chapter 93A false advertising claim in that it (1) “imposes

liability only for false statements, while the Lanham Act also

encompasses misleading statements”; (2) “requires ‘actual malice,’

meaning the defendant either has knowledge of a statement’s falsity

or acts with reckless disregard of its truth or falsity”; and (3)

“does not require that the false statement be made in advertising,

as the Lanham Act does.” Pegasystems I, 424 F. Supp. 3d at 226

(citing Kiel, 984 N.E.2d at 767).

1. Appian and BPM.com’s Motions on Pegasystems’ Claims

a. Lanham Act — Injury

Appian and BPM.com challenge the fifth element of

Pegasystems’ Lanham Act claim: that the BPM.com Report caused

Pegasystems a legally cognizable injury. A plaintiff may prove

injury through loss of sales or goodwill. See Cashmere, 284 F.3d

at 311. “[A]lthough diversion of sales to a direct competitor may

be the paradigmatic direct injury from false advertising, it is

not the only type of injury cognizable under § 1125(a).” Lexmark

Int’l, Inc. v. Static Control Components, Inc., 572 U.S. 118, 138

(2014). One type of injury arises when “a defendant harms a

plaintiff’s reputation by casting aspersions on its business,” as

“the plaintiff’s injury flows directly from the audience’s belief

in the disparaging statements.” Id. A presumption of injury and

causation may arise where a defendant makes literally false

comparative statements about competing products. See Merck Eprova

AG v. Gnosis S.P.A, 760 F.3d 247, 259 (2d Cir. 2014); HipSaver

Co., Inc. v. J.T. Posey Co., 497 F. Supp. 2d 96, 106 (D. Mass.

2007).

Defendants contend that Pegasystems is not entitled to a

presumption of injury because multiple firms compete in the BPM

market. In HipSaver, this Court held that “the weight of the

caselaw in this circuit supports a rebuttable presumption of

causation and injury for willful literally false advertising in a

two firm market where a defendant makes comparative statements

targeting a direct competitor’s products.” Id. at 109. However,

a two-player market is not always required to give rise to the

presumption. The presumption of injury applies in cases involving

a “misleading comparison to a specific competing product [because

the comparison] necessarily diminishes that product’s value in the

minds of the consumer.” Merck Eprova, 760 F.3d at 259 (quoting

McNeilab, Inc. v. Am. Home Prods. Corp., 848 F.3d 34, 38 (2d Cir.

1988)); see also Porous Media Corp. v. Pall Corp., 110 F.3d 1329,

1336 (8th Cir. 1997); Harper House, Inc. v. Thomas Nelson, Inc.,

889 F.2d 197, 209 n.8 (9th Cir. 1989). One court recently

identified three scenarios in which the presumption of injury

applies: (1) “where the defendant made a false comparative

advertising claim”; (2) “where the statement at issue was

derogatory and undoubtedly referred only to the plaintiff”; or (3)

“in a ‘two-player market’ where there is evidence of ‘deliberate

deception.’” In re Elysium Health-ChrornaDex Litig., No. 17-cv-

7394, 2022 U.S. Dist. LEXIS 25090, at *158–59 (S.D.N.Y. Feb. 3,

2022) (quoting Merck Eprova, 760 F.3d at 259–61).

This is a false comparative advertising case to which the

presumption of injury applies. For purposes of this motion, Appian

and BPM.com do not dispute that the BPM.com Report contained

falsities, or even that the false statements were willful.

Further, the BPM.com Report is replete with comparative

statements. For example, it states that “Pega customers reported

spending on average 11 times more than Appian customers.” Dkt.

575-6 at 11. It also says that “Appian customers reported delivery

on average in one-fifth the amount of time cited by Pega

customers.” Id. Because the BPM.com Report’s comparative

statements would diminish Pegasystems in the minds of consumers,

it is entitled to the presumption of injury at this stage. See

Merck Eprova, 760 F.3d at 259.

