SiteLink Software, LLC v. Red Nova Labs, Inc.
| Decision Date | 20 August 2018 |
| Docket Number | 14 CVS 9922 |
| Citation | 2018 NCBC 87 |
| Court | Superior Court of North Carolina |
| Parties | SITELINK SOFTWARE, LLC, Plaintiff, v. RED NOVA LABS, INC., Defendant. |
Daughtry, Woodard, Lawrence & Starling, by Luther D Starling, Jr., and LedoLaw, by Michele A. Ledo, for Plaintiff SiteLink Software, LLC.
Morningstar Law Group, by J. Christopher Jackson, John T Kivus, and Shannon R. Joseph, for Defendant Red Nova Labs, Inc.
JAMES L. GALE, SENIOR BUSINESS COURT JUDGE.
1. THIS MATTER is before the Court on cross-motions for summary judgment by Plaintiff SiteLink Software, LLC ("SiteLink") and Defendant Red Nova Labs, Inc. ("Red Nova"). For the reasons discussed below, the respective motions are GRANTED in part and DENIED in part.
2. This dispute concerns two companies that provide and develop software for the self-storage industry-the industry in which facility owners and operators rent storage units to tenants. SiteLink provides facility-management software ("FMS") to self-storage facility owners. Red Nova provides FMS and lead-generation and website-development products.
3. SiteLink's FMS requires certain computer hardware and software to be installed. SiteLink licenses an Application Programming Interface ("API") to ancillary service providers like Red Nova to access data for mutual customers. For customers that use both SiteLink's FMS and Red Nova's lead-generation or website products, Red Nova uses the API to access and retrieve customer data.
4. Use of the API is governed by a license, the terms of which SiteLink has updated at various times. Initially, the license required users to disclose conflicts of interest they have with SiteLink. Later, SiteLink added a non-compete provision. SiteLink contends that Red Nova violated both versions of the license, and both parties contend that the other defamed it in the course of competition.
5. SiteLink instituted this action by filing its Verified Complaint for Preliminary Injunction, Permanent Injunction and Other Relief in the Wake County District Court. After Red Nova filed its Answer, Defenses, Counterclaims, and Supplemental Motion to Transfer, the case was transferred by consent to the superior court division, after which Red Nova filed a Notice of Designation seeking to have the case designated as a complex business case. The Chief Justice designated the case as a mandatory complex business case on October 28, 2014, and the case was assigned to the undersigned on October 29, 2014.
6. On May 4, 2015, the Court entered a Consent Preliminary Injunction granting Red Nova certain limited use of SiteLink's API.
7. The Court allowed an amended complaint ("Amended Complaint") on August 4, 2015, which asserts claims for (1) trade-secret misappropriation, (2) violations of the Computer Fraud and Abuse Act ("CFAA"), (3) computer trespass, (4) breach of contract, (5) unjust enrichment, (6) tortious interference with existing contractual relations, (7) tortious interference with prospective contracts, (8) libel, (9) unfair or deceptive trade practices, and (10) declaratory judgment.
8. Red Nova answered the Amended Complaint and asserted counterclaims for (1) tortious interference with contract, (2) anticipatory repudiation of contract, (3) defamation, (4) unfair or deceptive trade practices, and (5) state antitrust violations.
9. The Court dismissed Red Nova's counterclaims for antitrust violations and anticipatory repudiation of contract, and dismissed Red Nova's counterclaims for unfair or deceptive trade practices and tortious interference with contract to the extent they were based on SiteLink's license being unlawful. See SiteLink Software, LLC v. Red Nova Labs, Inc., No. 14 CVS 9922, 2016 NCBC LEXIS 45, at *35 (N.C. Super. Ct. June 14, 2016).
10. Both parties have moved for partial summary judgment. SiteLink seeks summary judgment on its own claims for breach of contract, unjust enrichment, libel, tortious interference with existing contracts, misappropriation of trade secrets, violations of the CFAA, and unfair or deceptive trade practices, and against Red Nova's remaining counterclaims for defamation per se, tortious interference with contract, and unfair or deceptive trade practices. Red Nova moves for summary judgment on all of SiteLink's claims.
11. There are other motions that are not addressed in this Order & Opinion, including SiteLink's several motions claiming that Red Nova should be held in contempt because it has violated the terms of the Consent Preliminary Injunction.
