VendNovation Sues to Enforce Copyrights and Protect Trade Secrets in Vending Machine Software

VendNovation, LLC, filed a complaint (pdf) claiming copyright infringement, breach of contract, misappropriation of trade secrets, unfair business practices and other causes of action against Apex Industrial Technologies LLC, on April 26, 2011, in the Western District of Washington.  VendNovation developed “Web Management Software,” a server-hosted software program that allows the user to remotely control vending machines through an Internet connection.  Special control boards programmed by VendNovation are installed in the vending machines.  VendNovation claims trade secrets in the design of the software and the know-how to make it work.  It licensed its software, but did not license the source code.  VendNovation also protected its trade secrets by using a secure procedure to register its software copyrights.  Apex markets and sells vending machines.

VendNovation alleges that it, Apex and a vending machine manufacturer formed a three-way venture to manufacture, market and license vending machines with VendNovation’s Web Management Software and control boards.  The parties operated under an oral agreement for about two years. 

VendNovation alleges that in April 2008, Apex wanted to acquire VendNovation’s assets or become an exclusive licensee and obtain access to VendNovation’s source code so that it could pursue an opportunity with a large customer (Fastenal).  VendNovation declined, but Apex started selling vending machines with VendNovation’s Web Management Software and control boards to Fastenal without an exclusive license from VendNovation or access to its source code.  The Web Management Software used by Fastenal was hosted on VendNovation’s servers.

Users must agree to VendNovation’s End User License Agreement (EULA) before they can access its website.  The EULA is a “click through” license in which users must acknowledge reading the EULA by clicking a button.  The EULA contains language claiming VendNovation’s copyright and intellectual property rights in the software, including the software’s look and feel.  The EULA prohibits reverse engineering, modification or de-compiling the software.

VendNovation alleges that it entered into a written licensing contract with Apex in February 2009.  The license reiterates VendNovation’s ownership in the software, control boards and derivative works.  The license provides that Apex can access VendNovation’s source code and produce derivative works only if VendNovation becomes insolvent. 

VendNovation allegedly learned in January 2011 that Apex ordered vending machines from the manufacturer without VendNovation’s control boards.  It alleges that Apex developed its own competing control board and an inferior substitute for VendNovation’s Web Management Software.  Some people installing Apex’s competing software believed that VendNovation designed the software and contacted VendNovation for technical support.  VendNovation alleges that Apex sold vending machines with Apex’s competing control board and access to Apex’s competing software to Fastenal.  Apex also sold a desktop vending machine model incorporating VendNovation’s control board and Apex’s competing web management software to Fastenal and others.

Apex’s competing works allegedly use VendNovation’s trade secrets and copyrighted works, without VendNovation’s authorization.  VendNovation has not received compensation from Apex for using VendNovation’s copyrighted works or trade secrets.

VendNovation’s cause of action for copyright infringement includes claims against Apex of willful infringement and Apex’s unauthorized copying, distributing and creation of derivative works.  VendNovation requests injunctive relief under 17 USC §502 and impounding and destruction of infringing materials pursuant to 17 USC §503

The number for this case is Case 2:11-cv-00700-JLR, Western District of Washington at Seattle.

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