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From Antitrust Law Daily, July 8, 2013

Real estate information service can pursue antitrust, deceptive trade practice claims against multiple listing service

By Tobias J. Gillett, J.D., LL.M.

An online real estate information service sufficiently alleged Sherman Act, Minnesota Antitrust Law, and California Cartwright Act antitrust counterclaims against a multiple listing service (MLS) cooperative over the cooperative’s alleged conspiracy with its member-brokers, other MLSs, and the National Association of Realtors (NAR) to suppress competition by asserting invalid copyright claims and refusing to negotiate in good faith concerning licensing agreements, the federal district court in Minneapolis has ruled (Regional Multiple Listing Service of Minnesota, Inc. v. American Home Realty Network, Inc., July 5, 2013, Tunheim, J.). The court also declined to dismiss the information service’s Minnesota Deceptive Trade Practices Act claim based on the allegedly disparaging effect of communications regarding the service’s alleged unlawful use of the MLS’s copyrighted material.

Regional Multiple Listing Service of Minnesota, Inc. (RMLS) is a multiple listing service cooperative run by local member real estate brokers, who pool and disseminate information on homes available for sale in their regions. American Home Realty Network, Inc. (AHRN) owns NeighborCity, an online service displaying information about properties for sale, connecting prospective buyers with buy-side real estate agents, and providing information to assist buyers in selecting an agent.

On September 17, 2012, RMLS obtained a preliminary injunction against AHRN, barring it from further use of certain photographs and other content over which RMLS allegedly held copyrights. In its present decision, the court considered RMLS’s motion for sanctions based on AHRN’s continued publication of content over which RMLS allegedly held copyrights and RMLS’s motion to dismiss AHRN’s counterclaims under the Sherman Act, the Minnesota Antitrust Law, California’s Cartwright Act, and the Minnesota Deceptive Trade Practices Act.

AHRN alleged a conspiracy between RMLS, the NAR, other multiple listing services, and the member-brokers of RMLS to refuse to engage in good faith negotiations with AHRN on licensing agreements for the data in real estate listing databases and to assert invalid copyright claims to suppress competition. AHRN claimed that this conduct dissuaded brokers and agents from entering into referral agreements with AHRN, limited AHRN’s access to information about properties on the market, and deprived consumers of information about and access to agents that were independent of listing brokers and agents, thus discouraging price competition for brokerage services and home prices.

Noerr-Pennington doctrine. The court rejected RMLS’s contention that its conduct in filing its complaint against AHRN, sending cease and desist letters regarding its copyrighted material, and refusing to grant AHRN a license was protected by the Noerr-Pennington doctrine. The court assumed, without deciding, that all of RMLS’s alleged activities were reasonably and normally attendant to effective petitioning and could thus be protected by the Noerr-Pennington doctrine.

The court concluded that AHRN had adequately alleged that RMLS engaged in sham petitioning activities for purposes of the Noerr-Pennington doctrine. AHRN alleged that “RMLS asserted a copyright over the manner in which the facts and data are compiled” in a database, even though the database was built on software that RMLS did not design or own and that RMLS did not take photographs over which it asserted copyrights or obtain assignments of the copyrights from the actual photographers.

The fact that the court had issued a preliminary injunction against the use of the allegedly copyrighted material did not alter the court’s decision, because “[t]he issue of whether RMLS in fact owned the copyrights underlying this action was not challenged at the preliminary injunction stage, and it is possible that AHRN will ultimately prove that RMLS does not own these copyrights.” Moreover, AHRN had alleged a broad pattern of asserting sham copyrights beyond just the copyrighted material at issue in the present case.

Conspiracy. The court also concluded that AHRN had alleged a plausible conspiracy among RMLS, other MLSs, and the NAR for its Sherman Act claims. AHRN had alleged that it had received thirty cease and desist letters following a NAR annual meeting at which discussions allegedly occurred regarding what could be done to shut down AHRN. AHRN also alleged that RMLS’s president “sent an e-mail suggesting that AHRN should not think that MLSs were ‘unconnected, unserious, and more noise than threat.’” Further, AHRN alleged that the NAR voted to fund the present action and other actions and to adopt exclusionary rules. Finally, AHRN alleged that licensed third-party syndicators of the data offered by RMLS and other MLSs informed AHRN that they could extend a license to AHRN because AHRN did not direct home buyers to a listing broker’s website.

