One of the main reasons real estate agents and brokers join Realtor associations is to access the transaction forms they need to buy and sell homes.
But what if the forms are available elsewhere, and they cost less than association dues would?
The California Association of Realtors has filed a federal lawsuit against Massachusetts-based PDFfiller Inc., alleging the tech firm has copied, published and sold at least 64 of CAR’s copyrighted real estate forms “many hundreds of thousands of times, and possibly millions of times” through its website without authorization.
Los Angeles-based CAR is the largest state Realtor association in the nation, at about 170,000 members. Members receive CAR’s transaction forms at no additional cost with their membership.
The trade group’s complaint alleges copyright infringement, trademark infringement and unfair trade practices and asks for at least $136 million in statutory damages.
According to the complaint, PDFfiller and two of its executives are engaged in a “massive counterfeiting scheme” in which they “willfully infringe” CAR’s intellectual property rights by:
- Enabling PDFfiller users to upload CAR’s copyrighted works and to create fillable, reusable PDF forms from the uploaded files, which users then republish and reuse
- Obtaining CAR’s copyrighted works from user uploads for the PDFfiller database of documents
- Obtaining CAR’s copyrighted works from other sources
- Republishing the CAR works in their entirety on the PDFfiller searchable database
- Creating and selling unlocked, reusable and fillable PDF forms copied and derived from the CAR works in their entirety on the PDFfiller searchable database
- Marketing, advertising, offering to sell and selling the CAR works, bearing CAR’s trademarked name and logo, to the public through the PDFfiller website
“As a direct and proximate result of the acts of Defendants alleged above, CAR has already suffered irreparable damage and has been deprived of lost revenues and profits, sustained consumer confusion, and suffered loss of reputation in the industry,” CAR’s attorneys said in the complaint.
“This lawsuit is necessary to obtain damages and to stop Defendants from continuously and systematically selling services and subscriptions to their users, and permitting users to improperly republish, access, alter, reuse, download and otherwise reproduce the works from the CAR Library,” they added.
PDFfiller responds
In an emailed statement, Boris Shakhnovich, president at PDFfiller, said, “CAR’s allegations have no merit whatsoever. PDFfiller has not infringed CAR’s copyrights or trademarks. PDFfiller intends to vigorously defend itself.”
Shakhnovich, who is a defendant in the case along with PDFfiller CEO Vadim Yasinovsky, described PDFfiller as “a startup in a space that desperately needs innovation.”
“PDFfiller’s main product offers a document management solution for small and medium businesses in their quest to save time, go paperless, and introduce more efficiency to their document workflow,” Shakhnovich said.
“You can really think of us as Adobe Acrobat in the Cloud. We do nothing more or less than provide a general purpose tool to type on, fill, fax, sign, edit documents. Our customers love us as evidenced by a third-party rating of 4.3 from over 20,000 customers with 13,000 of those giving us 5 stars!!”
PDFfiller has many clients in the real estate industry, though its biggest customers are government, healthcare, insurance and legal institutions, he said.
[Tweet “PDFfiller: ‘CAR’s allegations have no merit whatsoever'”]
“The lawsuit filed by CAR is replete with inaccuracies and misstatements about both PDFfiller and CAR’s allegedly copyrighted forms,” Shakhnovich said.
“For example, they allege that we sold or granted access to CAR forms to ‘hundreds of thousands of users’ — that is simply false. They also allege that we charge our users for access to counterfeit CAR forms, maintain a database of CAR forms, break passwords and create fillable CAR forms. We do none of that.
“In fact, as PDFfiller explained to CAR on several occasions, the forms they allege we infringed in their suit are freely accessible to anyone with access to the Internet, and we simply point to these resources in the same way that Google or any other search engine does.
“The complaint CAR has filed characterizes PDFfiller’s business in a manner that is entirely divorced from reality. CAR’s press release — and its apparent attempt to litigate its case in the media — fare no better.”
In an emailed statement, June Babiracki Barlow, CAR’s vice president and general counsel, said, “CAR obtained the numbers of infringing activity from PDFfiller’s own website which advertised ‘89,471 downloads’ of a prominently displayed CAR form, which was only one of 64 forms. If the figures were inaccurate, then so is their advertising.”
