'Nonpracticing entity' or 'patent troll'? Property Disclosure Technologies sues 13 real estate companies

Patents awarded to 'Master of Disaster' valuation expert Randall Bell now assigned to PDT LLC

More than a dozen real estate companies -- including Re/Max, Century 21 and Keller Williams -- have been hit with patent infringement lawsuits by a company that does not maintain a website or offer any products or services but holds patents on a "real estate disclosure reporting method."

As a company that earns, or plans to earn, the majority of its revenue from the licensing or enforcement of its patents, Delaware-based Property Disclosure Technologies LLC  is characterized as a "nonpracticing entity," or NPE, by PatentFreedom, a company that tracks NPEs for its subscriber clients.

Patent holder image via Shutterstock.
Patent holder image via Shutterstock.

Critics often apply the pejorative term "patent troll" to such companies -- a label PatentFreedom considers "unhelpful" given the many differences between various companies and individuals who have sought to enforce their patent rights through the courts, and and the heated rhetoric that the label inspires.

The list of 13 companies sued by PDT LLC reads like a who's who list of franchisors and brokerages, with Zillow thrown in for good measure.

The defendants in the lawsuits, all filed in the past month, are Zillow Inc., Redfin Corp.Re/Max LLC, Keller Williams Realty Inc., BRER Affiliates LLC (part owner of the Prudential Real Estate franchise network), Weichert Co., JB Goodwin Realtors Inc., David Winans GMAC TEXASMLS.com LLC, and Realogy subsidiaries Century 21 Real Estate LLC, Coldwell Banker Real Estate LLCBetter Homes and Gardens Real Estate LLCERA Franchise Systems LLC and Sotheby's International Realty Affiliates LLC.

At issue are two patents, both titled "Real estate disclosure reporting method," granted in 2009 and 2011.

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The first patent, No. 7,584,167, describes a systematized way of handling real estate disclosures according to certain conditions and, among other things, encompasses "listing a plurality of known items of disclosure for a specific property" on "Web page media" and "categorizing the known items of disclosure on the Web page media according to a plurality of real estate conditions."

The second patent, No. 7,945,530, is a continuation of the first patent and describes a process that "identifies a subject property, accesses an insurance claim database, determines from the database whether an insurance claim has been filed for the subject property, and generates a report regarding the subject property and the insurance claim."

The lawsuits are all similar in wording. Each complaint alleges that the company named as a defendant is directly infringing one or more claims of both the '167 patent and the '530 patent "by making, offering and/or using in the United States the computer-implemented website ... which provides computerized real estate searching and reporting functionality that performs one or more methods claimed in" each patent.

The lawsuits also allege that each company indirectly infringed on the patents "by inducing visitors ('End Users') to its website to directly infringe" the patents "through its use of the infringing functionality."

As a result of the alleged infringement, the lawsuits say "PDT has suffered, is suffering, and will continue to suffer injury and damages for which it is entitled to relief ... in an amount to be determined at trial."

Realogy spokesman Mark Panus, speaking on behalf of all the Realogy companies named in the lawsuits, said, "We believe these claims are meritless, and we will vigorously defend against them." He declined to comment further.

Zillow, Re/Max, Keller Williams Realty, Weichert and David Winans declined to comment. Redfin, BRER Affiliates and JB Goodwin Realtors did not respond to requests for comment.

The inventor of these patents is Randall Bell, a real estate appraiser and CEO of Bell Anderson & Sanders LLC, a company that specializes in real estate damage economics and valuation.

Bell's niche -- determining the value of stigmatized properties -- as well as his "ripped from the headlines" caseload have earned him the nickname "Master of Disaster" from the media. Bell gauges the effects of natural disasters, terrorism, brutal crimes and other catastrophes on property values, and his work has taken him to all 50 states and seven continents.

Examples of some of his work sites include Chernobyl, the path of Hurricane Katrina, the JonBenet Ramsey home, and the Flight 93 crash site. His services are in high demand -- his rate is $375 an hour, according to the Los Angeles Times.

In July 2013, Bell assigned patents '167 and '530 to Empire IP LLC, a nonpracticing entity that describes itself as a patent licensing and monetization company. Empire IP partners with patent holders and offers to advance all the costs and expenses of setting up a licensing program in exchange for a share of licensing revenue. In limited circumstances, the company will purchase a patent or patent portfolio.

