A federal court today will hear motions for summary judgment in a lawsuit challenging California’s licensing of Internet real estate publishers.

The Institute for Justice filed the lawsuit in 2003, claiming the state’s law that requires real estate advertising Web sites to obtain real estate broker’s licenses to legally conduct business in the state is unfair. The Institute represents ForSaleByOwner.com, a Web-based real estate advertising company that refused to go along with the state’s demand that it obtain a realty license.

The court is expected to issue a ruling within a few months.

The Institute for Justice is a non-profit, self-described “libertarian public interest law firm.” It claims California’s real estate law represents an unconstitutional prior restraint on speech and alleges the practice is invalid regulation of commercial speech that discriminates against certain companies based on the type of media they use–in this case, the Internet.

“This is censorship, pure and simple,” the Institute wrote in a statement.

The battle between the California DRE and FSBO Web sites has been brewing since August 2001 when the DRE began sending stop-it-or-else correspondence to operators of Web sites that sell classified advertising of for-sale-by-owner houses. The FSBO Web site operators have been accused of selling real estate without a license and the DRE has demanded that they either get a California broker license or stop soliciting California home sellers and buyers.

ForSaleByOwner charges home sellers a flat fee that varies by location and service and in return provides sellers a national forum to advertise their properties. The comprehensive Web site also provides real estate consumers with a menu of links to affiliated services companies and “how-to” information about mortgages, neighborhoods, credit reports, home buyer and seller check lists, school reports and the like.

But the Web site doesn’t get involved directly with home buyers and sellers.

The suit is “an important test case with broad implications for e-commerce,” according to the Institute.

“Information is more important to the economy than ever before, yet government remains a serious impediment to its free flow and the economic benefits it promises,” the Institute said in a statement. “These laws harm businesses and consumers, stifle innovation, and perpetuate wasteful and antiquated business practices.”

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