Can you have a public API but put restrictions on it? Well, we assume that’s what terms and conditions were made for. But, to what extent must those terms and conditions comply with antitrust law? Or, at least allow for competitive applications of your API if your company doesn’t qualify as a monopoly? Can your application programming interfaces truly be “public” if your terms and conditions disallow application contexts deemed to be competitive to your business interests?
These are the questions coming up in the API legal space, most notably with Uber, which, for one developer, has withdrawn access to its API based on terms and conditions that some view as an illegal effort to lock out the competitors. However, the lawsuit-ridden San-Fran-based online transportation network company may see a silver lining in last month’s North Carolina Superior Court’s dismissal of SiteLink Software, LLC v. Red Nova Labs, Inc. in which similar issues are covered
Today we will talk about this new ruling and how it may or may not help secure Uber’s ability to have a selectively public API.
How SiteLink v. Red Nova Secures Control Over Public APIs
There’s no doubt that the self-storage industry has received a lot of press and influx of money over the last few years after cable TV’s competitive reality shows like Storage Wars. And, like any old-fashioned industry, the self-storage industry is embracing the way technology and APIs can help it grow. But this has left two facility management technology companies having their own storage war over access to one API.
SiteLink Software offers a partner ecommerce API that provides access to real-time storage facility management data to developers of complementary solutions. For example, through SiteLink’s APIs, developers of storage facility websites can incorporate SiteLink’s ecommerce and back-office capabilities. Red Nova Labs is a company that Builds websites for self-storage facilities that, in recent years, decided to offer its own facility management software (FMS). According to the court opinion, SiteLink as market leader has about 11,000 customers — or more than a third of the available market — while, according to its website, Red Nova has only about 2,000 customers.
As complementary offerings in 2012, the two companies were partners not competitors, with about 40 percent of Red Nova’s customers also being SiteLink’s customers. But, in 2013, after SiteLink allegedly turned-down Red Nova’ request for a FMS partnership, Red Nova developed its own storage facility management software offering.
In April 2014, SiteLink modified its API licensing terms to state that an API user shall “not compete directly, or through an affiliate company, or through...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, or in conflict with the services provided by SiteLink.”
Essentially, SiteLink fashioned new terms of service that prevented developers from using its API if those developers had also purchased or used competing services in the self-storage industry, which, since 2013, included Red Nova. In January 2014, SiteLink not only revoked Red Nova’s access to its API, but also sent letters to those overlapping customers that they could only continue to use SiteLink if they switched to a list of other website providers and stopped using Red Nova.
It appears that SiteLink made this change specifically to restrict Red Nova’s access to customers, which indeed it did.
SiteLink says that Red Nova broke its API licensing terms by competing with SiteLink and using the API at the same time, while Red Nova says that SiteLink’s API licensing agreement imposes trade restraints that are in violation of the State of North Carolina’s Chapter 75 antitrust law. SiteLink is a North Carolina company.
In addition, Red Nova complained that SiteLink uses these licenses to maintain an “unlawful anticompetitive advantage and to forestall Red Nova’s ability to compete with SiteLink.”
Did the Court’s Findings set API Precedent?
SiteLink won this dismissal by a long shot in a very strong opinion by Superior Court Judge James L. Gale.
Since the 1985 North Carolina Supreme Court case of Oates v. JAG, Inc, the state court has had a very stringent mandate to dismiss a case if any of these three things are true:
- No law supports the plaintiff’s claim
- Complaint does not plead sufficient facts to state a legally sound claim
- The complaint discloses a fact that defeats the plaintiff’s claim.
Judge Gale believes that Red Nova failed to offer enough facts — including that it did not list any of the customers it had lost — and thus it did not offer an actionable antitrust claim.