Real Estate Listing Services Use Questionable Copyright Claims In Attempt To Block Criticism Of Agents

from the i've-got-a-feist-to-show-you dept

We've noted in the past just how incredibly backwards facing the real estate industry is. Last year, I got to present at a real estate industry conference, where I compared how the MLS (multiple-listing service) players were similar to the record labels and music studios, acting as monopolist gatekeepers to information. And, just as the entertainment industry gatekeepers have attacked disruptive innovators with lawsuits, so too do the MLS operations. In the past we've discussed how they've attacked web upstarts like Zillow and Redfin. The latest is that they've gone after NeighborCity, an offering from a company called American Home Realty Network (AHRN), who dared to make use of real estate data to actually rate real estate agents on their performance. As you might imagine, the real estate agents don't like that very much.

AHRN noticed that it suddenly received a flood of complaints and cease & desist letters conveniently timed exactly to the dates of the National Association of Realtors's (NAR's) annual meeting in November of 2011 -- and each of the letter seemed to include similar language. After responding to all of the complaints, two separate MLS providers sued AHRN. Amusingly, prior to the lawsuit, an executive for one of the MLS's (NorthStar, from Minnesota) appeared to accidentally cc AHRN on an email to its lawyer, complaining about "the bad fellow" (AHRN CEO Jonathan Cardella) not simply bending over and taking down NeighborCity in response to the complaints, and suggesting that filing copyright infringement lawsuits against AHRN/NeighborCity would be useful in bringing a "world of hurt" on the company. The email also discusses having various MLSs share the costs of litigation.

Indeed, NorthStar and a separate MLS, Metropolitan Regional Information Systems, Inc. (MRIS) appear to have followed through and sued for copyright infringement. You can see MRIS's filing embedded below. MRIS repeatedly insists that it holds a copyright on its database, completely ignoring fairly well-established law that you can't copyright facts, and that MRIS's copyright (if there is one) is limited to the creative works it added to the process. Instead, MRIS repeatedly claims to hold a copyright on the entirety of the database. It also claims to hold the copyrights on the photos uploaded by individual agents, saying that as part of that process, the copyrights are assigned to MRIS.

NeighborCity has hit back with its response (also embedded below), arguing that MRIS has no such copyright, and citing the litany of cases that establish you cannot copyright factual information, relying heavily (of course) on the important Feist ruling in the Supreme Court, which rejected "sweat of the brow" arguments for copyright, and said you cannot copyright a collection of facts, such as a telephone book.

It seems that the chance of succeeding on such a claim is slim to none. MRIS and its lawyers should be slapped around by the judge for even trying such an argument. MRIS clearly seems to recognize this by trying to use the photographs to make a separate argument. It claims that every photograph that is uploaded has its copyright assigned to MRIS (I'm actually a bit surprised that real estate agents would agree to this...) and thus it also alleges infringement on the photos. AHRN, however, points out that MRIS failed to register the individual copyrights on the photos, instead only registering a copyright on the "catalog." Here, AHRN notes (again) that there is widespread precedent limiting what sort of copyright can be applied to a catalog where little to no additional work was done by the party claiming copyright. Further, it points to the Muench case, which noted the "the registrant of a compilation copyright must list the names of the authors of the underlying works." That's just a district court ruling, so it's not clear how big an impact it would have.

AHRN also questions the claim that anything it has done creates irreparable harm to MRIS is completely baseless. MRIS's best argument is that outdated info on NeighborCity reflects poorly on MRIS, but AHRN points out that it would reflect much worse on NeighborCity itself.

The real issue, of course, is almost certainly that the real estate agents don't like the fact that they're being rated by the site. The fact that NeighborCity has operated for years without a problem... until it put up its agent rating service, makes that pretty clear.

The larger issue may be that AHRN is also alleging that the action confirms that real estate agents are violating the final judgment in the antitrust lawsuit the US government filed against the National Association of Realtors. The email that was sent to AHRN certainly seems to indicate plans for concerted action. Combined with the timing correlating to the NAR event... and there's at least a reasonable case for the DOJ to look into the activity here by real estate agents and MLS services.

