NeighborCity hit with MLS copyright lawsuits

Referral site providing transaction-based scores for 850,000 agents

Two regional multiple listing services have filed copyright lawsuits against the operator of NeighborCity.com — not long after the site rolled out updated profile pages for 850,000 agents that feature agent scores and performance metrics based on their transaction history.

The lawsuits allege that NeighborCity.com’s owner and operator, American Home Realty Network Inc., reproduced, displayed and distributed copyrighted listing content, including photographs, without the MLSs’ authorization.

NeighborCity’s CEO Jonathan Cardella is named as a co-defendant in a lawsuit filed by Rockville, Md.-based Metropolitan Regional Information Systems Inc. (MRIS).

The complaint filed by MRIS on March 28 alleges the company violated copyright laws through "the creation of unauthorized derivative works incorporating the MRIS database."

St. Paul, Minn.-based Regional Multiple Listing Service of Minnesota Inc. (NorthstarMLS) filed suit against American Home Realty Network on April 18.

San Francisco-based American Home Realty Network — licensed as a brokerage in California, but no other states — has not filed a formal response to the complaints in court.

Cardella told Inman News that NeighborCity obtains some, but not all, of its listing and transaction data through agreements with individual brokerages. The site contains nearly 2.7 million listings nationwide, about 2 million of which are identified on the NeighborCity website as MLS listings.

"We cannot address ongoing litigation at this time but to say that the MLSs apparently do not recognize our broker agreements, which convey the right to use the listing data available on our website," Cardella said. "Additionally, we have not seen the federal copyrights of any of the alleged copyright violations despite our requests for those MLSs to" provide them.

Cardella added that in NeighborCity’s brokerage agreements, "brokers only give us permission to use their (own) listings." The site also has licensing agreements with third-party data aggregators that provide public records information, among other types of data.

Cardella declined to elaborate on other sources for the site’s listing and transaction data, saying, "We cannot go into detail on our data collection as it is proprietary and subject to the ongoing litigation."

MRIS and NorthstarMLS both declined to comment for this story. An attorney for MRIS said, "MRIS’s position is that brokers can share or distribute their own listings outside the MRIS multiple listing service."

Brokers who have agreed to publicize other brokers’ listings on their websites frequently receive listing feeds from their MLS, which include the listings of all participating brokers in their market.

In its complaint, MRIS said it provides brokers participating in its Internet Data Exchange (IDX) program with a "licensed data feed" in the Real Estate Transaction Standard (RETS) format.

Participating brokers and authorized third-party vendors may acquire an authorized developer license from MRIS to implement an "authorized application that uses … information MRIS makes available through a RETS data feed," MRIS said in its complaint.

MRIS claims that American Home Realty Network, through Neighborcity.com, provides "customers with unauthorized access to and use of the copyrighted MRIS Database and informational content in support of their referral business."

When NeighborCity first launched agent profile pages in 2008, several MLSs shut off data to the site, Cardella said. NeighborCity then turned to brokerages, rather than MLSs, for listing data, and no longer pulls data from any MLSs. He declined to say whether MRIS or NorthstarMLS were among the MLSs with which NeighborCity previously had licensing agreements.

Both MRIS and NorthstarMLS declined to comment on whether the timing or reasons behind the lawsuits had anything to do with the updated agent profile pages.

MRIS first informed NeighborCity of its alleged copyright infringement in a letter dated Nov. 18, 2011. The letter noted the absence of a licensing agreement between the two companies and demanded the brokerage "immediately cease any access to or distribution or other use of the copyrighted MRIS MLS database or any of the informational content therefrom."

In a Dec. 21, 2011, response, NeighborCity offered to enter into a "custom license" agreement with MRIS that would enable the brokerage "to continue to use the listing data in which your client claims a proprietary interest" in order to make referrals exclusively to MRIS members, charge them referral fees, "rank and rate member brokers and real estate agents for public display and to effectuate referrals," and "derive and own analysis and derivative works from the factual listing data," among other things. MRIS rejected the offer.

Cardella said he made similar offers to NorthstarMLS and more than 30 other MLSs, all of which were either ignored or rejected.

"We are … very disappointed that our overtures, prior to these suits being filed, to both of these entities to engage in productive relationships that benefit the general public as well as their member-brokers, were summarily rejected. Apparently they prefer to engage in litigation rather than negotiate a business relationship in good faith," Cardella said.

"We are providing listing agents and brokers with exposure for their listings via visible credit on our listing pages, and we streamline the process for buyers seeking to obtain buy-side broker representation by matching and connecting them together for showings and to facilitate offers and listings. We cooperate closely with the client and the member-agent and broker to get deals done and to satisfy our clients," he added.

"Why any MLS would refuse to license their data to our brokerage and would instead prefer to sue us instead is beyond my understanding, but I’m sure they feel justified in their position because it is a strategic imperative for their respective businesses, thus the MLSs are working together to essentially destroy NeighborCity."

