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Counterclaim Against MLS Dismissed

Maryland federal court has considered a multiple listing service’s motion to dismiss two antitrust allegations made in a counterclaim to the multiple listing service’s copyright infringement lawsuit.

Metropolitan Regional Information System, Inc. (“MRIS”) operates a multiple listing service in the mid-Atlantic region. In 2012, MRIS brought a copyright infringement lawsuit against the American Home Realty Network, Inc. (“Website Operator”), which operates a website known as “NeighborCity.com” (“Website”) that purports to offer a national real estate search and provides rankings of real estate professionals. The trial court entered a preliminary injunction barring the Website Operator from using MRIS’s copyrighted information - click here to read the earlier summary. The injunction was upheld on appeal - click here to read.

Following the issuing of the preliminary injunction, the Website Operator answered MRIS’s complaint and filed a counterclaim against MRIS, adding the National Association of REALTORS® (“NAR”) to the counterclaim. The counterclaim contained a wide array of state and federal claims, including antitrust allegations.

The core theory advanced in the counterclaim was that MRIS: created a copyright program to register and obtain “sham” copyrights for its compilation of MLS listings; cooperatively worked to deny licenses for MLS data to the Website Operator; made false statements about the Website Operator; and passed anticompetitive rules designed to drive innovators like the Website Operator out of business. The MRIS copyright program was created by the MLS in 2005, and was a two-part guidance paper designed to help MLS’s “administer, secure, and enhance the value of real estate listing content.” MRIS and NAR filed motions to dismiss the counterclaim.
The trial court initially dismissed the entire counterclaim, but allowed the Website Operator to file an amended counterclaim. The court dismissed the new counterclaim against MRIS except for federal antitrust and Maryland unfair competition allegations. Because the arguments to dismiss these allegations involved materials outside of the complaint, the court stated that it could only rule on these arguments through summary judgment. The court allowed limited discovery on the remaining allegations in the counterclaim, and MRIS then sought judgment in its favor.

The United States District Court for the District of Maryland, Southern Division, entered judgment in favor of MRIS. MRIS argued it had Noer-Pennington antitrust immunity and the court determined if that were true, then MRIS would be protected from the Website Operator’s remaining allegations. Noer-Pennington is a doctrine that allows parties to work together free of antitrust scrutiny to create laws, regulation, or collaborate on litigation, even if this would create a restraint or monopoly, so long as the parties are acting in good faith and not taking the actions merely to interfere with the business of another. The Website Operator argued that that MRIS had committed fraud in registering its copyrights and so this made its litigation a “sham,” making MRIS ineligible for Noer-Pennington antitrust immunity.

The court found that MRIS was entitled to Noer-Pennington antitrust immunity. Copyright litigation like the MRIS lawsuit, where the parties have a mutual interest, falls within the Noer-Pennington doctrine. The Website Operator’s main allegation was that MRIS had used third-party software to arrange the MLS compilation and so was not able to claim the copyright, since the original work of selecting and arranging the compilation had been done by the third party. The Website Operator further claimed that MRIS had committed fraud on the U.S. Copyright Office by seeking copyright registration for works it allegedly did not create.

The court rejected the Website Operator’s argument that the MRIS litigation was a “sham.” First, the Website Operator had mischaracterized the purpose of the software used by MRIS. The two programs that the Website Operator claimed were used to arrange the compilation were in fact used for other purposes: one program was used for searching, while the other program was used to help participants enter listing information into the MRIS database. Neither software program was used in the “selection, coordination, and arrangement of material” in the MRIS database, which is the original work entitling a compilation to copyright protection.

The Website Operator also argued that the use of RETS by MRIS undermined the copyright registrations, since this was a standard established by the industry. The court also denied this argument, finding that RETS was simply a way for computers to interact with each other and had nothing to do with the arrangement of the MLS compilation. Therefore, the court entered judgment in favor of MRIS because it was entitled to Noer-Pennington antitrust immunity.

Metro. Reg’l Info. Sys. v. Am. Home Realty Network, 12-CV-00954-DKC (D. Md. Mar. 13, 2014). [Note: This opinion is not published in an official reporter and therefore should not be cited as authority. Please consult counsel before relying on this opinion.]