Real Estate Alliance Ltd. — which claims Realtor.com operator Move Inc. and dozens of other real estate companies, brokers and agents violated its mapping technology patents — may soon have its day in court.
The Federal Circuit Court of Appeals this week ruled that a lower court erred in interpreting the scope of one of REAL’s patents too narrowly, and vacated that court’s ruling that Move had not infringed on the patents.
The appeals court agreed with REAL’s position that the scope of the patent — which expired in 2008 — was broad enough that it could have applied to mapping tools employed by Realtor.com and other websites.
The decision means attorneys for REAL will get their chance to prove allegations that Realtor.com and operators of other real estate websites infringed on the patent, which was granted in 1991.
"The Federal Circuit Court of Appeals has sided with us on what this patent means," said Louis Solomon, a New York City-based attorney representing REAL. "We hope to go back to the district court and ask for a fast trial, now that we know what the terms (described in the patents) mean."
REAL claims the patent covered a process for creating a database of properties for sale, displaying a map of a geographic area, and allowing users to zoom in and identify properties inside areas within the map with a higher level of detail.
Most listing websites, including Realtor.com, offer such mapping capabilities. Attorneys for Move Inc. have maintained that the claims made in REAL’s patents didn’t cover the methods used by Realtor.com to construct property databases, display properties on maps, and allow users to zoom in on them.
In a Nov. 25, 2009, order, U.S. District Judge George King applied narrow definitions to several key terms used in the REAL patent claims — in effect narrowing the scope of the patent.
In order to clear the way for an appeal of the judge’s claim construction order, attorneys for REAL did not stand in the way of a Jan. 27, 2010, judgment in which King ruled that Move had not infringed on REAL’s patent.
In a nonprecedential decision published this week, a three-judge panel of the Federal Circuit Court of Appeals agreed with REAL that King had erred by defining too narrowly the scope of several claims asserted in U.S. Patent No. 5,032,989.
The decision keeps alive REAL’s hopes that it can recover licensing fees from dozens of companies it says infringed on its patents before they expired (REAL also held a related mapping patent, U.S. Patent No. 4,870,576, that was granted in 1989 and expired in 2006).
Dispute’s history
REAL, which had only limited success in licensing its mapping technology before the patents expired in 2006 and 2008, sued Pennsylvania Realtor Diane Sarkisian in 2005, claiming she had violated the patents.
In February 2007, REAL attempted to expand the lawsuit into a class-action suit against Sarkisian’s multiple listing service, TREND MLS, and customers of Realtor.com who had purchased enhanced listings.
That prompted Realtor.com operator Move Inc., the National Association of Realtors, and the National Association of Home Builders to file suit against REAL in U.S. District Court for the Central District of California, seeking a judgment that Move had not infringed on REAL’s patents.
In September 2007, the U.S. District Court for the Eastern District of Pennsylvania denied REAL’s motion to expand the Sarkisian case into a class-action lawsuit. The case was stayed in March 2008, pending the outcome of Move’s lawsuit against REAL in California.
Attorneys for Move say REAL first approached the company in 1998, alleging that Move and users of the company’s website were infringing on its patents and demanding that Move license its mapping technology.
In an amended complaint filed in October 2008, attorneys for Move alleged REAL had made public statements "extorting real estate agents, brokers and MLS providers into subscribing to their websites, depriving Move of substantial revenue."
In addition, Move attorneys claimed, REAL was "threatening users of Move’s websites, including MLS providers, real estate brokers and real estate agents, that unless they enter a license … or subscribe to defendants’ websites, then they will be sued for patent infringement."
Attorneys for REAL denied those claims and filed a counterclaim seeking triple damages against Move, NAR and dozens of real estate companies. There have been hundreds of filings in the case since then, and the list of companies involved in the lawsuit reads like a who’s who in real estate, including homebuilders, real estate brokerages, multiple listings services and MLS vendors.
