A software company fighting to regain a $2 billion trade secrets award urged the Virginia Supreme Court on Tuesday to affirm the verdict, arguing that an appellate court was wrong to disturb the conclusions from jurors and the trial judge.

The state Court of Appeals "mischaracterized and misapprehended" the trial's proceedings and "repeatedly second-guessed" Judge Richard E. Gardiner of Fairfax County Circuit Court, Robert Loftin of McGuireWoods LLP, which is representing Appian Corp. in its quest to restore the largest jury award in state history, told the justices at oral arguments.

"It is well settled that a party with a jury verdict approved by a circuit court occupies the most favored position known to the law," but the Court of Appeals didn't "acknowledge or even cite this standard," underpinning what he argued were errors in the decision that reversed the award last year.

Counsel for the defendant, Massachusetts-based Pegasystems Inc., countered that Judge Gardiner incorrectly prevented it from arguing that many of its sales came from products unrelated to the disputed software and that Appian had failed to do enough to protect its purported trade secrets.

"If you divulge your secrets to people without a promise of confidentiality, you are not treating them as a secret," Joshua Rosenkranz of Orrick Herrington & Sutcliffe LLP told the justices.

The case has drawn widespread attention, both for its unprecedented damages award and because it raises several relevant questions about trade secret protections, including what are considered reasonable measures for protecting confidential business information and how damages should be calculated.

Both companies make business process management software, which allows companies to create customizable applications to streamline certain tasks, such as opening customer accounts or fulfilling orders. The $2 billion judgment in 2022 amounted to one-third of Pegasystems' sales over eight years and more than double Appian's total revenue since 2014, according to Pegasystems.

The justices pressed both sides about whether Virginia law permits shifting the burden of proof for damages in trade secret cases from the plaintiffs to the defendants. At trial, the court instructed jurors that Appian only needed to prove Pegasystems' total sales to establish damages, and then Pegasystems had to prove which sales were not attributable to the trade secrets.

Loftin argued that the appeals court wrongly concluded that Virginia law forbids burden-shifting under the state's trade secrets statute, and said trial courts should be afforded discretion with their "quintessential gatekeeping functions."

Pegasystems "repeatedly gambled and lost with the manner in which it litigated this case," Loftin said. "Judge Gardiner lived with this case for 16 months. He knew the parties. He knew the way the counsel were operating and conducting themselves."

Rosencranz called the burden-shifting part of a "one-two punch" that was "terribly unfair and disastrous" for his client, along with its being prevented from presenting how much of its sales was the result of the allegedly misappropriated information.

"Having shifted the burden to Pegasystems, the court then allowed Appian to take away, or the court basically itself took away, [Pegasystems'] only defense on damages, which is that half of our products don't even incorporate the trade secrets," Rosencranz said.

Appian sued Pegasystems in 2020, accusing it of misappropriating more than a dozen trade secrets after retaining a government contractor who had access to Appian's software through his work with an Appian business partner. The government contractor received about $23,600 over two and a half years to provide staff demonstrations on building apps with Appian's software, according to court documents.

At trial, Pegasystems argued that thousands of developers had access to Appian's platform and user manuals and that jurors should hear about that to determine whether the asserted trade secrets were sufficiently protected. Appian successfully argued against that, saying the number of people with access to its platform and user manuals was irrelevant to the case, which included allegations of corporate espionage.

One of the justices brought that up during arguments, asking Rosencranz if he was defending Pegasystems' conduct in the case.

"Well, Your Honor, the question about reasonable measures has nothing to do with what the defendant did," Rosencranz said. "It has to do with the basic legal premise that if you want to treat something as a trade secret, which is an extraordinary power, the plaintiff has to define what the trade secret is. You have to treat it like a trade secret."

Appian is represented by Robert W. Loftin, Joshua D. Wade, Jonathan Y. Ellis and H. Brent McKnight Jr. of McGuireWoods LLP, Ellen D. Marcus and Sheila M. Costin of Holmes Costin & Marcus PLLC, Adeel Mangi and Muhammad Faridi of Linklaters LLP and Matthew Taylor Butler.

Pegasystems is represented by Monica T. Monday and Michael J. Finney of Gentry Locke Attorneys and E. Joshua Rosenkranz, Christopher J. Cariello, Eric A. Shumsky, Jeremy Peterman, Jonas Wang, Samantha Leff, Cesar Lopez-Morales and Zachary J. Hennessee of Orrick Herrington & Sutcliffe LLP.

The case is Appian Corp. v. Pegasystems, case number 240736, in the Supreme Court of Virginia.