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Cambridge tech company can continue lawsuit over negative research report that didn't mention a competitor paid for it, judge rules

Pegasystems, which makes software for large corporations, has shown enough proof that it was damaged by a research report claiming a competitor's offerings were far superior that it can continue its federal lawsuit against the competitor that secretly paid for the report and the research firm that wrote it, a judge ruled today.

The ruling by US District Court Judge Patti Saris means that Pegasystems, also known as Pega, can make its case to a jury that the report violated and state laws against lying in advertisements and commercial statements unless it reaches a pre-trial settlement with competitor Appian Corp. of Virginia and BPM.com of Cohasset, which claims to be "the Internet's leading destination for articles, news, research and white papers on Business Process Management, Process Modeling, Business Rules, and Case Management."

At the heart of the complaint is the fact that a May, 2019 report by BPM.com, which Appian still makes available on its Web site, does not mention that Appian commissioned the report. The report claims that a survey of users of business-process management software found that Appian users spent far less time and money building applications with Appian software than with comparable Pega software (he report also discussed IBM software; that company is not involved in the litigation).

Pega claims the omission, along with what it says are misleading statements in the report, violates both the federal Lanham Act and the comparable section of the Chapter 93A, the Massachusetts law that regulates commercial speech - not to mention Massachusetts common law - through "false and misleading claims."

Saris's ruling - on a motion by Appian and BPM.com to toss the entire suit - largely agreed with Pega that it had produced enough credible evidence to buttress its claim to let the company continue to pursue damages in court.

Pegasystems has plausibly pleaded that the omission of the relationship between Appian and BPM.com renders the representations in the Report and on Appian’s website false or misleading. An omission is actionable under the Lanham Act if it “renders an affirmative statement false or misleading.” Lokai Holdings LLC v. Twin Tiger USA LLC, 306 F. Supp. 3d 629, 639-40 (S.D.N.Y. 2018). ... Appian identifies BPM.com as the Report’s author and then describes BPM.com as “a leading market research group.” ... Within the Report, BPM.com states its purpose was to “understand how automation software is being used.” ... Nowhere in the Report or Appian’s statements promoting it would a reader learn that Appian was involved in the Report’s production - they would likely be left with the opposite impression. The allegation that the Report and website, when viewed in their entirety, are at the very least misleading is plausible because their description conveys neutrality.

Additionally, Pegasystems has plausibly pleaded that Appian made a literally false statement on its website when it wrote that BPM.com reached the Report's results "Through approximately 500 responses." ... The Report discloses that of those 500 responses, only 104 were verified and analyzed and, of those, only 27% of respondents used either Pegasystems or Appian. The number of responses yielding the comparisons between the two competitors falls far short of five hundred. While the Report openly acknowledges these figures, Appian's representation on its website about the Report's sample size is literally false.

Saris continued that Pegasystems made an assertion strong enough for a jury to consider that not only is the report legally wrong, it has hurt the company financially - something it would need to show to press for damagesl:

Pegasystems alleges that Defendants' statements have been disseminated to "major customers for which Appian and Pegasystems compete," representing "prospective revenue streams in the millions of dollars." .. The Court can reasonably infer that an explicit unfavorable comparison between Appian and Pegasystems is likely to divert those customers from Pegasystems to Appian, injuring Pegasystems.

Saris also rejected the defendants' request to drop Massachusetts law from any consideration, because the paper was published on Appian's Web site and that company is based in Virginia. But the judge noted that both Pegasystems and BPM.com are based in Massachusetts, that Appian has an office here and that the report was written here - so that one could reasonably argue that the damage was done here.

Saris did strike one of Pegasystems' arguments, that the paper violated its rights under Massachusetts common law related to "false advertising and unfair competition," because, she wrote, the company did not provide adequate facts to support that claim.

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