Where Real Estate Gets Its Dirt

Another CIVIX Lesson; guest post by Robert Drummer

Robert Drummer of iMapp is a guest posting today. I thought the subject matter timely so I hope you enjoy!

Unless you’ve been living under a rock, you’ve heard about the CIVIX-DDI patent fracas. In a nutshell, CIVIX-DDI has a patent on “systems and methods for remotely accessing a selected group of items from a database” or, more simply: Internet search with geo-location.

The NAR previously settled with CIVIX-DDI which included REALTOR.com operator MOVE and now, two years later, they have negotiated a $9.06 per member license on behalf of the member MLSs that were not covered by the NAR’s previous settlement. To my non-attorney mind this begs the question: Why weren’t the NAR members considered/covered in the first settlement?

Rather than risk additional legal expense and exposure, the NAR is now offering this license. While it’s possible the patent could be defeated (more on that later), a business decision was made; pay the license and move on. This questionable strategy creates an opportunity for other patent trolls to come out of the woodwork seeking master licenses with the NAR. As Rob Hahn said “There is a reason the USA doesn’t negotiate with terrorists”.

Laurie Janik, General Counsel at National Association of REALTORS®, informed me that they have reached the first milestone payment of $2.5 million dollars. Those MLSs (along with their members, vendors and affiliates) participating in the first round will be granted a license from the NAR. If you plan to participate, it seems prudent to make sure you are in the first round and that NAR receives your payment and paperwork no later than 5pm CST on June 16th, 2011.

If an MLS chooses to wait for the second or third round, they may be at risk of being excluded from the license. CIVIX-DDI may choose to accept whatever payments are received in those rounds, but that is entirely the decision of CIVIX-DDI.

The license runs with the MLS. That means if the MLS changes vendors in the future, those vendors will be covered under the license granted to the MLS. It is my understanding that in this scenario the ousted vendor receives no protection, other than that provided to their previously licensed MLS accounts.
Part of the agreement negotiated by the NAR includes a lawsuit cease-fire until August 17, 2011. After that date, any MLS that is not sub-licensed through the NAR could become a target for litigation from CIVIX-DDI. Ask MRED and MRIS how the litigation route went (not good, as they are paying more per member along with legal fees).

Here’s where it gets interesting for the Vendor Alley reader:
Most of these MLSs have provisions in their vendor contracts for indemnification. If the MLS decides to pass on the license and gets sued by CIVIX-DDI, the vendor may be liable for some or all of the legal expenses related to defense of the lawsuit. We’ll have to wait until August 17th to see which MLSs and vendors face possible exposure to a lawsuit.

Until then, there is still a chance that the remaining claims in the patents are overturned on reexamination. There are facts relating to prior art that have not been presented in the previous reexaminations:
In the 2006 reexamination, a reference was made to the Xerox PARC Map Viewer (Page 5 – Steven Putz, Interactive Information Services Using World-Wide Web Hypertext, First International Conference on World-Wide Web ISTL-QCA-1994-03-01, 1994 (EXPO 25440-EXPO 25447)

It’s my understanding that this paper and its public presentation were too late to be considered prior art as the cut-off date was in January of 1994. However there was a June 1993 public invitation to use the Xerox PARC Map Viewer and to my knowledge this invitation was not presented in either the 2006 or 2011 requests for reexamination. There is a public description of the Map Viewer service which was used extensively by public users in the second half of 1993.

This prior art would seem to cancel the patentability of claims 20 and 26 (using the Internet) as the Xerox PARC Map Viewer is purely related to using the Internet for geographic search and map production.

The 2011 re-examination denial does not raise the specifics of this prior art. In the 2011 reexamination, the examiner appears to focus on the use of the “Internet”. While not explicitly disclosed in ARACO (as proposed by the 2011 reexamination), the “Internet” appears to be extremely clear in this Xerox PARC instance as it was being used to respond to thousands of Internet map requests in 1993.