Austin, Texas-based Empire IP was formed in September 2011. Property Disclosure Technologies is one of a network of more than 20 entities affiliated with the company and the only one that is going after real estate companies so far, according to PatentFreedom.

PDT was incorporated in August 2013 in Wilmington, Del. Empire IP assigned the '167 and '530 patents to PDT on Jan. 8. PDT filed its first lawsuit against a real estate company five days later.

PDT now owns the patents and Bell does not own PDT, according to Daniel Mitry, a member of PDT and a principal at Empire IP. He declined to comment further. Bell did not respond to a request for comment.

Stephanie Singer, a spokeswoman for the National Association of Realtors, said NAR had heard of PDT, "but at this point we're just monitoring and collecting information from our members -- that's all."

That is currently NAR's stance when it comes to "patent trolls" in general, Singer added. NAR also warns its members about some patent trolls it has come across.

Last month, the trade group issued a call to hear from members who had received a letter demanding a licensing fee for a technology or process used in their business. NAR hopes to use members' stories for its legislative efforts against patent trolls.

"We do know that our members have been impacted by the trolls, and we think that their resources are being diverted to this troll problem that could better be used in their business," said Melanie Wyne, a senior policy representative at NAR.

So far, not many members have come forward.

"I think it's a matter of people being wary to talk about the problem," Wyne said.

"If you're being threatened with a lawsuit, you don't want to antagonize the people that are threatening you."

NAR applauded the House passage of the Patent Litigation and Innovation Act of 2013 in December and is now turning its patent reform efforts to the Senate, where it is supporting three bills: the Patent Abuse Reduction Act of 2013, the Patent Litigation Integrity Act of 2013 and the Patent Transparency and Improvements Act of 2013.

The trade group wants reforms that won't allow trolls to hide behind shell corporations; to improve patent quality; and to change demand letters to be more specific about claims of infringement and to identify the potential plaintiff, Wyne said.

Previous patent reform legislation, the Leahy-Smith America Invents Act, became law in 2011. One of its provisions limited the naming of multiple unrelated defendants in the same lawsuit.

Ray Niro, a senior partner at a Chicago law firm that represents nonpracticing entitites, told The National Law Journal in a January 2012 article that the America Invents Act is "not going to affect my decisions about who I sue. I now have to bring five cases instead of one."

Lawyers for PDT have filed 12 lawsuits against 13 real estate companies using nearly identical language. The only two companies named in the same suit are Better Homes and Gardens Real Estate and one of its independently owned affiliates, BHGRE David Winans & Associates.

NAR is working with the Main Street Patent Coalition, which includes various types of businesses, including retail, restaurants, hotels, grocers and others, to show that patent troll issues are not just limited to tech companies.

While patent trolls have been an ongoing problem in the real estate industry, it's been only in the last couple of years that they have began to target more mainstream, nontech companies, Wyne said.

"It used to be (multiple listing services) and more technology intensive organizations that were the focus. Now it seems to be broadening to brokers and more Main Street businesses," she said.

She's not sure why that is, except that those seeking to enforce patents can make a lot of money, she said.

"It's a volume. If you can collect a couple thousand dollars from a thousand businesses just by sending a demand letter, that's a pretty lucrative business," she said.

In 2011, NAR negotiated a blanket licensing agreement with CIVIX-DDI LLC, a company that holds several patents on location-based Internet search techniques, after the company filed patent infringement lawsuits against two of the nation's largest multiple listing services and demanded licensing fees from several others.

NAR paid CIVIX a total of $7.5 million that it collected from Realtor associations, MLSs and MLS vendors to pay for a blanket licensing agreement that applied to the industry as a whole.

The agreement did not apply to third-party portals. Zillow paid CIVIX $850,000 in 2012 to be released from any claims that Zillow infringed on the CIVIX patents, and later that year Trulia settled a patent infringement lawsuit filed by CIVIX for $900,000.

In a regulatory filing, realtor.com operator Move Inc. said it paid $4.86 million in 2009 to settle both a 2005 claim brought by CIVIX against Move and NAR, and another patent infringement case brought by Tren Technologies Holdings LLC. The cost of each settlement was not broken out in the filing.


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