The summary judgment record also presents a fact question

regarding whether the BPM.com Report caused Pegasystems

reputational injury. Three Pegasystems customers, Ford Motor

Company, Tracfone Wireless, and Great West Casualty Company raised

questions about the BPM.com Report’s claims to Pegasystems

following its publication. These customers did not move their

business from Pegasystems, but a reasonable jury could infer, based

on their concerns, that the BPM.com Report generated similar

concerns in the marketplace. Thus, there is a triable issue on

whether Pegasystems suffered reputational injury.

b. Damages

Appian and BPM.com argue that there is insufficient evidence

of economic injury to support a claim of monetary damages.

Pegasystems conceded at various points during discovery that it

had not identified any business it lost because of the BPM.com

Report.

Pegasystems now argues that it lost an opportunity with

Oklahoma Gas & Electric (“OG&E”) because of the BPM.com Report,

but its evidence on that score is weak. Ryan Byrne of Appian sent

two OG&E employees the BPM.com Report on May 14, 2019, in an email

noting that the document was “referenced in our discussion.” Dkt.

578-43 at 3. On May 15, Byrne wrote to several Appian colleagues

that “the OG&E folks were really excited to hear about” the BPM.com

Report. Dkt. 578-42 at 2. However, there is no testimony or

documentary evidence from OG&E that the BPM Report was a

substantial factor in its decision. Even assuming OG&E read the

report (which is far from clear), on this record, no reasonable

jury could conclude that Pegasystems lost the OG&E opportunity

because of the BPM.com Report.

Neither of Pegasystems’ experts provides an opinion which

supports a claim for monetary damages.3 Accordingly, the Court

allows defendants’ motions for summary judgment on the claim for

money damages for lost business.

c. Disgorgement

While Pegasystems may not seek monetary damages at trial, it

can seek disgorgement from Appian. “If a plaintiff without

specific evidence of injury proves direct competition and

willfulness, an accounting may be available to the plaintiff

‘subject to the principles of equity.’” Hipsaver, 497 F. Supp. 2d

at 107 (quoting Tamko Roofing Prods., Inc. v. Ideal Roofing Co.,

Ltd., 282 F.3d 23, 35 (1st Cir. 2002)); see also Merck Eprova, 760

F.3d at 261–62. Additional principles of equity that courts look

to in determining whether disgorgement is appropriate include:

(a) the degree of certainty that the actor benefitted

from the unlawful conduct; (b) the relative adequacy to

the plaintiff of other remedies, including an award of

damages; (c) the interests of the public in depriving

the actor of unjust gains and discouraging unlawful

conduct; (d) the role of the actor in bringing about the

infringement or deceptive marketing; (e) any

unreasonable delay by the plaintiff in bringing suit or

3 The Court will address Appian’s Daubert motions (Dkt. 582; Dkt.

587) at a later date.

otherwise asserting its rights; and (f) any related

misconduct on the part of the plaintiff.

Hipsaver, 497 F. Supp. 2d at 109 (quoting Restatement (Third) of

Unfair Competition § 37(2) (Am. L. Inst. 1995)).

Critically, “[i]n assessing profits the plaintiff shall be

required to prove defendant’s sales only; defendant must prove all

elements of cost or deduction claimed.” 15 U.S.C. § 1117(a). This

means that “the plaintiff does not need to show which of the

defendant’s profits were attributable to the false advertising; on

the contrary, the defendant bears the burden of showing any portion

of sales that was not due to the allegedly false advertising.”

Wing Enters., Inc. v. Tricam Indus., Inc., 511 F. Supp. 3d 957,

974 (D. Minn. 2021); see also Fishman Transducers, Inc. v. Paul,

684 F.3d 187, 196 (1st Cir. 2012) (finding evidence of direct

competition would have sufficed to entitle plaintiff to

disgorgement); Tamko Roofing Prods., 282 F.3d at 37 (“once

plaintiff has shown direct competition and infringement, the

statute places the burden on the infringer to show the limits of

the direct competition”).

