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Regional Multiple Listing Service of Minnesota, Inc. v. American Home Realty Network, Inc.

United States District Court, D. Minnesota

July 5, 2013

REGIONAL MULTIPLE LISTING SERVICE OF MINNESOTA, INC., doing business as NorthStarMLS, Plaintiff,
v.
AMERICAN HOME REALTY NETWORK, INC., Defendant

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[Copyrighted Material Omitted]

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Calvin L. Litsey, Jared B. Briant, and Richard A. Duncan, FAEGRE BAKER DANIELS LLP, Minneapolis, MN, for plaintiff.

Chad A. Snyder and Adam P. F. Gislason, SNYDER GISLASON FRASIER LLC, Minneapolis, MN, for defendant.

OPINION

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JOHN R. TUNHEIM, United States District Judge.

MEMORANDUM OPINION AND ORDER

Plaintiff Regional Multiple Listing Service of Minnesota, Inc. (" RMLS" ) brought this action for copyright infringement against Defendant American Home Realty Network, Inc. (" AHRN" ). RMLS now brings two motions before this Court. First, RMLS moves the Court for a finding of contempt against AHRN and AHRN's Chief Executive Officer Jonathan Cardella for violations of the Court's September 27, 2012, preliminary injunction order. The Court will grant this motion, in part, because AHRN has displayed material copyrighted by RMLS without authorization. Second, RMLS moves to dismiss AHRN's counterclaims, including its counterclaim under the Sherman Act, 15 U.S.C. § 1. The Court will deny this motion because AHRN has sufficiently alleged counterclaims that survive a motion to dismiss.

BACKGROUND

I. PARTIES

Much of the background for this action is outlined in the Court's previous decision. See Reg'l Multiple Listing Serv. of Minn., Inc. v. Am. Home Realty Network, Inc., Civil No. 12-965, 2012 WL 4470286 (D. Minn. Sept. 27, 2012). The Court will repeat only some of those facts here.

RMLS is a Minnesota corporation with its principal place of business in St. Paul, Minnesota. (Compl. ¶ 3, Apr. 18, 2012, Docket No. 1.) RMLS is a multiple listing service company that serves more than 13,000 real estate brokers and agents in Minnesota and western Wisconsin. ( Id. ¶ 8.) Like other multiple listing services (" MLSs" ) throughout the United States, RMLS is a local cooperative run by local member-brokers, affiliated with the National Association of Realtors (" NAR" ), who pool and disseminate information on homes available for sale in their regions. (First Am. Countercl. (" Countercl." ) ¶ 17, Dec. 21, 2012, Docket No. 73.) RMLS acts on behalf of its member-brokers within the relevant market and is governed by a Board of Governors whose members are appointed by those member-brokers. ( Id. ¶ 15.)

RMLS provides information to brokers and real estate agents through NorthstarMLS. NorthstarMLS members enter into an agreement with RMLS to upload their real estate listings to NorthstarMLS. (Decl. of John Mosey ¶ 4, May 16, 2012, Docket No. 18.) The members upload photographs of a property, enter some factual information, such as list price, and also select other items from a dropdown menu of " field descriptors" allegedly created by RMLS, such as " Main Floor Full Bath," " Private Master," and " Whirlpool." ( See Decl. of Tim Schirm, Ex. C at 6, May 17, 2012, Docket No. 17.) In return, RMLS sends to a member-broker's consumer-facing

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website an " IDX Data Feed" that includes the broker's own listings and the listings of all other NorthstarMLS members. (Mosey Decl. ¶ 4.) According to RMLS, brokers benefit from receiving the IDX Data Feed because potential buyers who visit a broker's website to view the listings may be persuaded to hire the broker and its agents. ( Id. ) Agents and brokers also use NorthstarMLS for access to real estate listings and information in their respective markets. (Compl. ¶ 9.) Further, RMLS makes available brokers' offers of cooperation, which are the commission splits that listing brokers will pay other brokers who represent a buyer. (Countercl. ¶ 17.)

AHRN is a Delaware corporation, with its principal place of business in San Francisco, California. (Decl. of Ali Vahabzadeh ¶ ¶ 1, 3-6, May 11, 2012, Docket No. 10.) AHRN owns NeighborCity, an online residential real estate service. (Supp. Decl. of Ali Vahabzadeh ¶ 3, June 7, 2012, Docket No. 26.) NeighborCity offers three primary services to its visitors. First, NeighborCity offers information to visitors about properties for sale, including listing prices, photographs, and descriptors of certain property features. (Supp. Decl. of John Mosey, Ex. R, June 1, 2012, Docket No. 21.) Second, NeighborCity connects prospective buyers with buy-side real estate agents. ( See id. )[1] The final service NeighborCity offers, through its AgentMatch software system, is providing performance metrics, rankings, and statistics regarding real estate agents to assist buyers in finding an effective agent. (Vahabzadeh Decl. ¶ 8; Supp. Vahabzadeh Decl. ¶ ¶ 3-6.)

