Editor’s note: With identity theft and mortgage fraud on the rise, the security and privacy of consumer data in real estate transactions is a real concern, and experts say that companies need to manage security policies closely to improve consumer trust and protect themselves from lawsuits. In this three-part report, Inman News looks at three aspects of data protection: online property listings, options for small brokerage offices, and how the lender community is safeguarding sensitive consumer information. (See Part 2 and Part 3.)
There is not a single way to protect real estate property listings information — rather, there are several ways. And multiple listing services should fortify their defenses on several fronts and prepare for offensive strikes, too, if they are to successfully combat data thievery and misuse, say legal experts.
Copyright protections, along with contractual language and click-based consent mechanisms to access online listings information, are all part of the arsenal for protecting real estate data — and MLSs must also be prepared to go to court, they say.
While ongoing litigation between the U.S. Department of Justice and the National Association of Realtors trade group over MLS data display and sharing may make some industry participants a bit gun shy about aggressively asserting ownership or control of property listings information, legal experts say the industry at large is exhibiting a heightened awareness of data protection issues.
While there are a range of legal tools that the real estate industry can use to guard property listings information, the industry must ultimately be prepared to take this battle to court, say legal experts.
The use of the legal system to protect MLS information is analogous to the wielding of a gun, said Russ Cofano, a Seattle lawyer who specializes in real estate law.
“If you don’t sue anybody for misusing data, and nobody really believes you’re going to shoot the gun then the threat of the gun becomes worthless. I try to tell a lot of folks in the industry — before you determine how much money you want to spend protecting your data, you have to determine if you’re really going to protect the data, which means suing people. If you’re not going to sue people then don’t spend a whole bunch of money on technology and other measures,” he said.
“Protecting the data really is a multitude of factors — making sure the house is in order. Quite frankly for the real estate industry this is one of the big issues, because it’s not in order in most cases.”
To guard against automatons, sometimes called spiders or Web crawlers or robots, that collect property information from multiple Web sites, Cofano recommends that MLSs and brokers employ “browsewrap” or “clickwrap” agreements at their sites, which delineate terms for data use. Lawyers say these types of agreements are becoming increasingly popular in the industry.
Clickwrap agreements, which require site users to consent to the terms of use at a particular Web site by clicking a button before they can gain access to site information, tend to be a stronger contractual tool than browsewrap agreements, which typically are displayed as links to a site’s terms of use page. With browsewrap agreements, users are not required to review the site’s terms of use policy in order to gain access to other areas of the site, and the terms of use are typically accessed via a link at the Web site.
Cofano said he recommends that the links to “terms of use” policies are clearly visible “so that somebody getting onto the site will see it no matter what.” Also, he recommends that sites track visitors’ Internet addresses and send out follow-up notices to remind them about the site’s policies on data use.
Anti-scraping technologies and contractual language can provide a good defense against data misuse, he said, and can serve as a better tool in some cases than copyright protections. Intellectual property claims on real estate data could be difficult to enforce if the data is collected and re-disseminated from an offshore company, for example.
“I get frustrated with peoples’ continued attempt to base any effective strategy on copyright,” he said, adding that he is more in favor of openly licensing access to MLS data rather than strictly protecting it. “Erecting a fence around it, trying to keep everyone out,” can be a losing investment for real estate companies, he said, except perhaps for the largest real estate organizations. Hollywood invested millions to try to protect movies on DVD from being copied, though that movement hasn’t stopped illegal downloads and copying of its films, he noted.
“It’s kind of a cat and mouse game” in some cases, Cofano said, with the real estate industry at large working to protect its data while some technology players are looking for ways around these protections. “The question is do you really care about the small players, or do you make the economic decision that you go after the bigger players?”
While the Justice Department lawsuit against the Realtor association may have given pause to some industry participants who would like to assert more control or ownership of real estate information, Cofano said he does not believe that department officials are “specifically going out to make (the MLS) a public utility because I think they realize that by doing so it could be the demise of the MLS — and the demise of the MLS is not good for consumers or the real estate industry.”
The lawsuit is more about making MLS data available to all members rather than making the data available to non-members, he said. And while some real estate professionals have expressed fear that the lawsuit could lead to widespread public access to MLS information, Cofano said that is already a reality on some level. “That’s what’s happening today — not the entire database but significant portions of it are being made available to the public.
“The question the industry really needs to answer: Is the cost of protection worth the return on the investment? And I think that’s an open question. It has been the human cry for the industry: ‘We live by data therefore we must protect it.’ (But) data is not why there’s value. Value is in things besides the data.”
Brian Larson, a real estate lawyer, said that several of his clients are now implementing clickwrap agreements at their Web sites to increase data protection. Legally, he said, “It is almost certain that almost all clickwrap agreements are going to be enforceable,” though past court cases dealing with browsewrap agreements are less clear. Several major sites, such as Realtor.com, though, do not use clickwrap agreements, and Larson said he expects that a growing number of Web sites will adopt this form of consent for users who access the sites.
Larson said he has seen an increase in cases of real estate data misuse, though few of these cases actually hit the courtroom. Almost all of the instances, he said, are resolved through cease-and-desist requests. He noted that MLS contract language and copyright law can be complex, and even copyright lawyers can disagree over specific provisions — so it’s not surprising that some technology companies don’t understand the laws and rules governing real estate information.
The fact that the cases do not typically reach the courts also speaks to the power and authority of the MLSs when it comes to property information, he said — “if (the wrongdoers) realize they are naughty they back off.”
Most of the alleged misuse of property information is by real estate brokers or their third-party contractors, Larson also said, and this misuse is often “a good faith mistake.” Larson said that brokers are ultimately the ones holding the cards when it comes to data usage issues, whether an MLS is broker-owned or Realtor association-owned.
Some industry professionals are adopting new technological tools for discovering data misuse, he said, such as “digital watermarking” techniques that embed unique, telltale information in property photos, for example, that can identify whether the photos are displayed at unauthorized sites.
The increased reporting of possible data misuse could be a byproduct of the industry’s heightened alert for such misuse, he said. “MLSs are looking more carefully for them now. Their own members are more sophisticated in the use of the Web. I think it’s a certain organic growth of attentiveness to what’s going on on the Web that has led to more complaints.”
John Rees, a lawyer who specializes in intellectual property issues, said he has definitely seen a growing interest in data protection issues. Rees is preparing to deliver a four-hour workshop this month to industry professionals on best practices in managing listings content. “I did a presentation in West Palm Beach back in 2001 and I just got glazed looks. Now we go and do this and they’re eating it up. The industry has come a long way in all of these issues,” he said.
“I think the resources that are being put behind this now have gone up significantly.” For example, a growing number of MLSs appear to be devoting more staff resources to monitor and enforce data use, he said.
Brokers appear to be more assertive these days in their efforts to protect data, Rees also said. “I think there’s a renewed sensitivity to the needs of brokers. As new business models are developing around the country some brokers are feeling that they’re having their hands tied by MLSs limiting their access or use of listings, and they (feel they) can’t adequately compete with those that are not even licensed brokers.”
In his workshop, Rees said he will focus on the three basic ways to protect listings information: copyright laws, contracts and licensing agreements, and technology. He agreed with the other real estate lawyers that there will be an “upswing in the use of online agreements,” such as click-to-consent agreements to gain access to property listings information.
“I think everybody is working pretty well together right now on these issues. There is a lot of compromising and trying to work through the issues rather than litigate,” he said, adding that the industry is closely watching the ongoing litigation in the DOJ versus NAR case.
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