“[A] showing of direct competition requires a substantial

degree of equivalence and substitutability.” Fishman, 684 F.3d at

196. Willfulness “requires a conscious awareness of wrongdoing by

the defendants or at least conduct deemed ‘objectively reckless’

measured against standards of reckless behavior.” Id. at 191. It

“is a question of fact, which must be submitted to a jury.”

HipSaver, 497 F. Supp. 2d at 107 (citing Segrets, Inc. v. Gillman

Knitwear Co., 207 F.3d 56, 66 (1st Cir. 2000)).

Pegasystems may obtain disgorgement of Appian’s profits

without showing which of Appian’s sales were attributable to the

alleged false advertising. See 15 U.S.C. § 1117(a). Its expert

report is adequate to show that Appian has generated profits since

the publication of the BPM.com Report (an estimated $29.1 million).

Thus, Pegasystems may proceed to trial against Appian on its claim

for disgorgement of Appian’s profits.

d. Injunctive Relief

Appian argues that Pegasystems’ claim for injunctive relief

is moot because it removed the BPM.com Report from its website and

ceased distributing it once Pegasystems filed this lawsuit.

Pegasystems asserts that its claim for injunctive relief is not

moot under the voluntary cessation doctrine.

A defendant’s voluntary cessation of challenged conduct moots

a case where “subsequent events made it absolutely clear that the

allegedly wrongful behavior could not reasonably be expected to

recur.” Friends of the Earth, Inc. v. Laidlaw Envtl. Servs. (TOC),

Inc., 528 U.S. 167, 189 (2000) (citation omitted).

It is uncontroverted that Appian has discontinued use of the

BPM.com Report since the onset of this litigation. Appian further

submitted a declaration from its Chief Marketing Officer attesting

that (1) Appian has instructed its personnel to discontinue use of

the BPM.com Report, and (2) Appian will not at any time in the

future resume use of the BPM.com Report. The Court concludes

Appian has ceased reposting the BPM.com Report on its website and

will not do so again. The issue is therefore moot.

2. Pegasystems’ Motion on Its Claims

Pegasystems moves for summary judgment on the issue of

liability (but not damages) for its own Lanham Act claim. As to

the element of falsity, Pegasystems argues that the BPM.com

Report’s claim that the average total cost of ownership of

Pegasystems’s products was more than ten times greater than that

of Appian’s products was literally false. Pegasystems takes aim

at the BPM.com Report’s methodology, but does not show the actual

cost to own its solutions as compared to Appian’s. Appian points

to internal Pegasystems emails in which Pegasystems employees

state that Pegasystems is much more expensive than Appian, and an

independent report concluding that Pegasystems is “relatively

expensive.” Dkt. 599-1 at 120-21. There is a genuine issue of

material fact on the question of whether the BPM.com Report’s claim

comparing the two companies’ TCOs was false. Pegasystems’ motion

is denied.

3. Pegasystems’ Motion on Appian’s Counterclaims

a. Timeliness of Appian’s Counterclaims

i. Laches

Pegasystems argues that Appian’s Lanham Act counterclaim is

barred by the equitable principle of laches. There is a strong

presumption that laches applies if the counterclaim was filed

outside of the analogous state limitations period—here, the four-

year period under Chapter 93A. See Pegasystems II, 463 F. Supp.

3d at 161. “The laches period starts to run when ‘the plaintiff

knew or should have known’ of the defendant’s wrongful conduct.”

Id. (citing Oriental Fin. Grp., Inc. v. Cooperativa de Ahorro y

Credito Oriental, 698 F.3d 9, 21 (1st Cir. 2012)). Where laches

presumptively applies, it additionally “requires proof of (1) lack

of diligence by the party against whom the defense is asserted,

and (2) prejudice to the party asserting the defense.” Oriental,

698 F.3d at 21. The burden of proving unreasonable delay and

prejudice is allocated to the party asserting laches where the

complaint is filed within the limitations period, and the burden

of proving their absence falls on the nonmoving party where the

complaint is filed outside of the limitations period. See In re

Bankvest Capital Corp., 375 F.3d 51, 61 (1st Cir. 2004).

