Yesterday, in the United States District Court for the Southern District of New York, CompStak, the nation’s largest independent database of commercial lease comparables, filed a motion asking the court to postpone and reconsider a discovery order directing CompStak to release the names of several of its members to CoStar Group. CompStak’s motion is an effort to protect its members against meritless claims by CoStar Group, as noted in recent court filings and press releases.
Two weeks ago, CoStar Group filed a “John Doe” lawsuit and asked the court to direct CompStak to disclose the names and addresses of four CompStak members. CompStak believes that CoStar’s effort to learn the names of CompStak’s members and sue them is actually an attempt to discourage commercial real estate professionals from using databases that compete with CoStar. CompStak also believes that CoStar’s lawsuit violates an FTC Consent Order (entered to resolve a lawsuit over CoStar’s anticompetitive acquisition of LoopNet).
CoStar alleges that these four CompStak members have committed copyright infringement and breach of contract by furnishing CompStak with information originating from CoStar’s database. In response, CompStak has provided assurances and sworn declarations from the members in question, stating that CoStar’s claims are “entirely false,” and that none of the members copied any of the information in question from CoStar. CompStak’s CEO, Michael Mandel also submitted a signed declaration under oath, stating that in conversations with the CompStak members in question, each stated that he or she did not take any information from CoStar. Mr. Mandel further pointed out that the alleged infringed information is publicly available in the CRE community, including in widely-disseminated press releases and research reports. Lastly, Mr. Mandel noted that CompStak’s members could not possibly have taken photographs from CoStar and provided them to CompStak, because CompStak’s database contains no photographs whatsoever.
CompStak firmly believes that CoStar’s lawsuit is meritless and anticompetitive. These concerns have been brought to the attention of the Federal Trade Commission, as both the company and its members have spoken with the FTC. While it is too early to tell if the FTC will conduct an investigation, CompStak believes that CoStar’s actions violate the FTC Consent Order, which prohibits CoStar from:
… [D]iscriminat[ing] against, penaliz[ing] or otherwise retaliate[ing] against a Customer because the Customer ... provides or considers providing CRE Listings or CRE Information obtained or derived by the Customer from a source other than a CoStar Database.
CoStar has gone to great lengths to publicize its judicial actions through press releases and newsletters. In its papers filed with the Court, CompStak argued that these pronouncements indicate that CoStar’s true motivation is not to protect its copyrights, but rather to publicly discourage real estate professionals from using competing services.
CompStak’s CEO, Michael Mandel noted, “We know that our members only share information with CompStak that they fairly obtain from their work as CRE professionals, and not from the CoStar service, and we’re disappointed that CoStar would resort to intimidation to prevent our members from using CompStak.”
While Mr. Mandel is hopeful that the District Court will grant CompStak’s motion, he noted that CompStak’s efforts to protect its law-abiding members is paramount. “Suing your own customers is not the way to ensure long term customer happiness,” noted Mr. Mandel. “We believe that our members are savvy enough to read through CoStar’s baseless allegations, and to feel confident using CompStak’s service. We are a service created by CRE professionals, for CRE professionals, and our members know that there is nothing more important to CompStak than the trust and faith of our members and customers.”
Finally, Mr. Mandel opened an invitation to CoStar Group to communicate directly. “I have called CoStar’s CEO Andy Florence on several occasions, with no response. I have also told his in-house counsel that CompStak is prepared to do everything we can to ensure that CoStar’s data never makes its way onto CompStak. However, we will continue to do everything in our power to protect our members who are merely sharing publicly available information.”