NeighborCity plans to file responses to the complaints within the next 15 to 30 days.

Brian Larson, president of consulting firm Larson/Sobotka Business Advisors LLC, is one of the attorneys representing NorthstarMLS.

Larson told Inman News in December that he expected more MLSs would go after "data pirates" who redistribute MLS data without authorization, and that his firm was working with clients to evaluate ways of shutting them down, adding, "I’d expect some news on this front in the first quarter."

He declined to comment on whether he was referring to NorthstarMLS’ complaint at the time.

Northstar MLS has more than 13,000 members in Minnesota and western Wisconsin. MRIS has more than 40,000 members in Maryland, Virginia, Washington, D.C., and parts of Delaware, Pennsylvania and West Virginia.

In their complaints, both MLSs included screen shots of NeighborCity listing pages with photographs showing the MLSs’ copyright notices at the bottom of the images.

Source: MRIS complaint against NeighborCity

Source: NorthstarMLS complaint against NeighborCity

MRIS’ complaint calls for judgments against American Home Realty Network and Cardella for copyright infringement, payment to MRIS of "any and all profits arising from the foregoing acts of false designation of origin, and unfair competition," statutory and compensatory damages, and a permanent injunction required that the defendants "cease directly or indirectly infringing, or causing , enabling, facilitating, encouraging, promoting, and inducing or participating in the infringement of, any of MRIS’ respective copyrights," among other things.

NorthstarMLS’ complaint makes similar demands. The MLS also requests a jury trial.

In early March, just a few weeks before the complaints were filed, NeighborCity quietly began rolling out updated, transaction-based profile pages for 850,000 agents nationwide. The pages, which include "NC Agent Scores," are currently in beta, but will officially launch this Thursday.

The scores and the performance metrics that accompany them on the profile pages are based on agents’ transaction history. The metrics include the agent’s top cities; top neighborhoods; property types; percentages of buyers vs. sellers represented; total number of closed transactions compared to total average number of peers’ closed transactions; number of active listings compared to average number of peers’ active listings; percentage of agent’s transactions where he or she was a dual agent or where his or her brokerage was a dual agent; and price ranges represented.

"We know that it’s important to a seller that their home sells and that it sells at market rate or better and within a reasonable time frame," Cardella said. "And with a buyer we know that it’s important that they get someone who’s experienced with helping people buy homes … (and that buyers) get a reasonable price. How well they service their clients interests, that’s what we seek to capture."

Screen shot of an updated NeighborCity agent profile page

NeighborCity’s business model is based on referral fees. Agents pay the site a portion of commission when a sale closes with a client referred by NeighborCity. According to its website, NeighborCity ranks and displays every agent in a given market. Agents do not pay for their rankings and are listed regardless of whether they choose to work with the company.

Previously, agents on the site were ranked according to an "AgentMatch" score that considered how well an agent’s experience and performance matched a site user’s particular property or property search.

Now, the site has also incorporated NC Agent Scores, which are percentile-based rankings comparing an agent to his or her peers and analyzing that agent’s experience across all listings and transactions known by the site.

Screen shot of an updated NeighborCity agent profile page

Agents with the highest NC Agent Score relative to a given property or search now have the highest AgentMatch scores. That particular change has not yet been implemented throughout the site, but is expected to be by Thursday’s official launch. The site will also update its search to allow users to choose whether they are buyers or sellers, price ranges, location, and property types and return ranked results.

"We are having a lot of success using this information to make effective client referrals and to see those clients through to favorable outcomes. We have a proprietary system for making and tracking those introductions that is driving solid conversion rates (a few times better than industry average)," Cardella said.

"We will move hundreds of millions in home sales this year using this model and we are seeing over 3-4 times revenue growth, year over year. In short, we are bridging the online and offline real estate worlds using AgentMatch, and the rest of our competitors are too compromised to offer this service as media channels, beholden to the industry."

This is not the first time a real estate website has tried to offer consumers agent productivity data. In April 2010, HAR.com, the public-facing site for the Houston Association of Realtors, rolled out a "Realtor Match" tool that allowed consumers to see which agents had the most transactions and listings in a neighborhood they were interested in. Agents complained, however, and the association was forced to disable that particular feature of the tool after just a few days.

When HAR launched Realtor Match, Cardella told Inman News that having an MLS provide such tools was like "having the wolves guarding the sheep."

MLSs, Cardella said at the time, "Will always be stuck in the political quandary of the agent vs. the consumer, and the agent will always win because they are the ones paying the fees."

More recently, Seattle-based online brokerage Redfin offered agent "Scouting Reports" that included transaction data for agents in 14 markets going back three years in late September. The brokerage pulled the plug on the reports less than a week later, citing holes in multiple listing service data.