The court declined to dismiss AHRN’s counterclaim on the ground that RMLS’s conduct was “as with their unilateral interests in protecting their copyrighted material as it is with collective action,” because it was “unclear if RMLS in fact owns copyrights to the majority of the material that it claims.”

AHRN also sufficiently alleged the existence of concerted action between RMLS and its member-brokers, even though RMLS’s agreements with the brokers permitted them to license their own listings to anyone, including AHRN. AHRN adequately alleged that RMLS and the brokers colluded to assert false copyright claims and to exclude AHRN and companies like it from accessing the full amount of listings needed to compete. Moreover, AHRN alleged that RMLS and the brokers dissuaded brokers and agents from entering into referral agreements with AHRN.

Restraint of trade. AHRN sufficiently alleged a group boycott amounting to a per se violation of the Sherman Act, in the court’s view. AHRN alleged that RMLS and its co-conspirators cut off its access to a supply of information that was necessary for it to compete and that RMLS and its co-conspirators dominated the market. AHRN also adequately alleged that RMLS’s policy of dealing only with competitors that would refer customers to listing brokers was not intended to enhance efficiency or increase competition, but rather to increase the profits of RMLS’s member-brokers.

AHRN sufficiently alleged that AHRN’s business model had anticompetitive effects, according to the court. AHRN claimed that RMLS and its co-conspirators promoted dual-agency home sales, under which a seller and buyer’s agent are associated with the same agency, resulting in a lack of incentive to negotiate in the interests of either the buyer or the seller. Further, AHRN allege that RMLS’s conduct increased the price of referral fees by excluding competitors like AHRN.

The court rejected RMLS’s contention that AHRN could not show anticompetitive effects because the agents’ commissions and homes’ initial selling prices were set prior to homes being listed, because the dual-agency process allegedly resulted in less negotiation on behalf of customers after the initial prices were set. The court also dispensed with RMLS’s argument that AHRN could not recover for losses sustained from not being able to infringe RMLS’s copyrights, because AHRN claimed that RMLS did not actually own the copyrights it asserted.

Finally, AHRN sufficiently alleged market foreclosure, even though it was still able to access “for sale by owner” and foreclosure listings and to enter into licensing agreements with individual brokers. AHRN had “plausibly alleged that there are no reasonable alternative sources of complete real estate data than from MLSs.”

State laws. Since the Minnesota Antitrust Law and the Cartwright Act were modeled after the Sherman Act, and RMLS provided the same arguments for dismissing those claims as the Sherman Act claims, the court also declined to dismiss the state law claims.

Minnesota Deceptive Trade Practices Act. Finally, the court found that AHRN stated a claim under the Minnesota Deceptive Trade Practices Act. AHRN alleged that RMLS had falsely disparaged AHRN by claiming that it was unlawfully using RMLS’s copyrighted information with the particularity required by Federal Rule of Civil Procedure 9(b). Moreover, the fact that the allegedly disparaging communications had occurred between RMLS and its member-brokers did not require dismissal of AHRN’s counterclaim because the issue of “[w]hether there statements in fact had a disparaging effect or caused a likelihood of confusion [was] an issue for a later stage in the litigation.”

The case is Civil Action No. 12-965 (JRT/FLN).

Attorneys: Calvin L. Litsey (Faegre Baker Daniels LLP) for Regional Multiple Listing Service of Minnesota, Inc. Chad A. Snyder (Snyder Gislason Frasier LLC) for American Home Realty Network, Inc.

Companies: Regional Multiple Listing Service of Minnesota, Inc.; American Home Realty Network, Inc.

MainStory: TopStory Antitrust StateUnfairTradePractices MinnesotaNews

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