CoStar and Realtor.com argue over value of ‘stolen’ information at center of lawsuit — RISMedia

It would be an understatement to say there is no sympathy in the escalating dispute between real estate portals Homes.com and Realtor.com, as the two companies disagree significantly about the credibility of allegations in the ongoing legal saga.

The latest dispute began in a relatively civilized manner in June, when CEOs Andy Florance of CoStar and Damian Eales of Realtor.com, disputed each other’s figures on page view behaviorand on top of that, a few corporate insults were thrown in as well.

On July 2, Realtor.com’s parent company, Move, Inc., took over. Lawsuit filed in U.S. District Court in California, alleging that a former employee who now works for CoStar stole confidential information that helped Homes.com grow its booming business.

Florance and CoStar General Counsel Gene Boxer, in Interviews with RISMediaridiculed the maneuver, calling it an attempt to divert public attention from Realtor.com’s loss to Homes.com. Realtor.com will not return fire and said the filing spoke for itself.

The opposing parties’ opinions could hardly be more different on the severity of the lawsuit, the legitimacy of the claims made, the possibility of litigation, the reasons for the actions taken, and many other points. This leaves the public and the industry with room for speculation about what is likely to happen in the future. With neither side showing any signs of backing down – at least for now – further escalation or lengthy litigation seem possible.

Meanwhile, CoStar employee James Kaminsky, formerly of Move, sees himself as a defendant. Move claims in its initial complaint that he “systematically penetrated Move’s secure computer systems, secretly obtained Move’s trade secrets, and spied on Move’s confidential electronic documents in real time in order to give CoStar a massive unfair competitive advantage and help CoStar increase traffic to its competing real estate listings website.”

However, Boxer points out that the 31-page document does not allege that CoStar as a company was directly involved in the data theft. However, Move’s lawsuit alleges that CoStar benefited from Kaminsky’s intrusion and therefore “vicariously accessed” confidential data.

“If you read the complaint carefully, even though they mention both his name and CoStar’s name, there is not a single allegation that CoStar did anything wrong,” Boxer says.

In addition to its formal complaints, Move has adopted CoStar’s views and included several quasi-mocking statements in its complaint:

• “CoStar has raised market and investor expectations beyond measure through its public announcements of supposed success and is now desperately trying to drive traffic to Homes.com.”
• “According to every independent third-party source that Move can identify, Realtor.com has been the second most visited residential real estate listings website in the U.S. for years, behind Zillow and ahead of Redfin. By all independent third-party measurements, Homes.com ranks last in the top four.”
• “CoStar is desperately trying to expand its presence as a leading real estate listings website and has done everything it can to increase website traffic.”

While these may be just witty remarks, other allegations are to be taken seriously.

At the heart of the lawsuit is Move’s claim that Kaminsky, who led Realtor.com’s News & Insight group for nearly a decade, had “knowledge of nearly every aspect of the business, including strategy, organizational structure and operational details,” according to the suit. Kaminsky, Move said, described the group as “an essential branding and monetization engine for Realtor.com.” According to the suit, Kaminsky also “brazenly and repeatedly misused Move’s confidential information and trade secrets to give Homes.com a tremendous head start in launching (a similar group).”

“Upon leaving Move, Mr. Kaminsky stole confidential business information and sent it to his personal email account on his last day of access to Move’s computer system,” the complaint continues. “He secretly and undetectedly gained permanent access to enable himself (and thus CoStar) to spy on Move’s highly confidential documents stored on protected computer systems. To cover his tracks, Mr. Kaminsky then deleted nearly a thousand files from his Move computer and erased his entire browser history before returning the device to Move.”

The lawsuit seems to indicate that Move is willing to prove, via email and computer evidence, that Kaminsky did what the company claims. Florance and Boxer would not or could not address whether Kaminsky actually did what Move said. Instead, they focused on what they thought such information might mean for CoStar, insisting that he holds a role at the company that has nothing to do with anything of significance regarding overall strategy or financial impact. To the contrary, they say he is in a relatively powerless position and writes mostly about New York condos. Therefore, they believe the lawsuit is without merit.

“The idea that he’s somehow involved in content strategy, strategy development or strategy execution for Homes.com is completely false,” Boxer said. “The content and our strategy were developed years ago. They were executed by someone two levels above James in the organization.”

“We haven’t done any forensics, but we know what’s in our system, and what data he allegedly took or not, we don’t have. So what strategy could be relevant to overall monetization? The whole thing is absurd. They invest in advertising and have a monetization strategy, and we invest in advertising and have a monetization strategy, but there’s no connection to the guy whatsoever.”

Florance adds that “editing of home descriptions is in no way the intent of Homes.com, nor is it sensitive intellectual property.”

Where does Kaminsky stand at CoStar now? RISMedia emailed him to ask for a meeting, but a spokesperson responded, “Ideally, we wouldn’t do that.”

Boxer pointed out that while Kaminsky was specifically targeted in the lawsuit, CoStar was not, and explained that the company has new employees sign documents prohibiting them from bringing information from previous employers to CoStar.

“Every employee that comes on board at CoStar has to sign a non-compete agreement that includes confidentiality,” he said. “They are specifically told that anything they leave behind is theirs. We don’t want any of it. But there is nothing he could have possibly taken that would be relevant to us in his current role. And he wasn’t hired to do anything even remotely related to what he did before.”

Boxer said CoStar will do its due diligence and file a motion to dismiss the lawsuit, but he acknowledged he cannot predict what will happen next.

“To be honest, we have no idea,” he said. “So I don’t want to get into the details of our next steps. There are several things we can do. We can challenge the venue, we can try to dismiss the case, but that’s not the point. The point is that this is not about economic damages. This is a PR stunt.”

Does Kaminsky have to hire his own legal counsel?

“In situations where an employee is the target of a lawsuit (and the company’s name is also involved), we generally believe that our outside counsel can represent us and the employee until we determine that a conflict exists,” Boxer said. “If it later turns out that they need their own counsel, they may choose to retain their own counsel.”