MLSs mulling copyright enforcement group to go after ‘data pirates’

Supporters say collective action would spread cost, risk of litigation

When it comes to policing unauthorized data use, multiple listing services may take a cue from the music industry and form a group to file copyright enforcement lawsuits against "data pirates" who scrape listing data from MLS databases without permission.

In a presentation titled "Are the Cows Out of the Barn or Can MLS Organizations Still Protect Against Data Piracy?" attorneys Marc Manos and Richard Reimer proposed the idea to members of the Council of Multiple Listing Services at their annual conference in September.

Manos and Reimer suggested that MLSs form a group to collectively enforce copyright rights, spread the risk and cost of litigation, and develop a coordinated strategy to combat piracy and shape laws in their favor.

"It’s an efficient way for addressing a big problem that any individual MLS, perhaps even a large one, would find overwhelming from a cost and risk perspective," Manos told Inman News. Manos specializes in civil litigation at Columbia, S.C.-based business law firm Nexsen Pruet and has worked with MLSs on copyright, data protection, and antitrust issues.

The CMLS board of directors will consider the idea of forming a copyright enforcement group at strategic planning meetings this week.

"We’re just evaluating it right now. We haven’t put anything specific as to what we would do or how we would do that," said Greg Manship, president of CMLS and CEO of Boise, Idaho-based Intermountain MLS Inc.

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Manship said the issue has come up because of copyright infringement lawsuits filed by two large MLSs, Rockville, Md.-based Metropolitan Regional Information Systems Inc. (MRIS) and St. Paul, Minn.-based NorthstarMLS, against the owner and operator of agent ratings and referrals site NeighborCity.com. NeighborCity has since filed counterclaims accusing the MLSs and the National Association of Realtors of violating antitrust laws.

CMLS has been contemplating how to best educate its members about the lawsuits, and how it can use its resources to help the industry face increasingly common issues of patent and copyright infringement, Manship said. CMLS has 164 regular MLS members and 95 business partner members.

"We have become the voice, more or less, in the MLS industry," Manship said, and forming an MLS copyright enforcement group could be the next step in the evolution of CMLS as an organization.

"This is one of the things we’re considering looking at, discussing how that would fit into our long-term goals," he said.

But in order for CMLS to take such a step, members would have to be on board, he said.

"Whenever you’re looking at something legal … it’s going to be an investment, a financial investment, whether from CMLS or our members," Manship said.

"I think that CMLS could definitely organize the group, get the initiative started," but members would likely have to make an investment as well, he said.

The idea

While there’s plenty of case law regarding copyright rights in the music and software industries, Manos said, this is an area of law that hasn’t been tested and developed in the context of MLS databases.

"This would be an area where we’re shaping the law for a new industry," Manos said. "When that’s occurring, you want a well-funded, well-thought-out strategy to maximize your chances of prevailing and getting decisions that would benefit your industry."

For instance, one area of the law that’s still developing — and is an issue in the NeighborCity cases — is whether MLSs need only to register a database and obtain a compilation copyright, or whether they need to individually register copyrightable items within the compilation.

There’s "potent disagreement within the courts" on the issue, Manos said, with resolved cases nearly evenly split one way or the other.

Reimer is senior vice president of legal services at the American Society of Composers, Authors and Publishers (ASCAP). Manos and Reimer suggested either CMLS, a subgroup of member MLSs, or a separate group of MLSs form an organization modeled on the copyright enforcement arm of ASCAP or that of the Recording Industry Association of America (RIAA), a trade group comprised of major music companies that has filed numerous copyright lawsuits against both individuals and websites for illegal downloading.

ASCAP members grant the organization the right to both enforce their music copyrights and license public performances of their musical works.

ASCAP offers those who use copyrighted music a blanket license to use it; the organization files lawsuits against those who continue to violate the copyright and refuse to purchase a license. The organization’s copyright enforcement activities are funded by license fees.

On the other hand, RIAA pays for litigation through member dues — the likeliest course for an MLS group, Reimer told Inman News, perhaps with dues based on MLS size.

Interest

Both Reimer and Manos said they believe some MLSs are interested in forming such a group, though none had committed.

Manos warns that listing "aggregators are taking fees for referrals or otherwise profiting from the use of MLS data."

"I suspect there are large numbers of data scrapers out there scraping large numbers of MLS data," he added.

John Mosey, president of NorthstarMLS, said he has asked CMLS officers to consider Manos’ and Reimer’s suggestion.

"I think CMLS is the ideal rallying point for this kind of activity," Mosey said.

"It’s more than one MLS should have to do on its own and it affects all MLSs," he added.

NorthstarMLS would "absolutely" consider joining a copyright enforcement group, Mosey said, and he wishes that such a group had existed before the MLS filed suit against NeighborCity.

"The way these other organizations (ASCAP and RIAA) work is that they help coordinate the defense of the copyright infringement," Mosey said.

They "have other people similarly situated who can share in the cost because everybody is a beneficiary of the activity."

MRIS declined to comment for this story.

