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These are the questions coming up in the API legal space, most notably with Uber, which, for one developer, has withdrawn access to its API based on terms and conditions that some view as an illegal effort to lock out the competitors.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.
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But more important to us API geeks, Gale focused much of his consideration on the anti-monopoly clause of Chapter 75, thoroughly examining if SiteLink’s API license was in violation of it.
But what does this mean for the Uber API case?
What Storage Wars and the Uber API Have in Common
Now, we could say that this sets a reasonable opportunity for precedent for Uber’s case, but this is only at the level of the North Carolina state court, while other cases against Uber are at the federal level.
Gale dubbed API cases as per se violations, which he says the U.S. Supreme Court has avoided clarifying, so he followed suit. If the Supreme Court were to take up one of Uber’s many anti-competition law suits — and so far the Supreme Court has refused such cases— of course any precedent could be overturned.
To summarize the potential case that could be brought against Uber, the ride company made the headlines— again — last May, also under accusation of breaking antitrust laws. The Uber API terms of service forbids developers from using it and its fair-price data for anything that could be construed as competition, which is why it revoked access for UrbanHail, a new real-time, price-compare app for Uber, Lyft and taxi services. UrbanHail came back and claimed that Uber is going against the the anti-competition interpretation of antitrust laws by preventing them from using the Uber API. Uber counters that it has the right to do whatever it wants with its public API and UrbanHail had to have agreed to its terms and conditions before using the API. Therefore it was knowingly breaking those terms and conditions.
Now, of course, we know the Harvard Business School students were developing UrbanHail as kind of an experiment, with full knowledge that they’d almost certainly be cut off from Uber’s pricing data. They wanted to disrupt the ultimate industry disrupter Uber, and to fight back on antitrust issues, as well as, it seems, simply to call Uber on its hypocrisy.
“They are absolutely a champion of competition when it’s them against taxi companies or them against regulators,” UrbanHail co-founder Amber James told Boston.com. “However, in its own ride-hailing niche of the transportation market, Uber’s stance is, ironically, absolutely anti-competitive.”
But as my ProgrammableWeb colleague Patricio Robles already wrote, if UrbanHail were to win a case like this, it’d set a dangerous precedent in the API economy, one that could lead companies like Uber to take away their public APIs completely.
Robles wrote: “If large companies are unable to set restrictions on how third parties use their APIs, and can be forced to make their data public for any use because the software interfaces to distribute it are ‘already built,’ many companies would be disincentivized from building APIs in the first place lest they be told by attorneys and bureaucrats what to do with them.”
Of course, since its launch in 2014, the Uber public API has been part of the company’s path to world domination, so we’re not convinced it’ll shut off access completely just yet.
One of the cases cited in the SiteLink v. Red Nova opinion was Sambreel Holdings LLC v. Facebook, Inc, in which a California district court allowed Facebook to continue to block Sambreel from, simply put, advertising other social media platforms on Facebook.
That dismissal opinion ruled: “As an overarching premise, the Court is persuaded that Facebook has a right to control its own product, and to establish the terms with which its users, application developers, and advertisers must comply in order to utilize this product.”
Based on this statement alone, the precedent is in favor of Uber because it basically states that a private company has the right to control its own product and certainly the Uber public API is its own product.
Going even more into the developer relations and platforms overall, the SiteLink v. Red Nova opinion also quoted:
“Just as Facebook has the right to determine the terms on which it will permit its Application Developers to use the Facebook Platform, it has a right to dictate the terms on which it will permit its users to take advantage of the Facebook social network. There is no fundamental right to use Facebook; users may only obtain a Facebook account upon agreement that they will comply with Facebook’s terms, which is unquestionably permissible under the antitrust laws.”
There are many, many other points that Gale makes basically to completely shut down Red Nova’s case against SiteLink. Surely Uber will be citing this case if UrbanHail brings it to court.
On the other hand, if you talk to digital law expert and Harvard Business School associate professor Ben Edelman, he believes that we’re talking about two very different things and that SiteSeek’s win probably wouldn’t be applied to an Uber win.
“It seems SiteSeek and Red Nova were direct competitors. The court certainly said that. That seems less sympathetic to me – quite natural that companies don’t want to interoperate with competitors,” he told ProgrammableWeb. “But Uber and UrbanHail are rather different. UrbanHail isn’t a competitor with Uber – it’s an aggregator, with an obvious direct and immediate benefit to consumers. So the overall tone of the dispute feels quite different.”
Plus, Edelman thinks that size does matter here.
“Broadly, I think you’ll find that most consumers – and most courts! – think Uber is awfully powerful in the sphere in which it operates. I’m less sure that folks would immediately agree that Red Nova is similarly powerful,” he said.
But what do you think? Do you think these are private businesses allowed to control access to their APIs as they see fit? Or is big business just beating out the little guys in the software space again? Continue the debate below or on Twitter @ProgrammableWeb and @JKRiggins.