NAR took a forceful step against patent trolls last week by filing a petition with the U.S. Patent Office challenging the validity of patent claims by a company that’s been threatening infringement lawsuits against several real estate companies.
For several years one company, Data Distribution Technologies, has been sending letters to real estate companies demanding payment to use old and widely available technology that the company claims infringes its patent.
Data Distribution Technologies is considered a non-practicing entity, or patent troll, because its business model is based exclusively on buying overbroad patents and sending demand or “license” letters to users of products whose technology supposedly falls under the unreasonably broad scope of the patents. The letters demand payment of a licensing fee or face an expensive, resource-consuming patent-infringement lawsuit.
By picking off targets one by one, and settling for an amount just under the cost of litigation, trolls hope to avoid any serious scrutiny of the validity of their dubious patents. This strategy exploits the fact that no single accused target has sufficient economic incentive to fight the patent, even though the resultant damage to the industry overall vastly exceeds the cost of challenging the patent.
“With this action we’re telling the company and other patent trolls that our industry won’t tolerate these kinds of tactics against innocent real estate professionals who use well-known, ordinary technologies and business methods,” says NAR Associate General Counsel Ralph Holmen. “NAR and its members will continue to respect legitimate claims of intellectual property, but we intend to help protect members from being forced into cost-of-litigation settlements based on overbroad, invalid patents.”
NAR has filed what’s known as an Inter Partes Review (IPR) petition with the United States Patent and Trademark Office. Under this filing, NAR asks the PTO to review the validity of the specific patent of Data Distribution Technologies, LLC, of Suffern, N.Y.
DDT claims its patent covers essentially any technology that provides emails about price changes or any other updates to listings or if new listings are available to customers who’ve provided contact information to real estate brokerages.
Before the patent application was filed, this technology was widely available and the company’s claim to patent it is open to challenge based on a number of factors, Holmen said. Among others, it appears to be a simple and obvious extension of pre-existing technology.
By intervening with a challenge to the company’s patent now, Holmen said, NAR seeks to deter the company from proceeding with other lawsuits against real estate companies while the IPR is pending. While the IPR is pending, most courts will stay any related litigation under the same patent. And, should NAR prevail, it will make it difficult for the company to proceed against other real estate companies with similar overbroad patent claims.
“We’re sending a message to this company, and more broadly to any company that relies on overbroad, invalid patents coupled with illegitimate ‘troll’ patent litigation tactics to make money, that the real estate industry is prepared to fight back,” he said.
The Patent Office’s Patent Trial and Appeal Board is expected to respond to the Petition in about four months. When it does, it will indicate whether NAR has provided enough “prior art” evidence and expert testimony to warrant instituting an IPR trial. If an IPR trial is instituted, the Patent Office’s Patent Trial and Appeal Board will make a final decision on the patent’s validity within one year.
NAR has also been working the patent troll issue for several years on the legislative front. The association supports legislation in Congress that would make it harder for patent trolls to sue companies for patent infringement and also make it easier for companies to defend themselves. One bill, “The Innovation Act,” H.R. 9, has passed the House Judiciary Committee and must next pass the full chamber. Similar legislation is in the Senate as well.
—Robert Freedman, REALTOR® Magazine
