REAL ESTATE ALLIANCE CONTINUES PRESS FOR '989 PATENT ENFORCEMENT: As many of you may be aware, back in July, Real Estate Alliance, Inc. filed a lawsuit against real-estate agent Diane Sarkisian of Ambler, Pennsylvania for infringing U.S. Patent No. 5,032,989, titled "Real Estate Search and Location System and Method." The patent covers a mapping system "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."

Predictably, most people associated with real-estate searching went absolutely bananas. The patent is quite broad, and possesses an enviable priority date of 1986/1991 (the patent was a CIP having priority to a 1986 application). To date, no one is quite sure how aggressive REAL will be in enforcing their patent, and there are constant fears that REAL could become the next Trading Technologies of the real-estate business.

In this recently published "interview" with Scott Tatro, president of Equias, LLC, it would appear that REAL is getting ready to kick their enforcement of the '989 patent into high gear. As a quick background on the relationships involved here, Equias is currently a licensee of the patent that also happens to be "offering" the technology to the real estate community through its portal, FindAHome.com. Equias apparently obtained a license back in 1995 on the '989 patent and considers itself to be one of the market leaders in this technology.

Now the reason I used the quotations on "interview" was that the publication wasn't so much an interview, as it was an advertisement for the '989 patent. In fact, the whole piece reads like an infomercial you'd see on late-night TV:

"It's hard to believe - you're telling me I can make thousands of dollars working from home?"

"Absolutely! By following these 5 easy steps outlined in my program, you can make as much as 5 thousand dollars a week while never leaving the comfort of your pajamas!"

Here is what Scott (ST) had to say about the patent in the interview:

MP: How long can the ‘989 patent be enforced?

ST: The patent expires in 2008. There still exists an additional six years that REAL will still be able to take enforcement action against past infringers who did not acquire a license.

MP: Please tell us about Equias. What is this company all about?

ST: We formed Equias, LLC about a year ago. We are independent of REAL, the owner of the ‘989 patent, and we have obtained a license under the patent. 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. We’re working to create a fully licensed national portal, called http://www.findahome.com/. We’ll announce some significant national participants by the end of the year.

MP: If the patent is so clearly enforceable, why are people resisting?

ST: I don’t know. Maybe people still hope that this will just go away. For agents, many appear to think that their brokers or MLS will somehow protect them, but this is a mistake—it’s the agents that will be sued, and who will have to pay damages. The law permits REAL to seek “reasonable royalties” from those who make, use, sell or import the invention without a license, but so many agents have just assumed that they could use the mapping method of the patent, that they are shocked to learn that someone actually invented and patented it.

MP: Why do you think much of the real estate industry was unaware that they were infringing on this patent?

ST: I don’t know. Several years ago, NAR, HomeStore and the big MLS groups were offered the opportunity to license the patent, but they didn’t. Maybe they didn’t want to alarm the industry. Maybe they were looking for prior art for the past few years.

MP: What would it entail for a real estate professional to be in compliance with the patent? What would the licensing costs amount to?

ST: The patent has a couple of layers to it. Even if an agent stops every infringement right now, there is the issue of past infringement. If every MLS, portal, or IDX acquired a patent license today going forward, that would not necessarily relieve “users” from the liability of having infringed in the past. The license being offered by REAL covers all past liability and is good for the life of the patent. Its license offer is $10,000. That $10,000 number may be incredibly painful, but it is a small fraction of what REAL has calculated a court would award
as that “reasonable royalty amount.”

MP: One Realtor has already been sued by REAL for allegedly infringing the ‘989 patent. Do you anticipate further litigation of this kind?

ST: Yes. REAL has told us that more suits are “in the pipeline” against agents all over the country, but that they prefer to grant licenses to agents. We believe,
however, that the agent and her MLS, TReND, may be going after a precedent-setting case. Sources from TReND supposedly said, “all it takes is for one agent to write them [REAL] a check, and they could go after every agent in the country.” TReND has more than 20,000 agent members. Although a settlement may be less costly for this one agent, it appears to us that there are other forces in play.

MP: How would you respond to industry critics who say these suits ‘will never hold up?’

ST: As a licensed agent, I was once one of those people saying the same thing, so I can’t blame them. However, once someone has access to the relevant facts, it quickly becomes obvious that this patent and REAL are for “real.” Many of those facts can readily be downloaded at http://www.real989.com/.

I’m not an attorney, but we’ve been told that one of the best ways to avoid paying damages or license fees is to find invalidating prior art to present in court. That means prove that somebody else created and documented the invention before the patent holder. That appears to me to be about the only way to kill the ‘989 patent at this point. Certain parties will undoubtedly do what countless others have already done, by spending tens-of-thousands of dollars with lawyers from all across the country. They’ll be looking at a million different dotted “i’s” and crossed “t’s” to see if they can pick the patent apart and somehow avoid doing the right thing.

Evidently, REAL must has some kind of deal with Scott 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). Granted, REAL is currently litigating this patent in court, so it would be unwise of them to start blabbing in the press about what their patent does or does not cover. But it does raise some questions as to why he was selected as a spokesperson for this patent.

Second, it should be clear from this interview that REAL intends to start the enforcement effort with the agents themselves. At first blush, they would appear to be the most vulnerable to settlement, and thus provide a quick stream of revenue into the comany's coffers. And the $10k offer seems specifically designed to flip a fair amount of agents at the outset. However, there is the issue of agents acting alone versus agents acting at the behest of their employer (i.e., the real-estate firm). I will bet that there are some indemnification issues that could quickly bring these firms into the mix. Specifically, the first element of the '989 patent requires the step of "creating a database of the available real estate properties." As a previous poster of this blog pointed out, is this really something that agents compile on their own? Or is this step being performed by the realtors/MLS?

And the issue of realtors "ignoring" calls for licences for a period of years raises issues of laches and/or estoppel. The inventor had this patent assigned for over 10 years (until it was assigned to REAL in November of last year). Why did it take so long to start enforcement of this patent (especially towards the end of its life)?

All interesting stuff. I'm eager to see how this will play out in the months to come . . .