CAR legal exhibit showing CAR form on PDFfiller website
Referring to CAR’s request for a $136 million monetary award, Shakhnovich said,”CAR’s correspondence with PDFfiller, complaint and press release are part of a pattern of threatening activity that seem designed to force PDFfiller to capitulate to its unreasonable and unjustified financial demands.
“To that end, PDFfiller notes that CAR’s lawsuit and press release appear to be consistent with its past practice of threatening and filing lawsuits against small software companies, especially ones they see as potentially threatening or competitive to their own solutions,” he said, pointing to an Inman article about CAR’s dispute with transaction management company dotloop three years ago.
Barlow noted that CAR had never sued dotloop and dotloop had not sued CAR.
“CAR reluctantly commences litigation and in this case, PDFfiller failed to reply to our cease-and-desist letters in a timely manner and then it was nonresponsive,” she said.
“We are unapologetic for protecting our forms for our authorized dues-paying members. More importantly, we need PDFfiller and others to know they may not ignore our intellectual property rights, advertise to sell access to our intellectual property without authority and expect there to be no consequence.”
“CAR is seeking statutory penalties for willful infringement and stands by our complaint,” she added.
[Tweet “CAR: ‘We are unapologetic for protecting our forms for our authorized dues-paying members'”]
Barlow also noted at least one crucial difference between dotloop and PDFfiller: PDFfiller actively markets CAR’s forms and has created ad copy around them.
CAR legal exhibit showing PDFfiller paid ad for CAR form on Google
“Defendant PDFfiller has over 15 full time employees in Massachusetts dedicated to marketing and selling content including the Infringed Works through search engine optimization, Google and other search engine advertising, website analytics, and other strategic and state of the art techniques for targeting the public, specifically including California real estate licensees and home buyers and sellers — CAR’s prospective customers and its members’ prospective clients,” the complaint said.
Shades of dotloop
In April 2013, CAR sent dotloop a cease-and-desist letter informing the company that its users could not fill out the association’s copyrighted forms using dotloop’s software.
Dotloop complied, but the letter sparked a heated debate in the industry about the relationship between innovation and copyright.
It also prompted questions about whether conflicts of interest existed between nonprofit CAR and its wholly-owned, for-profit subsidiary Real Estate Business Services Inc. (REBS), which is the majority owner of forms company zipLogix.
Now, as was the case then, CAR’s electronic transaction forms are only available via zipLogix’ zipForm software, and CAR’s members can only fill out the forms through zipForm.
This is due to a long-term exclusive licensing agreement REBS granted to zipLogix, its own software firm, some 17 years ago.
“The reason we only put [the forms] on zipLogix is it’s a whole ecosystem,” Barlow told Inman.
“We update them twice a year. We want to make sure the forms that are out there haven’t been tampered with” and that people are confident that they are up-to-date, she said.
CAR has spent “considerable amounts of time and money and has employed numerous persons to continually revise, improve and update the CAR Library to ensure that its works remain current with the myriad of legal and policy changes affecting the California real estate services industry and to create and conform with ever-evolving industry best practices,” according to the complaint.
CAR has not considered changing the exclusive licensing agreement with zipLogix, Barlow said.
“The company works well with us. We like it. Our members are used to it. They like it. There’s no reason to go elsewhere,” she said.
ZipLogix has integrated zipForm with other transaction management tools such as SkySlope, though the integrations still require a zipForm subscription.
CAR’s forms and zipForm are included with CAR’s $184 annual dues fee. Non-CAR members can purchase an annual license to access the forms through zipForm for an annual fee of between $799 and $999.
By contrast, PDFfiller charges its customers a subscription fee ranging from $6 to $15 per month ($72 to $180 per year) to access and use the PDFfiller website and database, which includes CAR’s forms, according to the complaint.
“Access to the CAR Library is a highly regarded benefit of membership in CAR. Obtaining access to the CAR Library by joining also is a major selling point for CAR to market to and obtain members from the industry of California real-estate professionals,” CAR’s attorneys wrote.
“Only licensed zipForm users can access and use the software to fill in client and transaction details and create different types of documents with different purposes and functions, as needed, and then download and send completed documents for use in a real estate transaction.