Brian Larson, counsel for NorthstarMLS and a business partner member of CMLS, was a member of the organizing committee for the CMLS legal seminar.

He invited Manos and Reimer to speak, he said, because he thinks MLSs should be able to take legal action against data pirates, but the expense and fear of antitrust issues has held them back.

Antitrust

ASCAP’s model has been the target of extensive antitrust litigation, largely because of the group’s ability to sell and set prices for blanket licenses of musical works. An MLS group would not run into the same antitrust issues so long as the only rights the group obtained would be to enforce copyrights rather than license content, Reimer said.

But MLSs do license data to third parties. So Manos said any MLS group formed "would have to be careful not to discuss its economic terms and pricing for such licenses — discussing terms that should be included to help protect copyrights through contract would be fine."

In addition, individual MLSs would have to be the ones to sue, rather than the group, Reimer added.

"I think the national organization can guide the enforcement program, but the individual copyrights would have to be enforced on behalf of individual listing services," he said.

"The antitrust issues arise when one is attempting to prevent the use of copyrights in combination. In other words, if different listing services were to get together and attempt to prevent using their listings, especially if only under license. But otherwise, I don’t see a problem, especially if enforcing on an individual service-by-service basis."

No matter what, such a group is going to face antitrust claims, Manos said.

"There’s a natural fear that you’re going to be accused of unfair collusion or illegal price-fixing. And you are going to be accused of that," he said. "What this is about is enforcing your legal rights … without excluding any type of fair competition."

While such an enforcement organization can expect allegations of a group boycott, such as in the NeighborCity cases, attorneys for the group would have to show that limiting competition is not the group’s objective, Manos said.

"Nobody’s telling (MLS) members they can’t use your service, you just can’t take (MLSs’) stuff," Manos said.

While the RIAA was accused of "attacking the little guy," MLSs don’t have to worry about that kind of negative publicity, he said.

"At least right now, folks like NeighborCity, they’re large, it’s a business model, they’ve got investments. This is a business against a business," Manos said.

"It’s not … ‘this is a poor college student who just downloaded songs.’ That is the kind of David versus Goliath thing that bothers some people. This would not have those type of issues."

Gregg Larson, president and CEO of Clareity Consulting, said forming a copyright enforcement group is a good idea in the long run, though he said it would be "unwise" to form a group just to target NeighborCity, because that could bolster NeighborCity’s antitrust arguments. Clareity is a business partner member of CMLS and is not involved in the NeighborCity cases.

"Somebody like NeighborCity would call MLSs joining together a group boycott and scream antitrust to the court or the (Department of Justice)," Larson said. "That’s why MRIS decided to go it alone in their suit vs. (NeighborCity). MRIS doesn’t like bearing the legal fees solo, but they recognized a ‘group attack’ could have some pitfalls."

That said, the music and software industries have formed associations to protect intellectual property and enforce copyright without raising the Justice Department’s ire, Larson noted. The software industry’s anti-piracy trade group — BSA/The Software Alliance (formerly the Business Software Alliance) — was established in 1988.

"The DOJ does not consider this a group boycott, so (the) ASCAP or BSA model should work in real estate," Larson said.

Such a group would "save money and increase the power and and efficiency of cracking down on data pirates, just like the music and software industries have done," he said. "This may also serve as a deterrent to data thieves in the future."

Chris Miller, counsel for NeighborCity, said it would be "unlikely" that NeighborCity would sue an MLS copyright enforcement group if it were to be formed.

"Unless we have suffered some sort of direct injury by the formation of the group, we would have no legal standing to bring an action against them, especially in the absence of any activity on the part of the group directed at … NeighborCity," Miller said.

Jonathan Cardella, NeighborCity’s CEO, said if MLSs were to pursue collective action openly, they would lose on antitrust grounds to whomever they target next.

"This isn’t about protecting creative works simply to drive licensing revenues of those works," Cardella said. "This is about filing copyrights to block competition, to control listing flow and publication and to provide more exposure to the listing agent than, say, a buyer’s agent, in an effort to reserve the dual commission for the listing agent."

"This is also about brokers being able to control the lead and referral flow in order to tack on a markup commission."

Moreover, Cardella said, unlike copyrights held by MLSs, copyrights owned by the music industry were "pure as the fallen snow, and licensing these copyrights was their business," he said.

Douglas Miller, executive director and attorney for Consumer Advocates in American Real Estate (CAARE), has filed a "friend of the court" brief in support of NeighborCity’s claims that it’s the target of an "anti-competitive group boycott."

"CAARE believes that MLSs’ claimed copyright on consumers’ listing data has been obtained wrongfully and impedes competition, innovation and is harmful to consumers as well as to many MLS members who believe in third-party syndication," Miller told Inman News. 

"We believe that the MLSs are opening up a Pandora’s box by starting this litigation because it will raise an important issue that they would probably have been better off leaving in the box: Are copyrights on sellers’ data obtained legally?"

According to Miller, claiming copyright on clients’ listing data may constitute illegal self-dealing on the part of brokers, particularly if brokers’ purpose is to increase their chances of a double commission by limiting competition from sites like NeighborCity that offer referrals to buyer’s agents.