How this was missed is still a mystery. We’ll wait to see if this makes a difference for either Yahoo or Hotels.com, both of which are currently fighting lawsuits related to CIVIX-DDI and have taken the time to investigate our discoveries and the viability of the Xerox PARC information.
If this prior art changes the situation and the patent claims are overturned, our industry will have needlessly spent between $2.5M and $7.5M, paid by a combination of MLSs, their vendors and ultimately, the members of the NAR.

  1. As Kenney Rogers said “you’ve got to know when to fold em….know when to hold em….know when to walk away….know when to run.

    Just my two cents….

  2. John, but the the next verse goes….
    “They were counting their money,
    While sitting at the table.
    They forgot about their members,
    when the deal was done”.

  3. Pingback: More on CIVIX… | Vendor Alley

  4. As a member of NAR, i feel that the original settlement was completed in haste in an attempt to insulate REALTOR.com and should have been worked out to exclude membership jointly.

  5. This thing is turning into an onion. I keep uncovering new layers and each one makes me cry a little more.

    There is a whole new aspect to this that many (everyone?) will find troubling.

    I’ll write the follow-up as soon as I have all of the facts.

  6. It’s not a mystery why the prior art was missed: patent examiners rarely look to the real world when making their decisions – they mostly look at other patents.

    Unfortunately, courts seem to be giving less weight to prior art these days. I’ve been surprised at some recent cases that have gone against those holding prior art (sorry, IANAL and don’t have case #s at hand). This is only going to get worse – patent ‘reform’ laws moving through the federal government seem to be moving further against “first to invent” and more toward the benefit of “first to invent and file” – against prior art.

    Robert, to be clear, I’m not saying prior art is insignificant – just that it isn’t what it used to be and the risks of fighting patents in court are significant. You just don’t know which way a judge is going to rule in advance, no matter what the facts. Smart attorneys, versed in the law and depending on industry experts to bring forth prior art, have helped their clients make decisions regarding the level of risk in this case and the potential costs of different scenarios, and those clients have made a decision that we don’t necessarily like but have to respect.

    Gregg and I get brought into a lot of these types of cases as expert witnesses, so I keep up with the patent trends as well as (of course) the patents in a wide area of subjects that apply to our industry’s endeavors. I don’t like where our patent process is today and don’t have a lot of hope for where it is going in the future. Patents will continue to be a significant business cost, to research and file patents as software is developed and to defend against patents where one might infringe and will also continue to be a significant business risk for any software company.

  7. Matt,

    My issue with the missed prior art isn’t with the examiner, it’s with the two reexamination requests filed to challenge the patent and all of the other actions related to the lawsuit.

    If attorneys present themselves as IP/patent experts, they should find and professionally deliver all of the prior art and not just a stack of 40 pages of guesses to overwhelm the examiner.

    The significant dollars needed to challenge or defend were already spent so why not do it right?

    At this moment it’s just speculation if the prior art mentioned would make a difference. I’ve talked with patent attorneys being chased by CIVIX but outside of the NAR license and they feel it’s worth a third reexamination.

    Only time will tell.

  8. Ah – the 20-20 hindsight of Monday morning quarterbacks.

    The hotels.com suit has been going on since 2005 – chances are good that they, and the other defendants have already spent well over $7.5 million on defense. And the settlement effort lead by NAR covered a lot more people than the hotels.com suit did.

    Not to mention that this will certainly be appealed, and we know how that turned out in the REAL suit.

  9. @Russ

    Monday morning quarterbacking?

    When the call for help went out last December, I responded right away and continued to research prior art, including the Xerox program above (missed by all the attorneys).

    The settlement came as a surprise since we stood ready to defend as it appeared there were some weaknesses in the patent.

    I stand by my statements that:

    A) This should have been resolved two years ago when CIVIX and NAR were negotiating the first time.

    B) The patent is weak.

Sponsored By Paragon Connect