"We intend to get agents to send us the data to fill in the holes if there are any. If there are holes in the MLS data, (which is) the best available, then the hole is affecting everyone equally," Cardella said, adding that NeighborCity is "happy to address" any issues regarding inaccurate information.

Cardella said he personally believed political pressure, not missing data, was behind Redfin’s decision to pull its Scouting Reports.

"I think there is a lot of pressure within the industry to suppress information and I think they folded to it. Since we’re no longer members of these MLSs, (they) can’t say ‘we’ll turn off your (data) feeds,’" Cardella said.

Screen shot of an old agent profile on NeighborCity.com

"In any given market, there’s about 20 percent of all the members that really know their business. It becomes apparent through technology like this. If we’re successful … we’ll make these agents really, really efficient and the number (of agents) will decrease and I think (MLSs) see it as a threat to the size of their membership base. It’s about protecting the profession," Cardella said.

"It shouldn’t mean anything besides an opportunity to grow and benefit the public, but it isn’t. (There’s a) fear of change."

A guide to the new performance-based profile pages

While NeighborCity has been working on the user interface and the technology behind the updated agent profiles since about November, the site has been working on its rankings for years, Cardella said.

"We put an amazing amount of thought on how we’re doing this analysis," he said.

In addition to the general metrics listed above, NeighborCity also breaks down an agent’s performance as a listing agent and a buyer’s agent. Listing agent metrics include number of listings sold, average days on market, average days to sale, percent listings sold, and percent of asking price obtained on average — all compared to peers’ performance. The sold listings data covers up to the past five years.

Buyer’s agent metrics include number of listings purchased and average purchase price per square foot, both compared to peers. The data for listings purchased covers up to the last two years.

Further down the page under these metrics, consumers can see the agent’s peers. "Peers" are those agents who listed or sold properties that are comparable to the properties the profiled agent listed or sold in location, price and property type, among other factors. Six peers — those considered most comparable to the agent ranked according to an internal "peer score" — are readily visible on the profile page.

When making comparisons between an agent and his or her peers, the site typically considers only those sold transactions or properties listed within a six-month window of each of the agent’s transactions and comparable in terms of price, location and other factors.

"Accordingly, if we have a sold record five years ago and comparable solds that are within six months of that record, we incorporate that performance in our analysis," Cardella said.

The six-month window helps mitigate the differences between a new agent selling homes at comparatively lower prices than an agent selling homes during the housing boom, for example.

"We find that market gyrations in six months are usually minimal enough not to confound this analysis, and since they happen to everyone and are fairly typical, the significance is minimal. Everyone deals with price gyrations. Yes, they can make you look a little better or worse, but they do the same to your competition," Cardella said.

A profile page also includes a Google map that displays the agent’s active, inactive and recently sold listings. A contact form for the agent is provided under the NC Agent Score on the upper right corner of the page.

An agent’s profile page will display that agent’s transaction history from the first record the site has of the agent up to the present. The vast majority of the site’s data is less than two years old, but some is up to five years old. If an agent’s transaction history doesn’t meet a minimum threshold for transactions, listings, and other data points, the site will add a disclaimer to the relevant part of an agent’s page stating "Not enough data is available to verify the accuracy of this score."

"We need more than just a few listings or deals," Cardella said.

For now, if a listing goes off market and is relisted, it is treated as if it is a new listing and days on market are reset. Eventually, the site plans to detect when the same property has been relisted and display extended days on market, which would sum days on market for both listings. The site also plans to adjust the "percent listings sold" calculation similarly.

"Right now, I would imagine that those who relist a lot are punished by our scoring because they have a lower ‘percent listings sold,’ and from a seller’s perspective, that’s the most important attribute of a listing agent," Cardella said.

When an agent’s market activity indicates that he or she is part of a team, specializes in selling REOs (bank-owned homes), or is reporting for an entire brokerage or housing development, NeighborCity provides performance metrics for the agent but does not provide a score. That agent is also excluded from any peer group comparisons for other agents.

"If we did add them, (that) would skew the whole peer group, basically," Cardella said.

"Hopefully in the future, if you have a team, there would be a way to recognize the agent who represents each transaction," he added.

Agents can claim their profiles, but they cannot change the auto-generated summary that accompanies their profile, the metrics displayed, or the scoring. They may add their own bio, change their photo, enter their license number, and add their social media accounts, among other features. The site may also let agents add listings and transactions to their profiles in the future, Cardella said.

Since beta testing commenced, most agent have reacted positively to the profile pages, he said.

"I think they appreciate it, someone recognizing their performance. (If) some agents don’t do as well as they like, we listen. Some will say the data’s not right, and we say ‘what’s wrong’ and usually we don’t hear back from them," Cardella said.

In the next few months, NeighborCity plans to add user comments and feedback to the profile pages, though they will not be considered in the scoring or performance metrics. The site also plans to recognize individual agents with awards for outstanding performance and create feeds that plot a timeline of an agent’s sales activity.

Contact Andrea V. Brambila:
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