By mid-2008, the legal costs to NAR, alone, had reached $1.3 million (NAR and Move both declined comment. A NAR spokesman said attorneys for the association were still reviewing the Court of Appeals decision).
REAL’s licensing attempts
Before its patents expired, a REAL licensing entity, Equias Technology Development LLC, signed licensing agreements with LendingTree and real estate franchisor Envirian LLC.
Equias also claimed to have signed up a number of brokerage companies as members of a planned broker network, FindaHome.com, which brokers contacted by Inman News said was never fully realized — the website is still listed as "beta" several years after its launch.
According to a March 2007 Inman News article, FindaHome.com was intended to function as a data-rich search site with neighborhood amenities and demographic information. Equias president Scott Tatro, the co-founder of FindaHome.com, said the company sought subscriptions from one broker in each multiple listing service area across the country, with a monthly subscription fee of $199. Subscribers were to upload property information from their MLS to the site.
In the Inman News report, Tatro said that FindaHome.com would "leverage its sublicensing agreement rights to indemnify its broker members so that they never have to worry about any form of infringement, past or present or future," related to the mapping technology patent.
"We are also including terms in our agreement that states that if the patent holders eventually win their case and the broker/member has liability, then we will pay for their license at our cost," he said.
And in an October 2007 Realtown.com article, Tatro said that FindaHome.com member brokerages included Howard Hanna, Tarbell, F.C. Tucker, Baird & Warner, ShoreWest, ZIP Realty and "many more of the top 200 companies in the U.S."
In January 2006, Sarkisian’s attorneys filed a Racketeering Influenced and Corrupt Organizations Act (RICO) suit against Tatro and three of REAL’s owners, alleging that their case against her was part of a "bottom up" strategy to intimidate individual agents into signing licensing agreements.
Sarkisian’s RICO suit noted that Mark Tornetta — the University of Pennsylvania-trained engineer who was awarded the mapping patents — in 1998 and 1999 filed four patent infringement cases against Microsoft, Mapquest and Cyberhomes.com operator Moore U.S.A. Two of the suits were quickly dismissed, and the others were dropped when the defendants were not served with complaints.
Following a period of almost five years in which Tornetta allegedly "took no steps to enforce the patents," REAL’s owners "explored other avenues for reaping profits," Sarkisian’s lawyers said. These avenues allegedly included failed attempts to sell licenses to associations, agencies, and Realtor.com’s operator at the time, Homestore.com.
Tornetta also unsuccessfully attempted to convince NAR to purchase a "blanket license" for the entire real estate industry, Sarkisian’s RICO suit alleged.
After their "consistent failures in trying to extract money from sophisticated corporate entities," REAL switched to a "bottom up approach," Sarkisian’s complaint said, targeting "individual real estate agents, who cannot afford to employ patent counsel or to fight expensive patent lawsuits."
REAL sent letters to at least 12 agents, the RICO complaint said, offering licenses for $10,000. The strategy, Sarkisian’s lawyers said, was "built on the premise that it will cost individual real estate agents less money to take a license than to hire a patent attorney."
Attorneys for the defendants denied the allegations, and that case has also been stayed pending the outcome of Move’s lawsuit against REAL in California.
Tatro’s attorneys said the claims in Sarkisian’s RICO suit were "a response to a third party’s suit to prevent infringement of a patent" and that the RICO act "does not apply to parties attempting to enforce a patent" or to third parties such as Equias and Tatro who would benefit from such enforcement.
In July 2008, REAL and Tornetta announced they had reached a confidential legal settlement with a Manhattan Beach, Calif., real estate agent Robert Freedman.
Freedman issued a statement critical of NAR when the settlement was announced, saying the group had "made a serious mistake" and was spending money "wastefully without our full knowledge if not our full agreement" to fight REAL’s patent claims. A NAR spokesman said at the time that the group disputed many of the points made by Freedman.
