Will Patent Threat Bust Real Estate Boom in Geospatial?

By Adena Schutzberg

_Geospatial solution providers have looked at the real estate industry as a huge potential market for years.What could be better than GIS to sift through locations, prices, demographics, school ranking and proximity to the train station all at the same time? During the past few months, GIS applications for this sector has been revitalized.Recently, Prudential Preferred Properties of Chicago jumped on the Google Maps/Earth bandwagon and other, similarly powered sites have appeared.A few weekends ago the New York Times highlighted (free registration required) online tools for researching real estate in its Technology section.

But there is a threat to all this progress in the form of a patent. U.S.Patent Number 5,032,989 assigned in 1991, describes "a method for locating available real estate properties for sale, lease or rental using a database of available properties at a central location and remote stations which use a graphic interface to select desired regions on a map of the areas in interest.The user begins with a region where they are interested in acquiring property and select an inner area within this region by using a pointing device such as a mouse to designate boundaries on a map displayed on screen.This is then zoomed in on and a second area is selected within the zoomed region.The second area is then cross-referenced with the database of available properties whose approximate locations are then pictorially displayed on screen. Information about the properties can then be obtained in textual form."

Yes, the geospatial community has been through this before. There's that patent for moving data from GPS to GIS that appears now and again, and has been licensed, so far as I know.And, there's a patent for online mapping that many in the industry tried to refute by showing prior art (evidence that the idea was in use before the patent was assigned).So, is this a real threat?

The Real Estate Mapping Patent and Recent Lawsuit
The '989 patent described above is held by Mark Tornetta and assigned to a holding company formed specifically to license the patent: Real Estate Alliance Ltd., or REAL Ltd.Its URL is realpro989.com which has been unavailable in the weeks during which I researched this article. REAL was relatively quiet for several years, but in 2002 "a major investor, Andrew Rooke" joined and became president.

REAL contacted a RE/MAX agent in Pennsylvania earlier this year stating she was infringing on the patent.She was using a service, TReND, provided by the Multiple Listing Server, MLS.REAL put out a press release regarding the lawsuit.She and other end users contacted by REAL were asked to pay $10,000 in royalties each; none have paid according to an unnamed source quoted by Realty Times in a July 14, 2005 article. TReND, a non-profit, has retaining counsel to fight the alleged infringement and stated the case is without merit.

The patent expires in 2008, but the licensee has six additional years to track down and litigate past infringers who did not license the patent.

A Valid Licensee
One company did step forward and license the '989 patent.Equias Technology Development is the exclusive USA licensee of '989 "Real Estate Search Method and System."

CEO Scott Tatro, the comany's CEO, wants to "make the technology legally available to the real estate community through its portal, FindAHome.com." (The domain is owned by a company in Denmark, though Tatro claims control of it.) The website is just a placekeeper at this time; further developments are expected by the end of the year.According to an article in Red Herring, "Subscribers to Equias' site will be able to wipe the legal slate clean of any past or present liability."

Tatro contacted Directions to suggest we cover the story of the patent and the "huge industry cover-up." Tatro is making the rounds for his case this fall.In this RIS Media interview from October he tells his story in some detail.

Tatro's Story
Tatro has an interesting history that's interwoven with the patent.In 1994 he founded The HomeSearch Information Network, a searchable index of real estate available for sale across the United States.Four years later, in 1998, Microsoft bought the company's assets.In 2000 Microsoft spun off HomeAdvisor as HomeAdvisor Technologies Inc.but retained majority ownership.

It was at HomeSearch, while researching a consumer offering built around the index, that Tatro and his company were approached by Tornetta regarding the patent.After consulting with its experts, HomeSearch licensed the '989 patent.

Tatro stayed involved with the patent after the sale and performed significant due diligence.He felt strongly that the patent was valid and the industry was ignoring it.He formed Equias LLC, to take advantage of the intellectual property he'd licensed back in 1995.As he explains in the interview, "Our agreement allows us to take the exact same license that REAL is offering agents at a fee of $10,000, and provide it to agents who use our licensed system at a much lower cost, paid for over time." Equias recently approached the National Association of Realtors about a bundled license for its members, but was refused.

National Association of Realtors
Tatro contends that the National Association of Realtors (NAR) is not stepping up to the plate and is in fact participating in a cover up of sorts.Here's his argument, which is echoed in this anonymous post to a blog (second comment - the long one).

Tatro asserts that NAR has been aware of the '989 patent for more than 10 years.In fact, he maintains, executives from HomeStore, the operating business for the organization's website, homestore.com, spent $2 million researching this and other patents.The conclusion must have been that there was a need for a license since NAR met with REAL to discuss a license for NAR's Realtor.com and its 1.14 million members. That negotiation did not yield a license.Instead, says Tatro, HomeStore recoded the website to remove the infringement by cutting out some of the steps defined in the patent.He points out that NAR has since maintained that it does not infringe on '989 and never has. Further, he says, NAR has told its members and others not to bother with licensing the patent.

Suing Microsoft
Tornetta sued Microsoft and another company for infringement of the '989 patent in 1998, but those suits were dropped.One source reports, "The judge threw the case out because it was filed in the wrong name." A second source, Lawrence Husick, an attorney for REAL maintains that "Tornetta eventually dropped the suits because Microsoft and Cyberhomes [the other defendant] each had discontinued the services that allegedly infringed the patent" according to an article in Inman News.

Is the Patent For Real?
Peter Zura is a blogger and registered patent attorney based in Chicago.He's been keeping an eye on this story and raises some interesting points. "Evidently, REAL must has some kind of deal with Scott [Tatro] and his company regarding this patent, since there is no reason for him to plug the '989 patent in this manner (he's merely a licensee)." That's true.However, by speaking out on the patent issue Tatro is getting a whole lot of free advertising for his soon to be revealed service and licensing deal.Zura also raises the issue of REAL going after end users.While this might bring in some money quickly, in the end, he suggests those who "put together the databases" may well be liable.

In a second post on the matter Zura concedes that REAL may have a case but indicates two issues with which the company will need to contend: the stop and start litigation (suit in 1998 dropped and then another springing up in 2005) and the fact that the patent was granted before the Internet was mature as development platform.

My Take
The standing of the patent is for lawyers and potentially a court to decide.Tatro explains that he did due diligence on the patent and found it solid; that's why he says he decided to license it.The partners in REAL and Equias must feel there's value in their investment in this intellectual property and most likely expect some money to come their way in due time.It has also been asserted that HomeStore has expressed interest in investing in REAL (< $10 million), for appropriate concessions.

Those who have been sued claim no infringement.Some may have perhaps altered their offerings to limit liability.And, some have readied their legal staffs.Clearly, a whole long list of real estate mapping sites might be considered to infringe on the patent.I suspect we'll hear more about this in the coming months, especially as FindaHome.com goes live.

Published Saturday, November 26th, 2005

Written by Adena Schutzberg

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