Appian seeks to expand the limitations period for Chapter 93A

claims by arguing that it begins to run not when it knew or should

have known of Pegasystems’ alleged false advertising, but when it

knew that the advertising had caused it injury. Contrary to

Appian’s position, the laches period begins to run once it should

have known of Pegasystems’s wrongful conduct, which occurred when

it became aware of the allegedly false advertisements. See

Pegasystems II, 463 F. Supp. 3d at 161; Jarrow Formulas, Inc. v.

Nutrition Now, Inc., 304 F.3d 829, 837–38 (9th Cir. 2002) (“Laches

penalizes dilatory conduct; as such, the presumption is that a

§ 43(a) plaintiff is barred if he fails to file suit promptly when

the defendant commences the wrongful conduct.”). Moreover, laches

bars Lanham Act claims in the context of a continuing wrong. See

Hot Wax, Inc. v. Turtle Wax, Inc., 191 F.3d 813, 821 (7th Cir.

1999); Jarrow, 304 F.3d at 837.

Appian filed its initial counterclaim concerning the Sinur

Paper on December 17, 2019, meaning laches presumptively applies

if it knew or should have known of its claims arising from the

Sinur Paper before December 17, 2015. Appian contends that there

is no evidence that it knew Pegasystems commissioned the Sinur

Paper until the commencement of this action. Yet in the spring of

2014, Appian employee Malcolm Ross drafted a rebuttal to the Sinur

Paper that stated that it was a “known fact” that the Sinur Paper

“was paid for by Pegasystems without input from Appian.” Dkt.

599-1 at 81. It stated in other places that Pegasystems

commissioned the Sinur Paper. Thus, Appian at least should have

known by the spring of 2014 that it had a potential Lanham Act

claim against Pegasystems.

Appian filed its amended counterclaim concerning the

remaining Pegasystems Marketing Materials on June 17, 2021, so

laches presumptively applies if it knew or should have known of

its claims arising from those documents before June 17, 2017.

Pegasystems concedes that there is no evidence showing when Appian

learned of the specific Pegasystems Marketing Materials other than

the Sinur Paper. See Reply, Dkt. 621 at 10. Pegasystems instead

submits evidence that Appian was aware that Pegasystems was

generally attacking Appian’s ability to scale at presentations and

in marketing materials as early as 2013. See id. But the Lanham

Act regulates specific instances of commercial advertising, and

here, that means that Pegasystems must show when Appian learned of

each of the Pegasystems Marketing Materials. Accordingly, Appian

bears the burden to show reasonable diligence and lack of prejudice

as to its Lanham Act claims arising from the Sinur Paper, while

Pegasystems must show unreasonable delay and prejudice as to

Appian’s claims arising from the remaining Pegasystems Marketing

Materials.

Appian has not shown that its delay in suing over the Sinur

Paper was reasonable or that Pegasystems was unharmed by the delay.

It has not meaningfully attempted to explain why it did not bring

suit until 2019 despite being aware of the Sinur Paper in 2014.

Thus, its delay was unreasonable for laches purposes. Similarly,

Appian has not produced evidence demonstrating a lack of prejudice

to Pegasystems. For example, Pegasystems continued to promote the

Sinur Paper without any notice that Appian was challenging its

truthfulness. Similarly, Pegasystems lost certain emails, some of

which may have been on point, in a 2017 system upgrade. Laches

therefore applies, and summary judgment will enter for Pegasystems

on Appian’s Lanham Act counterclaim arising from the Sinur Paper.

On the other hand, Pegasystems has not proven unreasonable

delay or prejudice as to Appian’s Lanham Act counterclaim arising

from the remaining Pegasystems Marketing Materials. Pegasystems’

core argument on unreasonable delay—that Appian chose to respond

to the objectionable marketing materials in the marketplace and

cannot now file suit—applies only to the Sinur Paper. Pegasystems

has not produced evidence showing when Appian became aware of the

additional Pegasystems Marketing Materials, so there is no

evidence of unreasonable delay. Laches does not apply to Appian’s

counterclaims arising from the Pegasystems Marketing Materials

other than the Sinur Paper.

