Push Back

How the National Association of Realtors fights patent trolls—and why it matters

Left to right: Chloe Hecht, associate counsel, lead trademark counsel in protecting and enforcing proper use of the REALTOR® trademark; Karne Newburn, associate counsel of campaign finance and political law, advises local REALTOR® associations and their political action committees on campaign finance and lobbying laws; Ralph Holmen, vice president and associate general counsel, lead counsel on federal campaign finance and lobbying laws; Katie Johnson; Finley Maxson, senior counsel, oversees creation and distribution of risk management resources; Lesley Walker, senior counsel, lead on governing issues pertaining to the NAR board of directors; Jessica Edgerton, associate counsel, adviser on NAR technology initiatives.
Katie Johnson, Senior Vice President and General Counsel, National Association of Realtors

Patent trolls harm small businesses, entrepreneurs, and even corporations. Now, a somewhat unexpected group is taking a stand against the trolls: real estate agents.

Online listings, communications, and other web-based activities have become mainstays of buying and selling residential properties.

With this change in the industry, Katie Johnson, senior vice president and general counsel of the National Association of Realtors (NAR), faces new challenges.

Like many other industries, real estate has also become a target of technology predators: hackers who hijack networks or perpetrators of wire fraud using intercepted data.

That is why Johnson and her legal team create extensive risk management resources for the one million-plus members of the NAR and more than 1,200 state and local Realtor associations. These include videos covering legal risk, sample contracts, data security tool kits, webinars, and legal seminars for association attorneys.

However, patent trolls—instigators of patent infringement lawsuits based on the use of common website and business technologies—are an ongoing threat.

They have alleged infringement for capabilities such as searchable databases of property listings, locating points of interest on a map, and delivering updates to consumers when properties matching their search criteria come on the market.

The first significant action for the NAR may have started in 2005 with a demand letter from Real Estate Alliance. It addressed a “zooming” feature to locate properties on online maps used on NAR’s website, realtor.com, and by some members and their multiple-listing services in the Pennsylvania area.

Though NAR succeeded in filing a declaratory judgment against the plaintiff for non-infringement, the case continues to drag through the courts as the Real Estate Alliance attempts to appeal.

Another issue arose in 2010 when CIVIX-DDI targeted numerous multiple-listing services for the use of an online system that searches, locates, and transmits information from a database.

Because more than one million NAR members use those targeted multiple-listing services businesses, Johnson’s predecessor and a team of industry stakeholders decided that a settlement was more desirable than litigating and agreed to pay more than $7 million for a perpetual license to use technology in the real estate industry.

Shift to a multipronged strategy

The frequency of patent lawsuits has increased substantially since then. But there have also been significant Supreme Court decisions, such as 2014’s Alice Corp v. CLS Bank International.

The decision in that case restricts patenting an existing established methodology or system by, what Johnson characterizes as, “digitizing or applying a computer” to it.

“In the face of increased instances of patent trolling, the Supreme Court’s Alice Corp ruling helped change the legal landscape and has better enabled defendants to fight back,” Johnson says.

As a result, she and her legal team have helped NAR develop activities on three different fronts to help members protect themselves from fraudulent or trolling perpetrators.

The first is ongoing efforts to educate NAR members on how to protect themselves and how to respond to demand letters and threatened patent lawsuits.

The second prong is litigation and litigation support to members. Aside from actions taken by NAR, it offers a legal action program that provides assistance for select instances of litigation that carry potential nationwide effect on the real estate industry.

Help ranges from amicus curiae briefs to funding ongoing actions. This has resulted in successes such as an inter partes review filed against Data Distribution

Technologies requesting its patent for a “remotely updated database system” be invalidated and a civil complaint asking that the patent be declared invalid and unenforceable.

“We were able to stop the targeting of our members because the plaintiff knows we will help them fight back.”

In a separate action, NAR also helped J.B. Goodwin, a member in Texas, fight Property Description Technology. The victory came by successfully leveraging the grounds established by the Alice Corp decision.

“Trolls own thousands of patents and are very strategic about when, how, and against whom they roll out their enforcement efforts,” Johnson says. “In this case, Property Description Technology actually admitted that its business model does not include fighting lawsuits.

“So even though we weren’t able to invalidate its patent,” she adds, “we were able to stop the targeting of our members because the plaintiff knows we will help them fight back.”

The final element is ongoing lobbying efforts. NAR is part of United for Patent Reform, a coalition that includes approximately 200 prominent companies and associations.

These groups collaborate to encourage new legislation aimed at reforming patent litigation and discouraging frivolous lawsuits and overly broad claims.

Current efforts support the Innovation Act of 2015 (H.R. 9) and the Protecting American Talent and Entrepreneurship Act (S. 1137). Among other features, both intend to curb abusive patent litigation through enhanced pleading requirements as well as requiring mandatory attorney fee awards for frivolous lawsuits.

“We believe all of those efforts will go a long way to supporting and creating common sense patent litigation reforms,” Johnson says.