turnabout is fair play: undisclosed sponsorship of “objective” report could be misleading; overstatement of court holding could be defamatory

Pegasystems, Inc. v.
Appian Corp., 2020 WL 2616280, No. 19-11461-PBS (D. Mass. May 22, 2020)

sued Appian
for allegedly falsely touting a paid for report as independent;
now the court deals with Appian’s counterclaims for false advertising under the
Lanham Act and Mass. Gen. Laws ch. 93A; commercial disparagement; and
defamation, in connection with four separate fact patterns, granting Pegasystems’
motion to dismiss in part and denying it in part. 

(1) In March 2011,
Pegasystems posted “Pega BPM System z Benchmark Test Results” on its site, providing
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.” The
paper concluded that Pegasystems “met or exceeded all performance goals” for
the testing. But 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.” Appian alleged that “extremely few (if any) Pegasystems
customers would ever be using such a powerful supercomputer to run Pegasystems’
software” and that the paper was currently misleading because the testing was
performed on a long-discontinued version of Pegasystems’ platform.

But this was not
misleading because the fact that the test used “a computer too expensive for
most businesses to afford,” was “obvious” from the paper’s title and from the
website’s description: Anyone would immediately know that the System z
processor was used to conduct the test.  “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.” Likewise, the fact that the Pegasystems version that
had been tested had long been discontinued didn’t amount to
falsity/misleadingness, since any reader would see that the paper was published
in 2011 and could take that date into account.

(2) At Pegasystems’ 2019
annual conference PegaWorld, attended by over 6,000 people, Pegasystems
allegedly 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,” which
are still available on 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; and stating that Pegasystems
“get[s] accolades from analysts” while displaying four charts, three of which
Appian alleges were “falsely and misleadingly captioned.”

Appian alleged that
the second chart was labeled “Digital Process Automation” but
came from a report on “Software For Digital Process Automation For Deep
Deployments”; the third was labeled “Real-Time Decisions & AI” but came
from a report on “Real-Time Interaction Management”; and the fourth was labeled
“End-to-End Work Management” but came from a report on “Intelligent Business
Process Management.”

These changes to the
graph titles were not plausibly material to “the sophisticated consumers who
purchase business process management software.” So too with Pegasystems’
statement that it has “40,000+ certified professionals globally” when some of
them have lapsed certificates or certificates for obsolete versions of
Pegasystems. “It is implausible that the precise number of currently certified
professionals, as conveyed in passing on a presentation slide, would be
material to a consumer.”

(3) In 2014, Jim
Sinur published a six-page paper on Pegasystems’ website titled “Appian and
Pegasystems – Head to Head Comparison”; it was removed in January 2019. The
paper describes Sinur as “an author and independent thought leader in applying
business process management (BPM) to innovative and intelligent business
operations (IBO)” and refers to his 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.’”
The final summary says: “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.” That same year, 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,” and
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.’ ”

Appian alleged that
the Sinur Paper was commissioned by Pegasystems and that Pegasystems
“influenced its content,” though it nowhere disclosed a commission.

Was this claim
untimely? For the Lanham Act claim, the most analogous statute of limitations was
the four-year period under Chapter 93A. The laches period starts to run when
“the plaintiff knew or should have known” of the defendant’s wrongful conduct. That’s
hard to figure out on a motion to dismiss, and this one was no exception. For
commercial disparagement and Chapter 93A, the limitation periods were three and
four years, respectively. Under Massachusetts law, “a cause of action … does
not accrue until the plaintiff knew, or in the exercise of reasonable diligence
should have known of the factual basis for his cause of action.” Appian alleged
that it was unable to learn the factual basis for its claim until the discovery
in this case; that was plausible on a motion to dismiss.

Falsity: “[T]he
presentation of a commissioned paper as the analysis of a neutral third party
is at least misleading,” and Appian plausibly alleged this, such as in Pegasystems’
description of Sinur as an “independent thought leader.” Were consumers deceived?
Given that a competitor described the Sinur Paper as a “tongue-lashing from an
industry analyst and thought leader” who sought to “look objectively” at the
two platforms, it was reasonable to assume that customers also thought Sinur
was objective. Commercial disparagement claims also survived even without any
allegations of skewed data beyond the representation of objectivity.

(4) Finally, soon
after the court denied Appian’s motion to dismiss (linked above), a Pegasystems
executive published a post on LinkedIn 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 …” The LinkedIn post shared
a link to a post by the Boston-area community news blog Universal Hub, which 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.” Seven
other Pegasystems employees on LinkedIn reposted or “echoed” this post.

Defamation: Here,
calling Appian’s business practice “unethical” was a protected opinion since
ethical standards can vary. But accusing another party of being a “liar” has
generally been held to be defamatory. Although the LinkedIn Post ostensibly
relied on the court’s prior opinion, that opinion arguably does not support
that Appian told “blatant lies.” As to scienter, the post’s author had access
to the opinion and would have known that the opinion did not support an
accusation that Appian told “blatant lies.” Appian wasn’t required to plead
special damages because the LinkedIn Post’s statements are “actionable without
proof of economic loss” as “statements that may prejudice the plaintiff’s
profession or business.” Thus, the defamation claim was properly alleged.

Lanham Act and
Chapter 93A: Was this “commercial advertising or promotion”? Though the
LinkedIn post didn’t directly advertise Pegasystems’ products, it was “made
with the intent of influencing potential customers to purchase [Pegasystems’]
goods or services” over those of Appian, and targeted readers who were
“thinking about Appian” as a vendor, so it was commercial advertising. And the
falsity element was properly pled, see above.

from Blogger https://ift.tt/3gDQNdt

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