"We are really concerned to learn that MLSs all over the country are gathering together to try and put companies out of business that provide a real value to consumers and make Realtors’ jobs easier," Miller said.

Litigation goals

Reimer warned that copyright litigation is expensive, time-consuming and unpredictable.

"One can’t guarantee success, so it might not always be cost effective to bring a lawsuit, especially if the people who sustain the judgment don’t have the wherewithal (to pay any imposed fees)," Reimer said. "They may go bankrupt and you don’t get anything."

In addition, the relief that can be obtained through such litigation is limited. In an extensive paper fleshing out the proposal for collective action, Manos describes the two types of damages allowed under copyright law.

"The copyright owner may seek its actual damages and any additional profits owned by the infringer as a result of the infringement. These types of damages can be difficult to prove," Manos wrote.

"The MLS would have to show lost membership or other revenues to establish its actual damages. The MLS would then have to establish what profits the infringer earned from displaying the copyrighted material. While this may be practical in some cases, it will almost always involve extensive factual discovery, forensic accounting, and use of experts."

On the other hand, if copyrights are registered in advance, MLSs can seek statutory damages and attorneys’ fees without having to prove they lost profit or the infringer made profit from the infringement. For nonwillful infringement, copyright holders may obtain between $750 and $30,000 per work infringed; for willful infringement, between $750 and $150,000.

The main goal would be to get an injunction against the infringing party to stop taking what doesn’t belong to them, Manos said.

"The second goal would be … to obtain attorneys’ fees and costs and obtain statutory damages to pay for the expenses of litigation and protecting yourself."

How long such a group would last would depend on the results of litigation. The group could get together to find the best cases to pursue and then either get a series of "good" settlements that discourage further infringement by others, or get a series of "bad" results that let everyone know what is and isn’t allowed and everyone subsequently stands down, Manos said.

"Or it could be like the music industry … where there are opportunities to infringe and there are ever-evolving ways to do so and the group sticks around. It’s hard to predict which way it would go."

The upfront cost of forming such a group "wouldn’t be cheap," but the expense is partially dependent on the number of MLSs that join, Manos said.

"If you’ve only got a a few MLSs … against well-funded defendants, that could be a large cost; if you have a large number of MLSs, it could be a pretty reasonable cost," he said.

Such a group would also have to consider at least two types of organizational structures with differing costs. ASCAP, for example, has teams of investigators that spread out throughout the country to find instances of copyright infringement to litigate when a settlement cannot be reached.

Another model to consider is have members themselves identify instances of copyright infringement, instead of having the group pay for investigations.

The former model is more aggressive, but also more expensive, Manos said. Manos, who said he’d like to be part of the potential group’s national counsel if given the opportunity, said he does not recommend either model in particular. The decision should be based on what the group wants and how much it’s willing to spend, he said.

Why now

Back in May 2005, Manos wrote a paper concerning MLS intellectual property issues for the North Carolina Association of Realtors. In it, he warned MLSs to assure a proper chain of assignment or licensing for copyrighted works through well-written contracts.

Agents need to assign or license their copyrighted content to their broker and possibly the MLS; the listing homeowner needs to assign or license any copyrighted material they want used to sell their home to the broker and possibly the MLS; and brokers need to assign or license copyrighted materials to the MLS, Manos said. Each party can reserve the right to use the material for their own business, he added.

"You’ve got to dot your I’s and cross your T’s," he said. "It’s something you have to go back and look at and make sure it’s done correctly."

Since that 2005 paper, Manos said several MLSs he ‘s worked with have taken his advice, "but there are hundreds upon hundreds out there and I honestly don’t know" if it’s a widespread problem, Manos said.

Manos said he’s not sure why copyright enforcement has suddenly come into the spotlight now, seven years after that 2005 paper. But he said it has at least something to do with technological advances and the move to online computing.

When the MLS looked like a phone book, "we looked at copyright cases as like somebody snitched your binder and copied it," Manos said.

"It’s a different world the way data can be manipulated and reproduced."

Technology itself may provide a cheaper solution to MLSs’ intellectual property protection efforts, according to Clareity’s Larson.

"The way we see it, the brokers and MLS operators have to make some reasonable efforts to prevent the wholesale scraping of a site before just hiring a fleet of lawyers to sue people for piracy," Larson said.

"Yes, it’s copyrighted data, but when people can steal it so easily, it means the only recourse is to sue them, which is tedious and extremely expensive — as we have recently witnessed."

Though he was not ready to provide any details, Larson said Clareity is working on an anti-scraping product and would be conducting beta tests this month.

"We’ll have some very interesting data in about 30 days," he said.

Regardless, Larson said he thinks there’s "a reasonable chance" MLSs will form a copyright enforcement group in 2013.

"Clareity will have a session at our MLS Workshop in February regarding the industry-wide efforts to protect data from illegal use and pursue data pirates as a organized group," Larson said.

"We look forward to the continuation of that discussion among the MLS CEOs."


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