Two can play the lawsuit game, and the National Association of Realtors just dealt itself in.
On June 8, NAR filed a civil complaint against Data Distribution Technologies, LLC (DDT) requesting that its patent on a “remotely updated database system” be declared invalid and unenforceable by the U.S. District Court.
Over the past few years, DDT has filed lawsuits against three real estate companies that employ NAR members and sent demand letters to several more brokerages, MLSs and technology vendors.
The lawsuits were filed against Re/Max LLC, Weichert Real Estate Affiliates Inc. and Prudential Brer Affiliates. Each of those cases settled.
NAR said it cannot disclose the names of the other entities that have been targeted with demand letters but have not yet been sued.
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On May 19, 2016, NAR filed what’s known as an Inter Partes Review (IPR) petition with the United States Patent and Trademark Office (USPTO), requesting that the agency review DDT’s patent. NAR is expected to get a response on the petition from USPTO’s Trial and Appeal board within four months of filing, and make a final decision within a year on whether it’s valid. So far, there have been no updates on the petition’s status.
(Click here to download the full petition.)
While the IPR is pending, NAR hopes to deter DDT from suing additional real estate companies, as most courts will stay litigation related to the same patent until a decision is announced.
“We filed the lawsuit strategically to prevent DDT from attempting to sue us in a jurisdiction that is known to be favorable to patent trolls,” NAR’s legal team wrote in an emailed statement. “We expect that the litigation will be stayed until the USPTO’s decision on the IPR has been issued.”
A subsidiary of patent monetization firm General Patent Corporation, DDT holds a single patent (No. 6,529,908, “Web-Updated Database with Record Distribution by Email”) and secures revenue by suing other firms for infringement rather than developing products related to the patent — a financial setup characterized as a non-practicing entity or NPE.
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Critics of the business model, including NAR, like to swap NPE for “patent troll,” a contentious term that draws on the allegedly dubious nature of these companies. Hiding behind patents instead of under bridges, in the words of Realtor Magazine’s Robert Freedman, patent trolls make their fortune “picking off targets one by one, and settling for an amount just under the cost of litigation.”
What’s in the legislative pipeline
This isn’t NAR’s first patent rodeo, but the lawsuit represents its boldest ride to date. In February 2014 the association had heard about “patent trolls” from its members but told Inman that “at this point we’re just monitoring and collecting information from our members — that’s all.”
A number of legislative efforts have been pushed through to protect companies from unfair patent demands and separate them from legitimate infringement claims. NAR commended the passage of the Patent Litigation and Innovation Act of 2013 in the U.S. House of Representatives and additional reform efforts in the Senate.
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Most recently, described as the “best patent troll-killing bill yet,” NAR is standing behind “The Innovation Act,” H.R. 9, which has cleared the House Judiciary Committee and is headed to the full chamber.
Litigation station: nature of the lawsuit
DDT alleges that real estate websites in general violate the ‘908 patent because they are databases that can be updated remotely and such updates can trigger an alert that is sent to a user via email.
For example, a user of a real estate website may receive an email alert when the website is updated with a property that matches the user’s desired criteria. DDT claims that process infringes its patent rights.
At the heart of NAR’s lawsuit is a laundry list of criticisms poking holes at what NAR says is the “vague” language found in DDT’s ‘908 technology patent, i.e.:
The patent covers a remotely updatable database system method and computer readable medium. The system includes a user interface, a database of information records, a database manager, and a message server. (Read the full patent here.)
The complaint alleges that the patent “lacks an inventive concept” and “does not disclose an algorithm” for the licensed functionality.
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In addition to requesting that a judge strip the patent of its power, NAR also asks that it “be awarded such other and further relief as may be deemed just and proper by the Court.”
“NAR respects legitimate intellectual property rights,” said NAR’s General Counsel Katherine Johnson in an emailed statement.
“But if anyone threatens frivolous patent troll lawsuits against the real estate industry, the National Association of Realtors is prepared and willing to rise to the challenge to invalidate those patent claims to protect its members.”
At the time of publication, DDT had not responded to a request for comment.
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