“Defendants’ PDFfiller website is designed to do the same thing, and directly mimics the functionality of zipForm concerning numerous works from the CAR Library. CAR strictly limits access to the electronic version of the CAR Library to licensed and registered zipForm users.”
[Tweet “CAR: PDFfiller ‘directly mimics the functionality of zipForm'”]
Could agents be on the hook?
ZipForm’s user agreement prohibits agents from uploading CAR’s forms to unauthorized systems, tampering with forms or selling them, Barlow said.
PDFfiller likely obtained CAR’s forms from an authorized user or users who uploaded the forms to its site or sold their zipForm password, she said.
When asked whether CAR planned to investigate the problem and sue any agents involved, Barlow said, “We have ongoing policing of unauthorized use of our forms. With our members, if it’s a goof, we will tell you not to do it again and certainly not share your password” — though if the actions are repeated, CAR may go after them for damages.
“We’re focusing more on the vendor. If, however, we find members that try to get around their obligations to protect the documents, we’ll handle that separately,” she said.
Any members who see an unauthorized use of forms or password sharing can report it to copyright@car.org, she said.
When asked why agents would use PDFfiller instead of zipForm, Barlow said, “I think that some of them may believe that they can get around paying their dues. You would have to ask them. I frankly don’t know why.
“I don’t know if it’s one person that did a lot of them or many different people. We will find out as this lawsuit progresses. But if anybody has a question they should get in touch with zipLogix and make sure it’s OK.”
[Tweet “CAR: Some agents may believe they can get around paying their dues w/ PDFfiller”]
She advised agents to be careful with vendors they use and make sure they’re using forms in a way that’s authorized.
She also noted that, because of this lawsuit, dues-paying members “should feel secure that people who are cheating don’t get [forms] a different way.”
NAR deal
Through its ownership of REBS, CAR has a stake of just under 65 percent in zipLogix.
The National Association of Realtors has owned a 30 percent stake in zipLogix since 2001. Several other state and regional associations hold the remaining 5 percent.
In November, NAR’s board of directors approved a proposal to provide the trade group’s 1 million-plus members transaction management software from zipLogix at no additional cost to members.
The three-year agreement with zipLogix charges NAR $10 per member for the first two years and increases the rate by no more than the increase in the federal Consumer Price Index in the third year, according to NAR CEO Dale Stinton.
The deal was estimated to cost between $11 million and $12 million per year from NAR’s reserves.
The deal, which also gives members free access to transaction forms for their specific area, was approved after a vigorous debate among board members.
Some said the deal was a waste of association resources given that some 600,000 Realtors already used zipLogix’ software at the time and NAR had negotiated a per-member rate that at least one board member said seemed costly for its size.
Others objected to NAR supporting zipLogix at the expense of another Realtor-owned forms company not partially owned by NAR, Form Simplicity.
Board members who ultimately prevailed said the deal was a valuable step for the industry to take, especially in response to Zillow Group’s acquisition of dotloop.
At the time, Stinton said NAR expected to add 100,000 more Realtors to zipLogix’ user base with the deal. ZipForm became available to all NAR members in January, according to zipLogix’ website.
When asked how many more users were using zipForm since then, CAR spokeswoman Mary Belongia said via email, “we want to be perfectly clear that this lawsuit is strictly about CAR’s copyright alone and does not involve zipForm.”
Later, Barlow said CAR did not know how many users zipForm had and directed the question to zipLogix.
ZipLogix Chief Operating Officer Lisa Mihelcich told Inman the cloud-based version of zipForm had about 500,000 users at the end of 2015 and that figure had gone up to over 525,000 as of July 15.
That figure does not include users of zipForm’s desktop version, which is not included in the NAR deal.
“The numbers do not reflect others that participate in the platform, such as transaction coordinators, admins, the actual client (buyer or seller) that can collaborate in the platform. The numbers would be much greater,” Mihelcich said via email.
“Again, timing is important and the numbers at the end of 2015 only reflect a snapshot in time. While the desktop version is not a member benefit to NAR, it is a member benefit that is provided by many state associations to their members, in addition to the NAR benefit.
“A member can chose what product they want to use. That is the beauty behind the technology we built. They can be entitled to both.”
NAR is prepared to fund the zipLogix offering “in perpetuity” from NAR’s reserves, Stinton said in November.
Like me on Facebook! | Follow me on Twitter!
