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Contract – Software License – Non-Compete Provision – Breach

Where claims arising from copying and distribution of source code were preempted by the Copyright Act, and where the parties had legitimate interests in contacting customers regarding the termination of the parties’ relationship, or made public statements of undisputed fact or pure opinion, there could be no defamation or tortious interference.

We grant plaintiff summary judgment on defendant’s counterclaims relating to tortious interference but deny the remainder of plaintiff’s motion, and we grant defendant partial summary judgment on plaintiff’s misappropriation, breach of contract, intentional interference, and defamation claims but deny the remainder of defendant’s motion.

Plaintiff licensed an Application Programming Interface (API) for its facility-management software (FMS) to service providers like defendant, to permit customers who used both plaintiff’s FMS and defendant’s lead-generation and website software to access customer data through plaintiff’s API. Plaintiff governed use of the API through a license, and alleged that defendant breached the conflicts of interest and non-compete provisions of that license.

Plaintiff filed an amended complaint asserting claims of misappropriation, violation of the Computer Fraud and Abuse Act (CFAA), trespass, breach of contract, unjust enrichment, tortious interference, libel, and unfair or deceptive trade practices. Defendant asserted counterclaims for tortious interference, defamation, and unfair or deceptive trade practices.

We first rule that plaintiff’s claims that defendant improperly copied or distributed plaintiff’s software are preempted by the Copyright Act. However, we hold that plaintiff’s unjust enrichment and trade secret claims are not preempted where they involved breach of the parties’ agreement rather than copying and/or distribution of copyrighted material; we further noted that trade secrets were incompatible with claims under the Copyright Act.

We find no evidence that defendant had access to plaintiff’s source code to misappropriate it. But we find genuine issues of material fact as to plaintiff’s trade secret claims with respect to plaintiff’s products and systems in its API specifications, as a jury should decide the reasonableness of plaintiff’s efforts to protect its API. Similarly, we find a factual dispute over whether defendant accessed plaintiff’s servers without authority to do so in violation of the CFAA.

We decline to enter judgment on plaintiff’s non-preempted breach of contract, unjust enrichment, and tortious interference claims, first finding a dispute as to whether defendant disclosed its intent to develop a competing FMS and whether such failure would constitute a violation of the API license. We further find factual disputes over the terms, duration, and breach of the express limited license plaintiff granted as a transition period for customers when plaintiff discovered defendant’s competition. Finally, we find insufficient evidence of any damages suffered by plaintiff.

We grant defendant summary judgment on plaintiff’s defamation claim arising from defendant’s press release, finding the assertions in the release undisputed, capable of more than one interpretation, or merely pure expressions of opinion.

Finally, we grant plaintiff summary judgment on defendant’s tortious interference counterclaims, ruling that plaintiff had legitimate business interests in contacting customers about the termination of defendant’s API access.                                                    

Parties’ motions for partial summary judgment granted in part and denied in part.

SiteLink Software, LLC v. Red Nova Labs, Inc. (Lawyers Weekly No. 020-064-18, 59 pp.) (James Gale, J.) Luther D. Starling, Jr. and Michele A. Ledo for plaintiff; J. Christopher Jackson, John T. Kivas, and Shannon R. Joseph for defendants. 2018 NCBC 87

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