"Intellectual property law is no joke! The outcome of this case will be interesting to watch." - Jerry
CoStar Group Inc. was required to make several concessions to avoid antitrust issues as part of its $860 million acquisition of LoopNet Inc. in 2012, and now it's suing the chief beneficiary of those concessions for allegedly fueling its growth by republishing CoStar's proprietary information without permission.
The Washington, D.C.-based commercial real estate data firm, with a reputation for aggressive and even litigious protection of its global online platform, alleges Missouri-based Xceligent Inc. has been engaged in "brazen and widespread theft of CoStar's intellectual property," according to the lawsuit filed Monday in the U.S. District Court for Missouri's western district.
Among the allegations: Xceligent republished without permission more than 9,000 photos from CoStar's LoopNet affiliate, which markets real estate for lease or sale, including several it passed off as its own by removing CoStar's logo from the images, according to the lawsuit. Xceligent operates competing websites CDX, a subscription-based database similar to CoStar's own, and CommercialSearch, an online marketing site similar to LoopNet.
"Xceligent's misconduct cannot be explained away as undue competitive zeal or a frolic by a rogue employee," the company's lawsuit alleged. "This is theft of intellectual property on an industrial scale."
Xceligent CEO Doug Curry, in a statement, said the lawsuit is without merit and alleged it's the latest attempt by CoStar to suppress competition as Xceligent expands its footprint in the U.S. It comes, Curry said, as Xceligent is in the midst of on-site inspections ahead of launching in the New York area.
"The lawsuit fits with a pattern of action by CoStar of filing lawsuits against its competitors to protect its dominant market position in commercial research in the United States," Curry said in a statement.
The lawsuit comes a little more than four years after the Federal Trade Commission imposed several conditions on CoStar as part of its merger with Loopnet, which at the time, held a partial interest in Xceligent.
Among those conditions, it was ordered to take steps to support Xceligent's competitive expansion including selling LoopNet's Xceligent stake and providing the company a list of all the brokers that listed properties on LoopNet in the past few years.
It's not the first time CoStar (NASDAQ: CSGP) has been accused of taking a heavy-handed approach toward the competition. The company filed several "John Doe" lawsuits in 2014 in an effort targeted at crowd-sourced data firm CompStak, which allegedly featured numerous photos and other data generated by CoStar or its affiliates.
CoStar CEO Andy Florance maintains he has an obligation to protect the company's intellectual property, gathered at great expense by field researchers and innovative technology and protected by copyright. As he told me in 2014, not doing so would be a betrayal of his duties as CoStar's chief executive.
"No we're not [a monopoly], we just aren't going to watch while someone steals all the TVs from our store," Florance had said. "And if I did, I should be fired, because it's not fair to my shareholders, it's not fair to my employees, it's not fair to my customers."
CoStar seeks compensatory and punitive damages, though an exact amount isn't stated in the lawsuit, to require Xceligent to both purge its system of CoStar-generated content and to bar it from future occurrences.