MRIS sued AHRN and its CEO for copyright infringement, violations of the Lanham Act, conversion, and unjust enrichment based on AHRN’s alleged reproduction of real estate listing content from MRIS’s database onto AHRN’s website, neighborcity.com. The court previously granted a preliminary injunction against unauthorized copying etc. of copyighted content from the MRIS database, and now gave further consideration to the case.
AHRN, a five-year old real estate brokerage referral services and technology company, provides information to home buyers and sellers nationwide by identifying appropriate real estate agents for them, using data on real estate listings etc. MRIS provides multiple listing services (MLS): it maintains a database of property listings and related information. Real estate brokers and agents must subscribe to the service; they agree to upload their listings to the database and get the right to display MRIS listings on their own websites via a licensed data feed. Counterclaim-defendant NAR is a trade organization for real estate brokers and agents; its 1600 state and local member boards control about 80% of the roughly 1000 MLSs in the US.
AHRN counterclaimed, alleging that the counterclaim defendants began a scheme to register sham compilation copyrights in MLS listings, enforced them against AHRN, made false and misleading statements about their copyrights and about AHRN, and passed anticompetitive MLS rules to drive AHRN and similar innovators out of the market.
The story begins with a 2005/2006 guidance paper from MRIS, “Strengthening the Foundation: The Real Estate Listing Content Copyright FAQ and An Updated Program to Administer, Secure, and Enhance the Value of Real Estate Listing Content.” The paper invited the MLS industry to join MRIS’s copyright program, whose purpose was to defeat “the emergence of several high profile initiatives proclaiming ‘new’ and ‘improved’ alternative business models that they propose will dramatically change the real estate industry.” MRIS heavily publicized the paper at industry conferences. The paper allegedly encouraged claiming and enforcing copyright in uncopyrightable listing data consisting of facts assembled in compilations. It urged the industry to stop using the term “listing data” and replace it with “listing content” to improve the aura of copyrightability. And it urged making each listing a joint work owned by the broker and the MLS, claiming copyright both in individual listings and in the compilation of automated databases.
Registration was obviously something of a hurdle, given how often the listings change, so the paper argued that the MLS industry should characterize the databases as “unpublished,” allowing it to use quarterly registrations, forego registering photos in group registrations, and save huge amounts of money in registration fees. The MLS adopted the copyright program, allegedly under NAR’s encouragement, at a meeting that allegedly featured discussions of the perceived threat AHRN posed to the industry and what the industry could do to “shut down” AHRN. NAR instructed member MLSs in how to fill out their compilation copyright applications and published “MLS Registration Tips.”
In November 2011, AHRN began to receive a torrent of C&Ds from brokers and MLSs, mainly threatening copyright infringement lawsuits; AHRN alleged that the timing was connected to the NAR meeting about to occur. AHRN was copied on an email from another entity, Northstar, stating that MLSs across the country had dropped C&Ds “on the head of the bad fellow,” AHRN’s CEO Cardella. It continued,
How do we connect the dots between all of the MLS's [sic] that have been abused so that we can act collectively, either in cost sharing and/or strategically by taking an action against Mr. Cardella that has the desired outcomes of:1. Getting all of our listings off of his site[.]
2. Discovering where he has been getting the listings[.]
3. Throwing a world of hurt on both[.]
4. Sending a message that our copyrights are enforceable and we are serious about punishing anyone who doesn't take us seriously.
NAR’s general counsel then allegedly advised local MLSs to send C&Ds.
AHRN responded to each letter with an offer to negotiate a license, but these were generally rebuffed, always in the same format and in essentially the same language. When agreements were reached or negotiations commenced, brokers repudiated these agreements in January 2012, allegedly in response to pressure from MLSs, again using identical/near-identical language.
