• Zillow has countersued Move Inc., alleging the realtor.com operator has divulged Zillow's trade secrets. Move denies this.
  • Zillow says Move's disclosure of a letter from a former Zillow employee has strained Zillow's relations with real estate agents and hurt its ability to compete.
  • Whether Zillow has, as claimed in the letter, actually used agent listing data, realtor.com data or Move data for its own benefit remains unclear.

Anyone hoping for an imminent resolution to the litigation between archrivals Zillow and Move Inc. is likely to be disappointed.

Zillow has officially filed a countersuit against Move, alleging that a letter publicized by Move has strained Zillow’s relations with real estate agents and had serious negative effects on Zillow’s reputation and its ability to compete.

The partially redacted counterclaim was first proposed in May but not officially filed until recently. It is the latest maneuver in litigation now a year and a half old involving at least eight law firms and sunk costs in the millions.

Both sides claim their trade secrets — and therefore their ability to compete for agent dollars and consumer mindshare — are at stake.

The legal war between the two portals appears to be far from over, as both sides suit up for an extended battle among lawyers and the courts. Meanwhile, the court filings offer a bounty of insight into how the two sides think and act.

The “whistleblower” letter

Zillow’s counterclaims, detailed in a previous Inman article, concern an April 9 letter to Move’s attorneys by a then-anonymous “whistleblower,” later revealed to be former Zillow Vice President of Strategic Partnerships Chris Crocker.

The official counterclaim filing is revealing in what it says and what it does not say. In his letter, Crocker alleged that Zillow illegally uses the realtor.com website to benchmark its listing count and figure out what listings are missing on its own site.

He also said Zillow illegally accesses agent IDX (Internet data exchange) listing data from its Diverse Solutions subsidiary to compare it to data scraped from realtor.com.

Zillow did not deny taking either of these actions in the counterclaim. Instead, Zillow objected to these actions being characterized as illegal.

“Those statements are false and disparage Zillow insofar as they accuse Zillow of acting illegally, using ‘offshore’ labor to operate supposedly illegal programs covertly, and stealing data,” attorneys for Zillow said in the counterclaim.

Mikael_Damkier / Shutterstock.com

Mikael_Damkier / Shutterstock.com

Secret programs and “stolen” data

In his letter, Crocker disclosed the existence of two secret Zillow programs having to do with listing quality, LSS and LSSv2. In the counterclaim, Zillow did deny that LSSv2 compares data from realtor.com or any other site and that LSSv2 uses offshore labor, but there are no such denials regarding LSS in the public filing.

Crocker also alleged that former Move employee Curt Beardsley, now Zillow’s vice president of industry development, has stolen Move databases and was using that information to benefit Zillow.

Beardsley himself has denied that he stole any data from Move. In its counterclaim, Zillow did not deny Beardsley had stolen data, but did say that Zillow had not participated in and “intentionally” benefited “from ‘stolen’ databases Beardsley took with him from Move.”

When asked whether Zillow would specifically confirm or deny the allegations regarding use of realtor.com data, agent IDX data or Move data, Zillow spokeswoman Katie Curnutte declined, citing confidentiality.

“As we have stated, Move’s litigation filing of a purported ‘anonymous letter,’ which was a mix of false, misleading information and confidential business information, was a clear attempt to discredit, disparage and damage Zillow publicly and competitively,” Curnutte said in an emailed statement.

“We have taken appropriate legal action to address this situation based on the facts. We will not be commenting any further on this matter.”

Zillow also declined to specify how the Crocker letter had strained Zillow’s relations with agents and had serious negative effects on Zillow’s reputation and its ability to compete.

If that’s the case, it is not readily apparent in Zillow’s latest earnings report, which found that the number of agents advertising with Zillow has risen 78 percent year over year to nearly 102,000, and its average monthly revenue per advertiser was up 18 percent to $375.

Cooking up a ListHub competitor

According to the counterclaim, the letter discussed trade secret and confidential information relating to Zillow’s efforts to compete against Move listing syndicator ListHub.

That information includes “internal programs, practices and strategies Zillow uses to maintain its competitive positioning as a real estate portal, as well as a previously unannounced new product and strategy,” Zillow’s attorneys said.

Although the “new product and strategy” could partially refer to the Zillow Data Dashboard released earlier this year, the dashboard does not appear to be the whole enchilada.

The letter referenced “a highly confidential and ongoing product development effort at Zillow,” attorneys for Zillow said.

Any specifics regarding this effort have been redacted from the filing, but Zillow noted that it benefits economically from not having a particular “new capability” be “prematurely announced.” If it were to be announced, ListHub and others could change their competitive positioning vis-a-vis Zillow, the company’s attorneys said.

Because Move publicized the Crocker letter and therefore information regarding Zillow’s attempts to compete against ListHub, “Zillow’s competitors, particularly Move Inc., will have the ability to preempt this product within the industry by, for instance, upgrading its ListHub offering, modifying the requirements for using ListHub, or otherwise frustrating the product’s appeal in the industry,” Zillow’s attorneys alleged.

“This has caused and will cause Zillow significant harm.”

Zillow’s attorneys do not allege that Move induced Crocker to send the letter in the first place, however. Therefore, while publicizing the letter could arguably have harmed Zillow in regards to other competitors, it is unclear how it would have harmed Zillow in regards to its competition with Move (and therefore ListHub) itself.

Move and its co-plaintiff, the National Association of Realtors, declined to comment for this story.

Move and NAR respond

Both, however, have filed replies to Zillow’s counterclaim in court. Move acknowledged publicizing the Crocker letter by filing it in open court and through media organizations but denied that any trade secrets were contained in the letter.

“The whistleblower letter describes conduct that cannot be a trade secret because it is unlawful,” attorneys for Move said in their reply.

Moreover, they said, to the extent any Zillow trade secret information is identified in the counterclaim, “that information is not in the whistleblower letter” or “was publicized voluntarily by Zillow.”

NAR filed a motion to dismiss Zillow’s countersuit, saying that the Crocker letter did not provide any details about the activities it alleged Zillow was engaging in — specifics regarding LSS and LSSv2, for instance — and therefore did not reveal trade secrets.

NAR said Zillow was pursuing its counterclaims “to harass NAR with an intrusive sideshow of depositions and document demands concerning the dissemination of the whistleblower letter, which Zillow itself has now publicly filed in open court.

“The burden on NAR, a nonprofit trade association, will likely be substantial. It also will be wholly unjustified.

“And merely allowing these frivolous counterclaims to proceed against NAR may, as Zillow intends, intimidate NAR’s volunteer leadership and member real estate brokers and agents from participating in this case, and scare other potential whistleblowers from stepping forward with more evidence of Zillow’s broad misconduct.”

The trade group declined to clarify how its member brokers and agents could potentially participate in the case or whether NAR has encountered any specific instances when members said they would participate in some way if they weren’t afraid of Zillow.

The trial date for this litigation has been set for June 6, 2016.

Email Andrea V. Brambila.

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