II. HISTORY OF THIS ACTION

RMLS alleges in its complaint that AHRN has willfully infringed RMLS's copyrighted material, including photographs and narrative descriptors on NorthstarMLS, by displaying this material on NeighborCity. On September 27, 2012, this Court entered a preliminary injunction against AHRN. Reg'l Multiple Listing Serv. of Minn., 2012 WL 4470286, at *11. The Court found that RMLS was likely to succeed on the merits of its copyright infringement claims against AHRN. [WL] at *7-10. In reaching this holding, the Court first found that RMLS had shown a likelihood that it owned the fifty photographs and narrative descriptors underlying its complaint against AHRN. [WL] at *7-8. There was a rebuttable presumption that RMLS owned copyrights to this material because the material was registered with the Copyright Office. [WL] at *8. Because AHRN had not challenged this rebuttable presumption,[2] the Court found that RMLS had shown a likelihood that it owned these copyrights. Id. Next, the Court found

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that the fifty photographs and some of the narrative descriptors were likely copyrightable and that AHRN had likely copied these materials. [WL] at *8-10. Accordingly, the Court found that RMLS was likely to succeed in showing infringement of these copyrights. The Court then analyzed the remaining factors relevant to a preliminary injunction and determined that an injunction was appropriate. [WL] at *10-11.

As to the scope of the injunction, the Court stated:

The Court must finally determine the scope of the preliminary injunction. The Court will issue a preliminary injunction prohibiting AHRN from copying all current and future photographs and any current and future " agent remarks" and " public remarks" found on NorthstarMLS for which RMLS has a copyright. " The power to grant injunctive relief is not limited to registered copyrights, or even to those copyrights which give rise to an infringement action[,]" Olan Mills, Inc. v. Linn Photo Co., 23 F.3d 1345, 1349 (8th Cir.1994), and " [t]he weight of authority supports the extension of injunctive relief to future works[,]" Princeton Univ. Press v. Mich. Doc. Servs., Inc., 99 F.3d 1381, 1392-93 (6th Cir. 1996). Because of the widespread nature of AHRN's apparent copyright infringement and the threat of future infringement, the Court finds that an injunction enjoining the use of RMLS's current and future copyrighted materials is warranted.

[WL] at *11 (emphases added). The Court then ordered the following:

Defendant, along with any of its officers, directors, subsidiaries, and successors, and all persons and entities acting in concert therewith, are immediately and until further order of this Court PRELIMINARILY ENJOINED from engaging in any unauthorized copying, display, use, and/or public distribution of Plaintiff's copyrighted photographic works, including, without limitation, the works covered by U.S. Copyright Reg. Nos. TX VA 1-432-912; VA 1-432-913; VA 1-432-914; and VA 1-432-917 . . . .

Id.

The Court also addressed the issue of which photographs on NorthstarMLS were owned by RMLS. The Court noted that RMLS had stated that it did not own copyrights to all of the photographs on NorthstarMLS. [WL] at *2 n.3. It noted, however, " RMLS claims that it places watermarks on the photographs for which it owns copyrights." Id. The Court declined to delineate between those photographs that RMLS did or did not own, but stated that its injunction would " extend only insofar as copyrights are owned or co-owned by RMLS." Id.

After the entry of the Court's preliminary injunction order, Cardella submitted a declaration to this Court stating that AHRN " has ensured that its data gathering process does not copy, display, or permit public distribution of any of the data or other materials which are the subject of the Court's Order." (Decl. of Jonathan Cardella (First Cardella Decl." ) ¶ 5, Oct. 16, 2012, Docket No. 44.)

III. BACKGROUND FOR SANCTIONS MOTION

The current sanctions motion before the Court is based on AHRN's publication, during the period from October 16, 2012 through October 23, 2012, of seventy-seven photographs allegedly subject to a copyright owned by RMLS. (Decl. of Michael Bisping (" First Bisping Decl." ) ¶ 3, Exs. 1-3, Nov. 15, 2012, Docket No. 51.) These are different photographs than the fifty photographs that underlie the original complaint brought by RMLS.

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According to RMLS, four real estate agents took the seventy-seven photographs at issue: John W. Anderson of Twin Oaks Realty, Inc. (" Twin Oaks" ), Marty G. Ringham of Countryside Realty (" Countryside" ), Claude A. Worrell of RE/MAX Results (" RE/MAX" ), and Michael C. Olsen of Keller Williams Premier Realty (" Keller Williams" ). ( See Decl. of John W. Anderson (" Anderson Decl." ) ¶ 2, Apr. 23, 2013, Docket No. 99; Decl. of Marty G. Ringham (" Ringham Decl." ) ¶ 2, Apr. 23, 2013, Docket No. 100; Decl. of Claude A. Worrell (" Worrell Decl." ) ¶ 2, Apr. 23, 2013, Docket No. 101; Decl. of Michael C. Olsen (" Olsen Decl." ) ¶ 2, Apr. 23, 2013, Docket No. 102.)

