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From Antitrust Law Daily, June 11, 2013

Real Estate Brokerage Referral Service’s Antitrust Claims Against National Association of Realtors, Multiple Listing Service Not Supported

By Jeffrey May, J.D.

The federal district court in Maryland has dismissed antitrust and false advertising counterclaims raised in a copyright dispute brought by a multiple listing service (MLS) against a real estate brokerage referral service that allegedly copied content from the MLS website (Metropolitan Regional Information Systems, Inc. v. American Home Realty Network, Inc., June 10, 2013, Williams, A.).

American Home Realty Network (AHRN) is a real estate brokerage referral service that provides information to home buyers and sellers through its website Neighborcity.com and its AgentMatch software. AHRN searches the Internet for data on real estate listings and identifies real estate agents most suitable to represent potential buyers and sellers in proposed transactions. AHRN is compensated with a percentage of the referred broker’s commission.

Metropolitan Regional Information Systems, Inc. (MRIS), a multiple listing service in the mid-Atlantic region, brought a copyright action against AHRN for copying copyrighted content from the MRIS database and preparing derivative works based that material for its products.

AHRN asserted conspiracy and monopoly counterclaims under the Sherman Act and false advertising counterclaims under the Lanham Act, among others, against MRIS and the National Association of Realtors (NAR). AHRN alleged that the counterclaim-defendants instigated a program to register and obtain sham compilation copyrights for MLS listings, threatened to and actually enforced those copyrights against AHRN, refused to deal with and refused to license MLS data to AHRN, made false and misleading statements related to their copyrights and concerning AHRN, and passed anticompetitive MLS rules consistent with their goal of driving AHRN and similar innovators out of the market.

The Noerr-Pennington doctrine barred AHRN's allegations that the counterclaim-defendants conspired to engage in sham litigation, or efforts incident to that litigation, such as the sending of cease-and-desist letters by brokers and MLSs. Under the doctrine, those who petition the government for redress are generally immune from antitrust liability, unless the petitioner engages in sham activity. The litigation was not a sham, because it was not objectively baseless. AHRN’s motion to dismiss the litigation was denied, and the court granted MRIS a preliminary injunction. Also rejected was AHRN's contention that that the counterclaim-defendants were not entitled to immunity because they committed fraud on the U.S. Copyright Office in registering their copyrights.

AHRN failed to support allegations of a more general conspiracy involving NAR and MLSs. AHRN pointed to refusals to deal, restrictive NAR rules, and industry meetings to support its conspiracy claim; however, it failed to outline the contours of an agreement. The court explained that it could not infer that an agreement was reach merely because an industry meeting was held.

Even if NAR rules, such as those discouraging MLSs from licensing their listing databases to third parties like AHRN, evidenced an agreement or were part of some larger cooperative scheme, AHRN’s allegations of anticompetitive effects were still insufficient, according to the court. Although NAR rules might have made it more difficult for AHRN obtain access to the MLS data, the Sherman Act did not guarantee AHRN the benefit of more effective competition, the court explained. AHRN failed to specify an economically plausible connection between the challenged NAR rules and harm to competition generally.

Thus, the court dismissed the antitrust conspiracy counterclaims, but granted AHRN leave to amend. AHRN had set forth some allegations, including its claim for fraud on the Copyright Office, that might be relevant to its Sherman Act, Section 1 claim, the court explained.

Monopolization. Monopolization counterclaims against MRIS also were dismissed, but with prejudice. AHRN contended that MRIS and its large broker subscribers had an intent and scheme to monopolize the market for real estate brokerage referral services in the MRIS service area of Maryland, Virginia, Washington, D.C. and parts of Pennsylvania, Delaware, and West Virginia.

According to the court, AHRN’s monopolization claim was fundamentally deficient for two reasons. First, AHRN failed to plead a relevant market for real estate brokerage referral services in the geographic areas in which MRIS operated and that MRIS had monopoly power within that market. MRIS was an MLS and did not compete in the market for such referral services. Second, AHRN failed to state a claim based on the essential facilities doctrine. AHRN could not allege that it was unable to practically or reasonably duplicate the property listing data in the MRIS database.

Lanham Act §43(a) false advertising claims. AHRN failed to state a plausible counterclaim of false advertising in violation of Sec. 43(a) of the Lanham Act, the court decided. The Lanham Act claims were dismissed with prejudice.

The claims based on statements about the copyrightability of MLS listing data were nonverifiable legal opinions that were not actionable under the Lanham Act. Further, none of the allegedly false or misleading statements were made in “commercial advertising or promotion.”

The court also ruled that a single disparaging statement made about NeighborCity.com by an NAR member was insufficient to state a claim for false advertising. Even if the alleged statement accusing AHRN of “theft” or “piracy” could be attributed to MRIS or NAR, AHRN has not demonstrated it occurred in the context of commercial advertising or promotion.

This is Civil Action No. 12-cv-00954-AW.

Attorneys: Margaret Aldona Esquenet (Finnegan Henderson Farabow Garrett and Dunner LLP) for Metropolitan Regional Information Systems, Inc. Richard Scott Toikka (Farkas + Toikka LLP) for American Home Realty Network, Inc. Jack R Bierig (Sidley Austin LLP) for National Assn. of Realtors.

Companies: American Home Realty Network, Inc.; Metropolitan Regional Information Systems, Inc.; National Assn. of Realtors

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