It’s a scenario that could qualify under “worst nightmares.”
A real estate broker receives a letter accusing him or her of violating a patent over something many real estate websites do: sending an email alert when a website is updated with a property that matches a user’s desired criteria.
Unless the broker pays up for a license, the patent owner threatens to sue.
The National Association of Realtors has made a deal to ensure its members and others in the real estate industry don’t receive that threat any longer.
In June, the 1.2-million member trade group filed a lawsuit against Data Distribution Technologies, LLC requesting that its patent on a “Web-updated database with record distribution by email” be declared invalid and unenforceable by a U.S. District Court.
Leading up to the lawsuit, NAR filed what’s known as an Inter Partes Review petition with the United States Patent and Trademark Office requesting that it review the validity of the same patent.
Now, DDT has agreed not to enforce its patent in the real estate industry in exchange for NAR abandoning those invalidation efforts, according to Katie Johnson, senior vice president and general counsel at NAR.
Who’s protected?
Katie Johnson
“‘[N]either NAR nor anyone else is paying DDT anything,” Johnson told Inman via email.
After NAR filed its petition and lawsuit, the association was able to reach a settlement with DDT, according to Johnson.
“[R]ather than defend its patent in those proceedings DDT agreed not to sue anyone in the real estate industry in exchange for NAR dropping those challenges. That was precisely the result NAR intended.”
“[O]ur members can continue to operate their businesses as usual without fear of litigation related to this patent,” she added.
Johnson said that the settlement specifically protects:
- NAR members
- Associations
- MLSs
- Real estate agents and brokers
- Brokerage firms and their affiliates, franchisees and franchisors
- Move, Inc., which operates realtor.com
- NAR subsidiaries, institutes, societies, and councils
- Vendors providing real estate listing displays to any of the above
Non-Realtor agents and brokers are covered under the settlement, as are IDX listing website providers.
But third-party listing websites unrelated to NAR, such as Zillow, are not.
What happens to the petition?
NAR and DDT have jointly requested that the USPTO terminate the inter partes review petition; the agency had not yet decided whether to institute a trial of the challenged claims, according to Johnson.
“We feel the terms of the settlement are sufficient to protect our members, and further action on the patent isn’t required to ensure they can continue operating undisturbed by this patent,” she said.
Under the law, the USPTO will terminate the review, “unless the Office has decided the merits of the proceeding before the request for termination is filed.”
DDT declined to comment for this story, saying it would not comment on the settlement beyond a joint press release to be issued today. An advance version of the release did not contain a comment specifically from DDT.
DDT is a subsidiary of patent monetization firm General Patent Corporation. DDT holds a single patent (No. 6,529,908) and secures revenue by suing other firms for infringement rather than developing products related to the patent — a financial setup characterized as a non-practicing entity or NPE.
Critics of the business model, including NAR, often swap NPE for “patent troll,” a contentious term that draws on the allegedly dubious nature of these companies.
“NAR considered DDT’s patent invalid and enforcement of it an overly broad and thinly-veiled effort to exploit real estate businesses for licensing fees with the threat of high-cost litigation,” the trade group said in a separate press release.
The settlement is “a major victory against patent abuse,” NAR added.
Lawsuits filed under patent
Starting in 2012, DDT filed lawsuits against three real estate companies that employ NAR members: Re/Max LLC, Weichert Real Estate Affiliates Inc. and Prudential Brer Affiliates.
DDT also sent demand letters to several more brokerages, MLSs and technology vendors.
Each of the lawsuits against the three real estate companies settled, and Re/Max additionally took a license under the DDT patent, according to DDT’s website.
When asked what happens to those settlements, Johnson said, “To our knowledge, the terms of those settlements with the three real estate companies are confidential.
“If those prior settlement agreements left any risk that DDT could pursue demands for licensing fees or litigation against those companies in the future, then NAR’s recent settlement agreement eliminated that risk for them.”
DDT has also filed suit, and settled with, three non-real estate companies: Pricegrabber.com, Kayak Software Corp., and Zoolert LLC.
The settlement does not prevent DDT from enforcing its patent against companies outside the real estate industry.
Hints of CIVIX
The settlement with DDT is a somewhat akin to a blanket licensing agreement NAR negotiated in 2011 with CIVIX-DDI LLC, a company that owned several patents related to location-based Internet search techniques.
At the time, NAR collected $7.5 million from Realtor associations, multiple listing services and MLS vendors to seal the deal and provide blanket protection for the industry as a whole from CIVIX’s patent infringement claims.
Tom Salomone
“When Realtors fall victim to abuses in the patent system, NAR is going to have their back,” said NAR President Tom Salomone in a statement today.
“We’re hopeful that today’s settlement will remind patent trolls across the country that this type of exploitation is unacceptable and won’t go unanswered.”
Citing figures from “anti-troll” organization United Patents, NAR noted that 2015 saw the most patent disputes in history, with patent trolls composing nearly 67 percent of patent litigation that same year.
The trade group is currently championing two pieces of patent reform legislation, H.R. 9, the Innovation Act and S. 1137, the PATENT Act.
“NAR believes in the protection of legitimate intellectual property rights, but we’re ready and willing to invalidate frivolous patent claims aimed at our members,” Salomone said.
“To fully defend business owners across the country, however, we need significant reforms to the system that offer robust protections against patent trolls. We’re urging legislators to take a hard look at that in the months ahead.”
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