RISMEDIA, March 20, 2007-Last week, an article covering a Class Action lawsuit, REAL v. Diane Sarkisian et al, which could involve tens of thousands of real estate agents around the country (http://rismedia.com/2007-03-15/class-action-motion-filed-in-patent-infringement-case/), drew considerable feedback from readers. Many requested more background information on the lawsuit. Here, an overview of the history of the case.
In the suit, filed in 2005, patent holder Real Estate Alliance Ltd, (REAL), alleged that RE/MAX agent Diane Sarkisian of Pennsylvania infringed U.S. Patents 4870576 and 5032989; "Real Estate Search and Location System and Method." The claims of these patents cover an online property location process that has become a de facto standard throughout the industry: interactive ‘zoomable' maps to locate available real estate properties. So can an agent actually be sued for something everybody already uses? The answer is a surprising, yes.
In a perfect world, if the person who creates the invention first files for a patent, the Patent Office examines the application (which can take as much as a few years), and then grants the patent. From that point on, the patent serves as a "title-searched" deed of ownership to that invention (property) and is presumed by law to be valid unless it is later invalidated by a federal court or the Patent Office itself.
That means the patent owner has the right to either license or exclude anyone he chooses from using, making, selling or importing the invention. Today licensing rights for billions of dollars per year are paid to patent holders for technologies that everyone has in their cell phones or computers right now. Lawsuits result when someone chooses to use the invention but refuses to license it, no matter how commonplace the technology has become.
Court records indicate that as early as June of 1999, SEC filings for Homestore, then operators of NAR's Web site Realtor.com, acknowledge the threat of liability from this patent. Several years later according to Homestore executives, they "invested millions in researching various patents including 5032989." In 2005, Homestore met with the patent owners to negotiate not only a license relieving any of their own past liabilities, but the rights to sub-license the patent to agents, brokers and vendors whose liabilities may have actually been caused by the mapping features of the Realtor.com Web site. Motions filed by the plaintiff now seek to create a "Class Action" that ties the decision made in the Sarkisian case to extend to perhaps hundreds of thousands of Realtor.com customers and participants.
The inherent controversy in this case has to do with the question of whether the plaintiff is telling the patent truth or is a patent "troll." A patent troll is generally said to be an entity that acquires ownership of a patent without the intention of actually using it to produce a product. Instead, the patent troll buys the patent and either licenses the technology to a person or entity that will incorporate the patent into a product, or sues those believed to already have incorporated the technology in a product or used the technology without permission. That's the "troll," so what's the truth?
Mark Tornetta, the inventor and majority stockholder of REAL says, "It's important that the truth eventually is told, because the patent simply is what it says. I didn't buy this invention, I actually invented it myself. I've spent much of the past several years trying to build this technology into a business."
Most of the Tornetta family lived and breathed real estate for generations in the Northeast. Tornetta attended the University of Pennsylvania where he later graduated with a degree in System Science and Engineering. Instead of donning an agent blazer and joining his family in the business, Tornetta decided to use his passion and new-found computer skills to invent a dramatic change in the industry that served the Tornetta family so well for so many decades.
"In 1983, '84 and '85 when agents used to wait anxiously for the delivery of the next MLS directory, I was trying to develop a technology that would turn the location aspect of real estate into a valuable computerized search tool," Tornetta said. "It was hard back then to get people in the business to believe that this was going to become a standard practice. I believed in it enough to strike out on my own and take a graveyard shift job in a local hospital so that I could spend days writing the code for my software, but still have enough money to pay the expenses of filing for my patent."
Tornetta finally did complete the technology and filed for the patent in early 1986.
Tornetta recalls, "Next, I needed to create a company and go into business for myself, and that's when I started RealPro."
As company president, Tornetta was dismayed by the difficulties he faced while attempting to gain access to the real estate multiple listing data to assist his customers.
According to Tornetta, it would be an understatement to say that the residential marketplace did not embrace the inventor as one of their own. Tornetta made an attempt to build a commercial application for the patented technology, but again was ahead of his time. Tornetta began broader licensing efforts in the mid 1990s when it became apparent that others were beginning to include his patented invention in their own online solutions.
"My goal was to bring this technology to life and help the industry move into the 21st century," explains Tornetta.
While he was busy trying to build his own solutions, the industry began to mature. In the late '90s Mark attempted to get ahead of the growing unlicensed use of the invention by offering to license, and eventually bringing suit against Moore Data's CyberHomes, and Microsofts' HomeAdvisor. His small company didn't have the money to see the case all the way through.
"Mine is a patented technology that the industry has known about and refused to license for years," stated Tornetta. "They've effectively kept me from building on my own property, while they themselves were using it. They have verified time and again that the patents are valid and being widely infringed, and now that my company finally has the resources to allow the court system to get the whole truth out, they are saying that my patents are invalid."
Tornetta is confident that the Summary Judgment Motions and their responses due later this month "will clearly demonstrate the truth of the matter."
If REAL prevails, it appears that this case may become one of the biggest and most unflattering episodes of Homestore's controversial history. More importantly, it may lead to a financial liability that extends not just to these alleged offenders but also to their customers who may have been intentionally kept in the dark about their possible infringement for so many years, Tornetta believes.