AHRN alleged that MRIS’s lawsuit and Northstar’s similar lawsuit were direct and concerted action constituting sham litigation, part of an anticompetitive scheme to suppress independent companies’ profile pages for real estate agents. NAR allegedly funded the lawsuits, and also promulgated rules governing MLSs that bar or strongly discourage them from licensing listing databases to third parties, inhibiting the development of new services. (AHRN will of course lose its antitrust claims, but this sure sounds like something the FTC might ask about.)
MRIS’s allegedly false and misleading statements were about the validity of its copyrights and copyright program, including claims to acquire copyright in submitted photos and listings by a clickwrap agreement and claims that listings could be copyrightable if MLSs only called them “content,” and also covered the use of false and misleading copyright notices on photos on MRIS's website and third party websites to which it syndicates the data. NAR allegedly republished or encouraged members to republish these false and misleading statements, and used words like “thief,” “theft,” “pirate,” “pirating,” and “piracy” to describe AHRN; a NAR member accused NeighborCity of stealing listing data and called them “Data pirates of the year.”
After noting that it hadn’t made a final determination on the validity of the copyrights at issue, despite issuing a preliminary injunction, the court turned to the counterclaims and found AHRN failed to state a plausible Lanham Act violation. Statements about the copyrightability of MLS data were nonverifiable, nonactionable legal opinions. Even if they were verifiable, the only logical conclusion would be that the statements about copyrightability/registrabilty were true, given that the Copyright Office routinely grants MLSs registrations and courts have found that compilation copyright protection exists for MLS compilations.
In addition, none of the statements at issue were made in commercial advertising or promotion. Statements in the copyright paper were directed to MLSs, and the paper wasn’t an ad promoting MRIS as an MLS or likely to influence a purchasing decision. Likewise, statements made to the Copyright Office weren’t advertising or promotion.
As for NAR, AHRN made only conclusory allegations that NAR republished or encouraged members to republish false or misleading statements on its website, without identifying which statements were republished or their nature and context. NAR’s “Registration Tips” weren’t false or misleading and weren’t ads.
Allegations of disparaging statements were also insufficient—AHRN identified a single disparaging statement by a NAR member, but that wasn’t sufficiently connected to these counterclaim defendants. Nor were these accusations of theft or piracy alleged to be in commercial advertising or promotion, and anyway they’d be nonactionable legal opinions.
The Sherman Act counterclaims didn’t plausibly plead fraud on the Copyright Office, which meant that defendants were entitled to Noerr-Pennington immunity from the Sherman Act claims to the extent that they were based on the filing of this copyright lawsuit. However, AHRN could file amended counterclaims specifying the allegedly unlawful agreement outside the lawsuit and how it affected competition.
AHRN’s Maryland unfair competition claims failed for the same reason the Lanham and Sherman Act claims failed. There was nothing unfair about expressing legal opinions about copyrightability, seeking registrations, or filing suit. And refusal to license AHRN couldn’t be the basis for an unfair competition claim, since copyright owners generally have the right to exclude others. (Though copyright misuse remains as a defense, albeit not a separate cause of action. If there were real antitrust law, I would find this somewhat odd: assuming that a defendant could prove copyright misuse, disentitling plaintiff from enforcing its copyright, then couldn’t the same misuse found a violation of the antitrust laws despite a copyright owner’s ordinary right to exclude?)
The California unfair competition claims also failed, for similar reasons and because the only conduct alleged to have occurred in California was a 2011 NAR meeting and MRIS’s presentation of its copyright paper in 2005 (which predated AHRN’s existence by two years). The allegations around the 2011 meeting were insufficient, and AHRN failed to plead harm suffered in California, which couldn’t be inferred simply because its principal place of business was in the state.
The court also dismissed the Maryland barratry counterclaim. Under Maryland law, “a person may not, for personal gain, solicit another person to sue or to retain a lawyer to represent the other person in a lawsuit.” However, this was a criminal statute providing no private right of action; also, AHRN didn’t successfully plead the required “officious meddling” and “personal gain.”