Posted by: Stephen Mostrom
April 18, 2015
In the United States, the real estate industry is driven by brokers. A broker acts as a liaison between buyer and seller, collecting, on average, a 6% fee for selling a home. The seller is willing to pay this fee—more than 90% of residential home sellers do—because the broker provides a wealth of expertise on a particular market. But where does the broker get his information?
Increasingly, online databases are being used to gather and disseminate information, and the real estate industry is no exception. In the real estate industry, a prominent series of property databases—known as MLS or Multiple Listing Service—has created what it terms an open exchange of information between brokers, embodied by the principle: “Help me sell my inventory and I’ll help you sell yours.”
Yet, while MLS databases provide a free flow of information between brokers and the public, the companies behind these databases have used copyright law to claim ownership of the information. Brokers are free to add and withdrawal information, but they have no ownership stake in the database and are thus limited in their use.
This article will look at the copyright protections afforded online databases—specifically MLS—and how the companies behind MLS data have used this protection to limit the movement of data.
1) What is an MLS?
According to the National Association of Realtors, an MLS (Multiple Listing Service) is a “private offer of cooperation and compensation by listing brokers to other real estate brokers.” Cooperation is accomplished by the creation and maintenance of private databases of property information, with millions of dollars invested in the maintenance of MLS databases.
There are more than 800 MLSs in the United States, making real estate information readily available to the public and providing a strong incentive for users to consolidate property information. MLSs also take steps to protect private information, such as seller’s contact information and times the home is vacant.
2) Is MLS Data Copyrightable?
The first inquiry is whether the companies that administer MLS databases—such as the Arizona Regional Multiple Listing Service (ARMLS)—have valid copyright claims. This section will look at the current state of copyright law, and whether protection is likely to extend to MLS databases.
a) Can Databases Be Copyrighted?
For the purpose of copyright protection, electronic databases have been classified as compilations under the Copyright Act of 1976. A “compilation” is defined as “a work formed by the collection and assembling of preexisting materials or of data that are selected, coordinated, or arranged in such a way that the resulting work as a whole constitutes an original work of authorship.”
The prevailing U.S. Supreme Court case addressing compilations—Feist Publications v. Rural Telephone Service Co.—held that copyright protection was based in the originality of the work.
In Feist, the court considered the legality of copying information from a competing telephone book. The court found that simply gathering information and organizing it alphabetically did not meet the originality requirement necessary for copyright protection—“a work must be original to the author.”
Although the Feist court declined to apply copyright protection, it established a low bar for originality. Originality requires only a minimal degree of creativity. “The vast majority of works make the grade quite easily, as they possess some creative spark, no matter how crude, humble or obvious it might be.”
b) Do MLS Databases Meet the Minimal Degree of Creativity Requirement?
In Feist, the Supreme Court established the limitations of copyright protection—simple gathering and sorting of data will not provide protection. However, what qualifies as a minimal degree of creativity is less clear.
The U.S. District Court of Minnesota considered the issue of MLS databases in Regional Multiple Listing Service of Minnesota, Inc. v. American Home Realty Network, Inc. In Regional, the plaintiff, RMLS, had copyrighted photos and property descriptions on its website, which the defendant, AHRN copied. The court cited “uniquely-phrased descriptions of property” in finding the MLS data to be copyrightable and issued an injunction requiring AHRN to remove all copyrightable information from its website within ten days.
c) What Are the Damages for Copyright Infringement?
The Copyright Act of 1976 provides three separate types of monetary damages that may be sought for copyright infringement. First, copyright holders can pursue actual damages. Actual damages are those losses experienced by the copyright holder, including lost revenues due to infringement.
Second, copyright infringers can pursue profits. Profits are those revenues made by the infringing party through the act of infringement.
Third, copyright holders can pursue statutory damages. Statutory damages are available only where a work has been registered with the U.S. Copyright Office, and provides several tiers of damages:
- Where infringement cannot be proven as innocent or willful: Between $750 and $30,000.
- Where infringement can be proven as innocent: No less than $200.
- Where infringement can be proven as willful: No more than $150,000.
A copyright holder may also seek an injunction prior to the determination of damages. In Regional, the court issued an injunction requiring AHRN to remove all copyrightable information from its website within ten days. Furthermore, AHRN had to issue an affidavit describing procedures “established to prevent the unlawful copying, display, use, and/or public distribution of Plaintiff’s copyrighted works.”
3) How is MLS Data Limited?
With an established copyright for MLS databases, the next inquiry must be the extent to which companies like the Arizona Regional Multiple Listing Service (ARMLS) regulates the use of MLS data. This section will look at the key ways ARMLS limits access and use of MLS data through confidentiality requirements and detailed terms for the re-display of data.
a) Confidential Information
ARMLS’s Content License Agreement places a confidentiality requirement on all users when they access the website. The relevant language states that, “the parties shall protect the Confidential Information with the same degree of care they take to protect their own sensitive business information of like kind, but in no event less than reasonable care.”
This confidentiality requirement does not extend to “Firm Internal Use” and “IDX,” but bars all other use, including disclosure to third parties. Further, the Content License Agreement provides for “liquidated damages in the amount of $15,000 for each such disclosure” and the parties’ ARMLS license terminates immediately after the first disclosure.
b) IDX Policy Limitations
ARMLS’s IDX Policy, which allows for the re-display of MLS data, places three key limitations on all IDX participants. First, Rule 3 sets forth that IDX participants must “notify ARMLS of their intention to display IDX information” and “give ARMLS staff direct access to such information for purposes of monitoring/ensuring compliance with applicable rules and policies.” This rule places the burden to both notify and provide access to all information necessary to ensure compliance.
Second, Rule 17 sets forth that the user is authorized to “retain all intellectual property rights to their listings.” However, ARMLS “retains all right, title and interest in and to the compilation of listings provided under the IDX Program as described in the ARMLS Subscriber Agreement.” This rule provides intellectual property protection for all information provided to the user under the IDX Program.
Third, Rule 18 sets forth that all “[s]ervice fees and charges for participation in IDX shall be established by the ARMLS Board of Directors.” This rule enables ARMLS to dictate service fees and charges to participants. Further, Rule 26 sets forth that “[t]he ARMLS Board of Directors may amend this policy and the rules that govern the IDX program from time to time,” while Rule 25 sets forth a $500 fine for violation of ARMLS rules.
In conclusion, information that is freely shared through the MLS program is not freely owned by the brokers who are providing it. Instead, the administrators of MLS databases—such as ARMLS—have used copyright law to establish ownership of the databases and sharp penalties for misuse.
With this ownership in tact, administrators have set up confidentiality requirements and terms of service for the re-display of data, limiting the users ability to access and utilize property information.
In short, someone else owns your property information.