In the end, though, this is the same story we've seen over and over again. Gatekeepers don't like being disintermediated by disruptive innovation. So, rather than adapt, they sue.
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Filed Under: database rights, real estate
Companies: ahrn, mls, nar, northstar

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  1. identicon
    Just some thoughts, 25 May 2012 @ 2:36pm

    Just some thoughts


    Your original analogy on gatekeeping is flawed and because you appear to have a preconceived notion that gatekeeping is always bad and/or old fashion, you're ignoring the fact that it benefits consumers.

    To start, you compared real estate to the music industry, but the music industry's product IS the data in question. Each record company typically owns the data they're selling and the fight was about limiting consumer rights to the product after the consumer purchased it.

    That, however, doesn't translate to real estate MLS data.

    The real estate industry's product is NOT the data- and consumers don't buy or license it. The data is simply marketing for the actual product (i.e. real property).

    The websites in question also aren't consumers; They're businesses who want to use other company's marketing data for their own personal gain. Unfortunately it's one thing to try and innovate and push the industry forward; it's another to use the industry's data for the exploitation of consumers.

    And that brings me to the first problem with your music industry analogy. Real estate agents typically have no ownership rights to the actual product being sold. So regardless of how important the buyer is, the listing agent's LEGAL obligation is to the product's owner (the seller)- even if the seller's wishes hinder the property selling.

    That difference means the agent MUST maintain control of the marketing data during the sales process should the seller make changes to the product (take if off the market, change the price, update photos if the seller paints a room, etc). Failure to do so is a breakdown of the agent's legal fiduciary responsibilities to the seller.

    When a rogue website decides to use real estate data without regard for the agent who posted it online, the person who is ultimately harmed is the consumer.

    Internally the industry has a need for gatekeeping as well. Real estate agents (and their marketing data) are regulated by state and federal agencies that can levy fines, suspend an agent's state license to do business and even jail an agent (See HUD's Fair Housing) while an investigation over marketing violations is being investigated. Even if innocent, an agent can be temporarily unable to earn income and be on the hook for legal representation while they defend themselves for actions taken by others who have taken liberties with their marketing data.

    But back to the consumer...

    Unlike the music industry, after real estate is sold or taken off the market the data in question becomes a legal liability to all parties involved should the original agent not have control to change the sales status or outright delete it.

    What do I mean by this?

    When real estate marketing data continues to be used after a property is no longer for sale, consumers looking to buy a home are deceived. The property owners may have consumers who wrongly believe a property is still for sale trespassing on their property to look at it (and have their privacy invaded or be legally liable for injuries to that person while on their property).

    But with all that said, in your music industry analogy the buyer of a CD, regardless of their rights to the music they buy, still has no legal rights to take the record company's marketing for that CD and use it for their own personal gain without the record company's authorization to do so- and that's exactly what a lot of websites are doing to real estate agents AND their sellers.

    Bottom line, real estate marketing databases are content rich and interesting to consumers- so there's a lot of revenue to be made by SEO savvy websites who can gain access to it. Unfortunately when it comes to SEO, more content is better so deleting old records isn't in the best interest of websites seeking to maximize content to place advertising or capture and sell real estate leads back to agents. That's a problem.

    If you believe what's in the best interest of consumers is for online marketing data to be accurate and honest, then there MUST be gatekeeping to make it happen because there's too much money to be made by being inaccurate and dishonest.

    It's sad that these conversations forget that each record in a real estate database contains personal and private information about someone's most personal space- their home.

    And regardless of what anyone thinks about real estate agents, no one EVER has to hire one to sell their home. It's a choice. So when a property owner decides to do it, they absolute have a right to assume their agent is in total control over their property's individual marketing.

    Switching topics to your actual post...

    As far as rating agents go, Angie's List has been doing it for years and I know of no legal action taken by a realtor organization against them.

    What you need to ask yourself is if the rating website is legitimately trying to provide a valuable service to consumers and is taking measures to keep the ratings honest and factual while giving all sides the ability to share their viewpoint, or is it just a content grab for SEO purposes so the site operator can rake in Google Ad revenue or trick consumers into giving them their information with the intent on selling it back to agents.

    In my opinion, this is really about shutting down the latter, not the former.

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