These agents each confirm that, in 2007, prior to RMLS uploading their photographs to NorthstarMLS, they entered into a click-through RMLS Subscriber License and Access Agreement (" the Subscriber Agreement" ). (Second Decl. of Michael Bisping (" Second Bisping Decl." ) ¶ 3, Apr. 23, 2013, Docket No. 103; Anderson Decl. ¶ 3; Ringham Decl. ¶ 3; Worrell Decl. ¶ 3; Olsen Decl. ¶ 3.) By accepting the terms of the Subscriber Agreement, each agent assigned all right, title, and interest in his NorthstarMLS contributions to his broker. (First Bisping Decl., Ex. B.) RMLS has also reviewed its electronic records and verified that each of the four agents clicked through the Subscriber Agreement on or about August 16, 2007, the first day that the requirement of signing this agreement was put into place.[3] (Second Bisping Decl. ¶ 6.)[4]

Each of the brokers for the four agents - Twin Oaks, Countryside, RE/MAX, and Keller Williams - entered into a Participant License and Access Agreement with RMLS (" the Participant Agreement" ). ( See First Bisping Decl., Exs. C1-C4.) Under the Participant Agreement, each broker assigned to RMLS an undivided twenty-five percent interest in the copyrights for their photographic and other contributions to NorthstarMLS, including the contributions of their employees and contractors. ( Id. )[5] In summary, then, RMLS claims that the copyrights in the seventy-seven photographs at issue were assigned by the photographers to the brokers and then assigned, in part, to RMLS.[6]

AHRN maintains that, even if RMLS can prove that it co-owns copyrights to the seventy-seven photographs, AHRN nonetheless had permission from Keller Williams and RE/MAX to display photographs from their NorthstarMLS listings. As support, AHRN points to alleged agreements it has with Keller Williams and RE/MAX that state:

By signing this Agreement, you give [AHRN] consent to use your name and the information regarding Your listings and the transactions in which You have cooperated for promotional purposes on Our website(s).

(Decl. of Jonathan Cardella (" Second Cardella Decl." ) ¶ 4, Ex. 1, Dec. 6, 2012, Docket No. 67.) The alleged agreement between AHRN and RE/MAX is electronically signed by John Collopy and the alleged

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agreement between AHRN and Keller Williams is electronically signed by Michael C. Olsen. ( Id. ) The exact identities of John Collopy and Michael C. Olsen are unclear to the Court.

The Vice President of RE/MAX wrote a letter to AHRN's CEO dated January 8, 2013, denying that it ever entered into an agreement with AHRN and demanding immediate removal of any and all RE/MAX listings from AHRN's website. (Decl. of Chad Snyder, Ex. A, Feb. 8, 2013, Docket No. 85.) Specifically, the Vice President stated that he had reviewed the purported electronic contract between RE/MAX and AHRN and denied that the contract was signed by an officer of RE/MAX. ( Id. )

IV. BACKGROUND FOR COUNTERCLAIMS

AHRN brings counterclaims against RMLS alleging violations of the Sherman Act (Count 1), Minnesota Antitrust Law (Count 2), the Cartwright Act (Count 3), and the Minnesota Deceptive Trade Practices Act (Count 4). (Countercl. ¶ ¶ 6-32.) RMLS moves to dismiss each of these counterclaims. The Court will outline below some of the primary allegations relevant to these counterclaims.

A. Agreement not to License Information to AHRN

AHRN alleges that RMLS, other MLSs, the member-brokers of the MLSs, and the NAR[7] have entered into a continuing agreement to suppress competition in at least two ways. ( Id. ¶ 26.) First, they have agreed to refuse to license AHRN access to data feeds containing real estate listing data. ( Id. ) According to AHRN, information contained within MLS databases is shared with third parties that are neither brokers nor members of an MLS, but access is limited to only certain types of third parties. ( See id. ¶ 27.) The information is generally made available through data syndicators, such as Point2/Yardi Systems, Inc. and ListHub/Threewide Corporation/Move, Inc. 28. ( Id. ) AHRN asserts, upon information and belief, that RMLS sets restrictions on when the syndicator can allow access to the data feeds and requires that the syndicator only grant access to third parties that send customer leads directly to the agent or broker that listed the residential property. ( Id. ¶ 28.) In other words, RMLS will not allow syndicators to grant access to third parties like AHRN that provide buyer-side referrals. ( Id. ) AHRN alleges that third-party syndicators have informed AHRN of this policy when refusing to extend AHRN a license. ( Id. ¶ 31.) AHRN further alleges that there are no reasonable alternative sources of complete real estate data other than from MLSs. ( Id. ¶ 10.)

AHRN claims that these restrictions on who may receive the data feeds are meant to promote RMLS's anticompetitive business model. AHRN claims that RMLS's model is designed to " maximize brokerage commissions through their own referrals and dual-agency home sales - arrangements in which the broker who lists a property is also the broker for the buyer of that property, and so is entitled to the entire commission for the sale, as well as the referral fee for directing the buyer to the listing and/or selling agent through the broker's website." ( Id. ¶ 13.) According to AHRN, because commissions are based on the sale price of the home, a broker and

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agent relying on dual agency have little incentive to negotiate in the interests of either the buyer or the seller, and both the buyer and the seller lose any right to independent advice and representation from the agent and broker. ( Id. ΒΆ 28.) AHRN claims that NeighborCity " threatens that model by connecting potential buyers directly with independent agents who ...


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