12. The motions for summary judgment are ripe for disposition.
13. The Court makes no findings of fact but summarizes the following undisputed and contested facts to provide context for its ruling. See Hyde Ins. Agency, Inc. v. Dixie Leasing Corp., 26 N.C.App. 138, 142, 215 S.E.2d 162, 165 (1975). Further background is provided in the Court's prior Order & Opinion dismissing some of Red Nova's counterclaims. SiteLink, 2016 NCBC LEXIS 45, at *4-6.
14. SiteLink is a North Carolina technology company that has provided FMS to the self-storage industry since the 1990s. Its FMS helps facility operators manage rentals, revenue, and accounting, among other things. SiteLink's FMS is server-based, and its API allows other software providers to access SiteLink customers' data. SiteLink's API includes "specifications," which are "the code necessary to retrieve information from" SiteLink's FMS. (Pl's. Mem. L. Supp. Mot. Partial Summ. J. 3 ( )
15. Red Nova is a technology company founded in Kansas City, Kansas, in 2009. (Aff. Daniel A. Miller ¶ 2, Jan. 23, 2015, ("Miller Aff."), ECF No. 17.) Red Nova's initial internet-based software products targeted lead generation and website development. Red Nova used SiteLink's API when working with SiteLink's customers. Red Nova later developed its own FMS platform. (Miller Aff. ¶¶ 11-13.)
16. It is common for self-storage facility owners to use both an FMS platform for primary management and other third-party software programs for ancillary services. Third parties can communicate with SiteLink's FMS by importing or exporting information manually, using SiteLink's web template to link a facility owner's website to SiteLink's servers, or accessing SiteLink's API, which allows a third party's application to interface directly with SiteLink's FMS.
17. SiteLink employs two licenses, one for its API, and another for its FMS.
(1) SiteLink's API License
18. Before July 2011, users seeking to use SiteLink's API would make an e-mail request to Luke Lenzen, SiteLink's Chief Technology Officer. Mr. Lenzen would screen for conflicts and provide approved users access to specifications necessary to use the API. (Lenzen Dep. June 23, 2016, 25:13-26:12, ("Lenzen Dep."), ECF No. 75.9.) The API specifications contain a footer that reads: (Pl's. MSJ Br. Ex. 9, ECF No. 75.4.)
19. On July 12, 2011, SiteLink implemented version 1.0 of an API license, ("API License 1.0"), and conditioned continued usage of the API on agreement to the licensing provisions. (Lenzen Dep. 34:11-37:6.) API License 1.0 stated that the "User agrees that User will disclose to SiteLink any conflicts of interest or potential conflicts of interest User may have in a timely manner." (Pl's. MSJ Ex. 6 § 9 ("API License 1.0"), ECF No. 75.8.) It also stated that "[a]ny and all licenses contained in this agreement shall terminate automatically without notice if User fails to comply with any provisions of this Agreement," (API License 1.0 § 7), and prohibited users from externally storing tenant e-mail addresses or other information sent or received from SiteLink. (API License 1.0 § 3(N).) After July 12, 2011, any time SiteLink provided the API specifications, it included the operative API license. (Lenzen Dep. 34:18-20.)
20. Although SiteLink states that this "should not" have been the case, (Lenzen Dep. 33:2-3), the API specifications were for a time available via a URL internet portal. The portal was not generally visible to the public on the internet, however, it was also not password protected or otherwise restricted at certain times, including between November 26, 2013 and April 5, 2015. (Lenzen Dep. 32:7-34:1-2.)
21. On April 28, 2014, SiteLink implemented version 2.1 of the API license ("API License 2.1"). API License 2.1 provided that an API user shall "[n]ot compete directly, or through an affiliate company, or through [sic] related third party with SiteLink," or "operate in conflict of interest to SiteLink, or in a manner detrimental to the reasonable business interests of SiteLink." (Pl's. MSJ Ex. 8 ("API License 2.1") §§ 3(R), (S), ECF No. 75.1.) API License 2.1 also contained, as did API License 1.0, the requirement that licensees disclose to SiteLink any potential conflicts of interest that the licensee had with SiteLink, (API License 2.1 § 10), and a self-executing termination provision in the event a licensee breached any provision of the license. (API License 2.1 § 7.)
(2) SiteLink's FMS Customer License
22. Since at least January 1, 2014, SiteLink has conditioned usage of its FMS on agreement to a customer license ("Customer License"). .) This license states that SiteLink "may suspend" the customer's "right and license to use the software" if the customer or a "related third party operate in competition" or in a "conflict of interest" with SiteLink....
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