ii. Statute of Limitations

Pegasystems raises a statute of limitations defense to

Appian’s Chapter 93A and commercial disparagement counterclaims

that the Court finds persuasive only as to Appian’s Sinur Paper

claims. The limitations period for the Chapter 93A counterclaim

is four years and for the commercial disparagement counterclaim is

three years. See Pegasystems II, 463 F. Supp. 3d at 162. For the

limitations period to begin to run for tort claims, a plaintiff

must have “enough information to suggest that he has suffered an

injury caused by the defendant’s conduct,” which is an “inquiry

notice” standard. Wolinetz v. Berkshire Life Ins. Co., 361 F.3d

44, 48 (1st Cir. 2004). A reasonable plaintiff in Appian’s

position would have been on inquiry notice that it had suffered an

injury from the Sinur Paper in early 2014. Thus, Appian’s state

law counterclaims arising from the Sinur Paper alone are time

barred.

b. Merits of Appian’s Counterclaims

i. Lanham Act and Chapter 93A Counterclaims

Pegasystems argues that Appian’s Lanham Act and Chapter 93A

counterclaims arising from the remaining Pegasystems Marketing

Materials fail on the merits because they are not commercial

advertising and on the grounds of injury, materiality, and falsity.

To qualify as commercial advertising, a representation must:

(a) constitute commercial speech (b) made with the

intent of influencing potential customers to purchase

the speaker’s goods or services (c) by a speaker who is

a competitor of the plaintiff in some line of trade or

commerce and (d) disseminated to the consuming public in

such a way as to constitute “advertising” or

“promotion.”

Podiatrist Ass’n, Inc. v. La Cruz Azul De. P.R., Inc., 332 F.3d 6,

19 (1st Cir. 2003).

Pegasystems contests the fourth element: that the Pegasystems

Marketing Materials did not reach enough customers to constitute

commercial advertising. While there is no magic number of

customers that an advertisement must reach, “the touchstone of

whether a defendant’s actions may be considered ‘commercial

advertising or promotion’ under the Lanham Act is that the

contested representations are part of an organized campaign to

penetrate the relevant market.” Fashion Boutique of Short Hills,

Inc. v. Fendi USA, Inc., 314 F.3d 48, 57 (2d Cir. 2002).

It is undisputed that the BPM market is large, with over

twenty vendors competing for business from a wide array of large

corporations and government agencies. The evidence before the

Court shows that Pegasystems distributed the Scalability White

Paper 6 times to 5 organizations, and the Technical Competitive

Brief 30 times to 15 organizations. There is no evidence of

distribution of the Competitive Comparison Chart or the Technology

Assessment. Further, Appian does not argue that the Scalability

Slide Deck, the Pega 7 v. Appian Comparison, the Competitive

Comparison Chart, or the Technology Assessment were commercial

advertising. As to the Scalability White Paper and Technical

Competitive Brief, Appian relies on the degree to which Pegasystems

circulated both documents internally, noting that Pegasystems

executives gave them to their sales force and encouraged

salespersons to use them with customers. A reasonable jury could

conclude that the Scalability White Paper and the Technical

Competitive Brief alone were commercial advertising. Summary

judgment must enter for Pegasystems on Appian’s Lanham Act and

Chapter 93A counterclaims with respect to all other marketing

materials.

Pegasystems’ remaining arguments for summary judgment on

Appian’s Lanham Act and Chapter 93A counterclaims are unavailing.

As to injury, Pegasystems’ statement that the BPM sales process is

so lengthy and complex that the Pegasystems Marketing Materials

could not have influenced purchaser decisions is conclusory.

Appian, however, points to seven customers that it claims to have

lost at least in part because of Pegasystems’ conduct, which its

expert states cost Appian $26 million in lost profits. For

example, in 2012, Pegasystems provided potential customer Rabobank

with both the Technical Competitive Brief and the Scalability White

Paper. When Rabobank chose Pegasystems over Appian, it informed

Appian that Rabobank needed a platform that could perform “on

enterprise architecture level,” which mimics the Technical

Competitive Brief’s criticism of Appian’s inability to handle the

“needs of an enterprise BPM program.” Dkt. 599-1 at 255–56. A

reasonable factfinder could infer that Rabobank, along with the

other six companies that represent similar examples, chose

Pegasystems at least in part because of the Pegasystems Marketing

Materials. There is a genuine issue of material fact on the issue

of injury.

