NAR and Ann Bailey saved us with CIVIXX

by Victor Lund on March 6, 2012

Anne Bailey Pranix ConsultingReal Estate agents, brokers and MLSs have plenty to complain about today. Real Estate is in a challenging cycle representing a blend of customary challenges with economic cycles that are beyond our control. When the National Association of REALTORS announced the CIVIXX settlement at Convention for the healthy sum of $7.5 Million to settle the patent lawsuit, the industry was a bit surprised. Many thanks to the nation’s league of MLSs who participated in funding the $7.5M bounty. Most MLSs also received significant contributions from their MLS vendors like LPS, Corelogic, FBS, Rapattoni and others. We all owe gratitude to NAR with the support of leading industry consultant Ann Bailey of Pranix Consulting.

Civixx claims to hold a patent of putting property on an electronic map. Microsoft paid them to settle their suit. Move, Inc., operators of REALTOR.com tried to battle CIVIXX in court and lost in an earlier settlement. The settlement amount was not disclosed, but Inman News reported the total settlement of $4.86M – some of which was for CIVIXX.  Zillow announced in their 10K filing that they agreed to pay $850,000.

Zillow is not out of the woods yet. Like many public companies, they have their cadre of companies with patent claims against them. Here is the complete extract from their 10-K.

Legal Proceedings (Zillow)

In March 2010, Smarter Agent, LLC (“Smarter Agent”) filed a complaint against us for patent infringement in the U.S. District Court for the District of Delaware. The complaint seeks, among other things, a judgment that we may have infringed certain patents held by Smarter Agent, an injunctive order against the alleged infringing activities and an award for damages. In November 2010, the U.S. Patent Office granted our petition for re-examination of the three patents-in-suit, and in an initial office action rejected all claims. In March 2011, the court granted a stay of the litigation pending the completion of the re-examination proceedings. We were granted a stay against the patent infringement complaint. We have not recorded an accrual related to this complaint as of December 31, 2011 or December 31, 2010 as we do not believe a material loss is probable. It is a reasonable possibility that a loss may be incurred; however, the possible loss or range of loss is not estimable. In addition, in October 2011, Smarter Agent filed a substantially similar complaint against Diverse Solutions, and other defendants, for patent infringement in the U.S. District Court for the District of Delaware. On October 31, 2011, we acquired substantially all of the operating assets and certain liabilities of Diverse Solutions, including the Smarter Agent complaint.

In April 2010, First American CoreLogic (“CoreLogic”) filed a complaint against us, for patent infringement in the U.S. District Court for the Eastern District of Texas. The complaint sought, among other things, a judgment that we may have infringed certain patents held by CoreLogic, an injunctive order against the alleged infringing activities and an award for damages. In December 2011, CoreLogic and Zillow entered into a settlement agreement under which each of the parties granted the other a full release from, and covenanted not to sue the other party based on, any claim relating to this litigation or conduct in the settlement negotiations prior to the effective date of the agreement. CoreLogic further covenanted not to sue us based on any claim relating to assertions of infringement of the CoreLogic patent at issue in the litigation. The parties also entered into a master license agreement with a contractual term of five years under which we license data content from CoreLogic that will be displayed on our website, including property data from various U.S. counties. A portion of the total consideration has been recorded in general and administrative expense during the year ended December 31, 2011 for the estimated fair value of the settlement component of the arrangement. A portion of the total consideration has been allocated to the data license under the terms of the master license agreement with CoreLogic. As the master license agreement includes uneven payment amounts over the term of five years, we will capitalize the payments as they are made as an intangible asset and amortize the total contract value over the estimated useful life, as we expect that the purchased content will provide future economic benefit through the recovery of the costs of the arrangements via the generation of our revenue and margins.

In September 2010, LendingTree, LLC filed a complaint against us, for patent infringement in the U.S. District Court for the Western District of North Carolina. The complaint seeks, among other things, a judgment that we may have infringed certain patents held by LendingTree, an injunctive order against the alleged infringing activities and an award for damages. We have not recorded an accrual related to this complaint as of December 31, 2011 or December 31, 2010 as we do not believe a material loss is probable. It is a reasonable possibility that a loss may be incurred; however, the possible loss or range of loss is not estimable.

In November 2011, CIVIX-DDI, LLC (“CIVIX”) granted us a full release and discharge from any and all claims for infringement of two patents owned by CIVIX, both covering “System and Methods for Remotely Accessing a Selected Group of Items of Interest From a Database”, and a fully paid-up, perpetual, irrevocable, non-exclusive, world-wide, royalty free, personal right and license under all patents and patent applications owned or controlled by CIVIX as of the effective date, for total consideration of $850,000. The full release and license was provided outside the context of litigation. A portion of the total consideration has been recorded in general and administrative expense during the year ended December 31, 2011 for the estimated fair value of the settlement component of the arrangement. The remaining consideration has been recorded as a prepaid royalty to be amortized and recorded in cost of revenue through the expiration of the related patent in January 2015.
Read more: http://www.faqs.org/sec-filings/120302/ZILLOW-INC_10-K/R21.htm#b#ixzz1oNBpaSIn

 

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