Monday, October 03, 2005

A patent impacting the real estate industry: US 5,032,989

Enforcement efforts by Real Estate Alliance, Ltd, (REAL) concerning US 5,032,989, entitled "Real estate search and location system and method," are attracting attention. The patent is based on an application which is a continuation-in-part of application Ser. No. 841,515 filed Mar. 19, 1986 of common inventorship and assignment now U.S. Pat. No. 4,870,576. The '989 patent has been cited by 81 patents. The first claim of the '989 patent states:

A method using a computer for locating available real estate properties comprising the steps of:

a) creating a database of the available real estate properties;

b) displaying a map of a desired geographic area;

c) selecting a first area having boundaries within the geographic area;

d) zooming in on the first area of the displayed map to about the boundaries of the first area to display a higher level of detail than the displayed map;

e) displaying the zoomed first area;

f) selecting a second area having boundaries within the zoomed first area;

g) displaying the second area and a plurality of points within the second area, each point representing the appropriate geographic location of an available real estate property; and

h) identifying available real estate properties within the database which are located within the second area.

Text from Rismedia shows many of the issues in a typical patent infringement case.

ST: Part of the “HomeSearch” business model was to develop a consumer Web site. This is when we first became aware of patent 5,032,989. We were approached by the inventor, Mark Tornetta, and his attorneys in 1995. After reviewing the patent, and getting advice from our counsel and our board members, one of whom was the founder of one of the nation’s premier mapping companies, we concluded that we were infringing on the patent and agreed to purchase a ‘989 license.

Over the years, I stayed in contact with Mark and his company. As I became more informed, it quickly became apparent that there was significant reason for concern on behalf of the industry. We did a lot of due diligence regarding virtually every aspect of the patent…including research for “prior art.” And the deeper we looked, the more it became apparent that the leadership within the real estate industry was well aware of the patent, but they were ignoring it.

MP: Please help us understand what the patent covers.

ST: In the early 1980s, one of the only sources available for locating properties was the MLS book. Computer searches were predominately text driven, and commercial use of the Internet was not allowed. Mark was an engineer and decided to write code that would allow for map-based geographic filtering of a database as one criterion for searching available properties. He filed for his patent in 1985.

MP: Why has the infringement issue only recently come to light?

ST: Mark’s first patent, #4,870,576, was issued in 1986. Patent #5,032,989 is related to that first patent. Today, everyone has come to expect map-based property search to be a free service on the Internet, but in 1991, the U.S. Patent and Trademark Office determined that it was a patentable process. The patent gave Mark the exclusive right to make, use, sell, and import the invention. Over the past several years, companies have realized the overwhelming desire and demand for such a search methodology from people who want to search for a home, using the Internet.

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 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

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.

MP: In your opinion, what is the easiest way to resolve this issue in an industry-wide fashion?

ST: Homestore went directly to REAL this past summer, and we thought the whole thing would be resolved in a few weeks. We are not privy to the details, but it seemed to fall apart when the lawyers apparently convinced Homestore to try to “beat” the patent, rather than cooperate with REAL.

It seems like the easiest resolution would be for NAR to negotiate a license on behalf of all Realtors. Then maybe we could all just kick in a few extra dollars a month over a few years, and perhaps this whole issue could be put behind us. One thing that Equias has learned is that we must make absolutely sure that neither we, nor any of our member-participants, will ever be accused of promoting homes over the Internet illegally by infringing on the ‘989 patent.

<--from Rismedia

There is also an account in Red Herring:

“REAL ran into a wall of money that they didn’t have the resources to fight,” said Mr. Tatro. “But they continued negotiating with companies through the ’90s. Then the law started changing, making users responsible for patent infringement.”

Wrong. Users have been infringers for a long, long time. Remember the advertisements to car buyers at the time of Henry Ford: Don't buy a lawsuit.

“We offered Ms. Sarkisian a license for free, but she is being represented by Trend, her MLS [multiple listing service] company,” said Mr. Tatro. “They don’t want her to take a license for free because they believe it opens the door for us to go through the entire country.”


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