“[M]ateriality is generally a question of fact.” Pegasystems

II, 463 F. Supp. 3d at 161 (quoting LivePerson, Inc. v. 24/7

Customer, Inc., 83 F. Supp. 3d 501, 518 (S.D.N.Y. 2015)). A

statement is material if it is likely to influence a customer’s

purchasing decision, which can be established by “showing that the

false or misleading statement relates to an inherent quality or

characteristic of the product.” See Cashmere, 284 F.3d at 311–12

(cleaned up). Pegasystems does not point to any evidence that the

statements about Appian’s ability to scale contained in the

Pegasystems Marketing Materials were immaterial. Moreover, as

Appian points out, one of Pegasystems’ own employees testified

that scalability is “one of the things that you would need to be

able to show to compete for business.” Dkt. 599-1 at 208. Appian’s

expert also submits that scalability is an essential factor in the

decision-making processes of potential purchasers. There is a

genuine issue of material fact on the question of materiality.

There is also a triable issue regarding the falsity of the

Pegasystems Marketing Materials. Pegasystems does not claim that

the challenged statements were true, but rather tries to show that

they were vague or open to interpretation and therefore not

literally false. Yet a statement, like that in the Technical

Competitive Brief, that Appian “lacks key capabilities needed to

scale” is unambiguous. Pegasystems contends that its statements

that Appian’s total cost of ownership is “higher” cannot be

literally false because “[h]igher than what is not specified.”

Dkt. 574-1 at 27. But any reasonable reader would understand the

documents to compare the TCOs of Appian and Pegaystems. Moreover,

the statements of Pegasystems employees suggesting that they knew

their claims about Appian’s scalability were made up are probative

of falsity. See, e.g., Dkt. 599-1 at 211–13 (“[w]hat we have

stated about [Appian’s] scalability does not seem to jive with the

Appian documentation.”). A reasonable jury could conclude that

Pegasystems made false statements about Appian.

ii. Commercial Disparagement Counterclaim

Pegasystems challenges Appian’s commercial disparagement

counterclaim on three grounds: lack of injury, lack of falsity,

and lack of actual malice. As discussed above, Pegasystems has

failed to establish a lack of injury or falsity. There is also a

triable issue regarding actual malice, which requires Appian to

show that Pegasystems “ha[d] knowledge of a statement’s falsity or

act[ed] with reckless disregard of its truth or falsity.”

Pegasystems I, 424 F. Supp. 3d at 226. The record contains

evidence from which a jury could decide that Pegasystems knew it

was making false statements about Appian. As noted, certain

Pegasystems employees made statements suggesting that they knew

their claims about Appian’s scalability were fabricated. The Court

denies Pegasystems’s motion for summary judgment on Appian’s

commercial disparagement counterclaim, with the exception of

claims arising from the Sinur Paper.

iii. Defamation Counterclaim

Appian brings a defamation counterclaim based on the LinkedIn

Post, which implied that the Court’s opinion in Pegasystems I

supported the notion that Appian had told “blatant lies” in the

BPM.com Report. Appian must prove that (1) Pegasystems made a

statement concerning Appian to a third party; (2) the statement

“could damage Appian’s reputation in the community”; (3)

Pegasystems was “at fault” in making the statement, meaning that

it acted negligently if Appian is a private actor or with actual

malice if Appian is a public figure; and (4) the statement caused

Appian economic loss, or was actionable without proof of economic

loss, for example a statement that may prejudice Appian’s business.

Ravnikar v. Bogojavlensky, 782 N.E.2d 508, 510–11 (Mass. 2003).

The First Amendment imposes a number of constraints on a plaintiff

who seeks relief from defamation. See Sindi v. El-Moslimany, 896

F.3d 1, 14 (1st Cir. 2018) (finding that rhetorical hyperbole are

not actionable). An undamaged person may recover nominal damages.

See Ravnikar, 782 N.E.2d at 509.

Pegasystems first argues that the LinkedIn Post is protected

by its First Amendment right to publicly comment on judicial

proceedings. However, false commercial speech is not entitled to

First Amendment protection. See Ibanez v. Fla. Dep’t of Bus. &

Prof’l Regul., Bd. of Accountancy, 512 U.S. 136, 142 (1994). A

jury could reasonably find that the LinkedIn Post was commercial

speech, as it encourages readers to review an article about the

Court’s opinion if they are “thinking about Appian” and Pegasystems

urged its sales force to share the post.

Second, Pegasystems argues that the LinkedIn Post is

protected by the “fair reporting” privilege. A report on court

proceedings is privileged if it “conveys to the persons who read

it a substantially correct account of the proceedings” and does

not “omit or misplace facts or make additions that ‘convey an

erroneous impression to those who hear or read it.’” Howell v.

Enter. Publ’g Co., LLC, 920 N.E.2d 1, 21 (Mass. 2010) (quoting

Restatement (Second) of Torts § 611 cmt. F (Am. L. Inst. 1977)).

Here, a jury could find that the LinkedIn Post creates the mistaken

impression that the Court found that Appian told “blatant lies.”

Third, Pegasystems argues that everything in the LinkedIn

Post is true. This Court previously found that “accusing another

party of being a ‘liar’ has generally been held to be defamatory”

and “[a]lthough the LinkedIn Post ostensibly relied on this Court’s

prior opinion regarding Pegasystems’ claims against Appian, that

opinion does not support the statement that Appian told ‘blatant

lies.’” Pegasystems II, 463 F. Supp. 3d at 163 (citing Milkovich

v. Lorain Journal Co., 497 U.S. 1, 18-19 (1990)). While

Pegasystems can point to aspects of the LinkedIn Post that are

true, there are also elements that a jury could find are false.

Fourth, Pegasystems asserts that there is no evidence of

actual malice. The actual malice standard applies only to

defamation claims brought by public figures, who are people who

achieve “pervasive fame or notoriety” or those who “voluntarily

inject[] [themselves] or [are] drawn into a particular public

controversy and thereby become[] a public figure for a limited

range of issues.” Lluberes v. Uncommon Prods., LLC, 663 F.3d 6,

13 (1st Cir. 2011). A public controversy “must be more than a

cause célèbre or a matter that attracts public attention.” Id.

(cleaned up). Further, “it must be shown that persons actually

were discussing some specific question and a reasonable person

would have expected persons beyond the immediate participants in

the dispute to feel the impact of its resolution.” Id. Under

that standard, Appian is not a public figure. There is no reason

to think that the Appian-Pegasystems dispute attracted public

attention. The actual malice standard does not apply, and there

is a genuine issue of material fact on Appian’s defamation

counterclaim.

ORDER

For the foregoing reasons, Defendants’ motions for summary

judgment (Dkt. 570; Dkt. 583) are ALLOWED IN PART and DENIED IN

PART. Pegasystems’ motion for partial summary judgment on its

claims (Dkt. 573) is DENIED. Pegasystems’ motion for summary

judgment on Appian’s counterclaims (Dkt. 573) is ALLOWED IN PART

and DENIED IN PART. At trial, Pegasystems may seek disgorgement,

but not monetary damages or injunctive relief. Appian may present

its Lanham Act and Chapter 93A counterclaims arising from the

Scalability White Paper and the Technical Competitive Brief, its

commercial disparagement counterclaim arising from all of the

Pegasystems Marketing Materials except for the Sinur Paper, and

its defamation counterclaim. The parties shall submit briefs

within fourteen days of entry of this Order on whether any viable

claims against Business Process Management, Inc. survive in light

of this opinion.

SO ORDERED.

/s/ PATTI B. SARIS

Hon. Patti B. Saris

United States District Judge