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RealMassive Response to Co-Star Lawsuit.

judges court gavel on a laptop computer

This is posted with the permission from RealMassive.

Case 1:15-cv-00440-RP Document 17 Filed 06/17/15 Page 1 of 10

IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF TEXAS AUSTIN DIVISION

COSTAR REALTY INFORMATION, INC., § § Plaintiff, § § v. §

§ Civil Action No. 1:15-cv-440-RP

§ REALMASSIVE, INC., JOSHUA MCCLURE, § CRAIG HANCOCK, JASON VERTREES, § and CRAIG NEGOESCU, § § Defendants. §

DEFENDANTS’ RULE 12(f) MOTION TO STRIKE SECTION V OF PLAINTIFF’S COMPLAINT

TO THE HONORABLE ROBERT PITMAN:
Defendants RealMassive, Inc., Joshua McClure, Craig Hancock, Jason Vertrees and

Craig Negoescu (Defendants) hereby move to strike, pursuant to Rule 12(f), Fed. R. Civ. P., Section V of the Complaint filed by Plaintiff CoStar Realty Information, Inc. (CoStar).
I. Introduction and summary.

This is a copyright infringement lawsuit. CoStar claims to own the copyright in certain pictures of buildings contained in RealMassive’s database of commercial property listing information. RealMassive denies infringement, but it removed the challenged images as soon as it learned of CoStar’s claims. CoStar does not seek preliminary injunctive relief.

CoStar is by far the largest provider of commercial real estate information in the United States. CoStar is so large, in fact, that it is under a Federal Trade Commission order restricting it from monopolizing access to its customers’ real estate data, including photographs of its

Case 1:15-cv-00440-RP Document 17 Filed 06/17/15 Page 2 of 10

customers’ properties. 1 RealMassive is an Austin-based start-up that, shortly before CoStar filed this lawsuit, publicly announced receiving Series A financing.

The Complaint alleges, “upon information and belief,” that RealMassive’s entire business model is based on “preying on the intellectual property of others.” This is false. RealMassive poses a commercial threat to CoStar precisely because its business model does not rely on any data owned or controlled by CoStar. In truth, CoStar’s claims in this lawsuit are based on a tiny and easily-replaced portion of RealMassive’s enormous public database. CoStar could have used the common and inexpensive method of sending RealMassive a Digital Millennium Copyright Act (DMCA) notice to request that RealMassive remove the contested pictures, and RealMassive would have readily complied. Instead, CoStar – which has a well-deserved reputation for aggressive litigation practices – filed this lawsuit and began a publicity campaign to smear RealMassive and its founders. Before summons was even served, CoStar had issued a press release and launched a website devoted solely to promoting this lawsuit. See www.realmassivecase.com (last visited June 16, 2015).

Sections I through IV of the Complaint set out CoStar’s copyright infringement claims. The Defendants are fully prepared to defend those claims, and are filing their Answer contemporaneously with this motion. However, Section V of CoStar’s Complaint alleges no facts supporting its infringement claim. Instead, Section V is devoted to purported descriptions of past, unrelated litigation involving unrelated companies that took place before RealMassive was even formed. Section V’s allegations about past lawsuits do nothing to prove CoStar’s

1 When CoStar’s parent acquired its next-largest competitor, LoopNet, Inc., the Federal Trade Commission required CoStar to divest its Xceligent subsidiary and LoopNet’s website at www.commercialsearch.com in order to avoid being charged with violating Section 7 of the Clayton Act (15 U.S.C. § 18) and Section 5 of the Federal Trade Commission Act (15 U.S.C. § 45). See https://www.ftc.gov/sites/default/files/documents/cases/2012/08/120830costardo.pdf (last visited June 17, 2015).

Defendants’ Rule 12(f) Motion to Strike – Page 2

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claim of copyright infringement in this case. They serve no purpose other than to disparage one of RealMassive’s co-founders and attempt to smear the other Defendants by association.

Rule 12(f) permits this Court to strike any “immaterial, impertinent or scandalous” allegations. Defendants respectfully request that the Court strike the irrelevant Section V from the Complaint, so that CoStar’s claims will be tried on their merits alone.
II. CoStar’s lawsuit.

Plaintiff CoStar alleges that it is “a leading provider of commercial real estate information.” Comp. ¶ 27. CoStar provides access to its commercial real estate data primarily through paid customer subscriptions. Comp. ¶ 34.

Defendant RealMassive is a growing Austin-based commercial real estate data company that was co-founded in 2013 by two U.S. Air Force Academy classmates, Joshua McClure and Craig Hancock. RealMassive does not restrict access to its database to paid subscribers. Instead, RealMassive provides free access through its website and plans to generate revenue through other services. RealMassive’s open-access, free data model is, obviously, a commercial threat to CoStar’s closed-access, paid subscription model.

Shorn of hyperbole, CoStar’s claims in this lawsuit are simple: CoStar claims to own the copyright to 115 images of commercial buildings that are contained in RealMassive’s database and which can be accessed through searches for properties on RealMassive’s website. Comp. ¶¶ 27-65 & Ex. A. CoStar claims that two of these images are also contained in a RealMassive tutorial and brochure. Id. ¶ 59. The images at issue are a tiny fraction of the data in RealMassive’s database, which contains many tens of thousands of commercial property listings, usually with multiple pictures for each.

CoStar does not allege that RealMassive obtained these disputed images from CoStar’s

Defendants’ Rule 12(f) Motion to Strike – Page 3

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own website. See Complaint ¶¶ 27-65. Despite its rhetoric, CoStar does not allege facts showing a pattern, let alone a “business model,” of deliberately misusing CoStar images. Of the 115 disputed images at issue, CoStar’s complaint identifies only 5 that bear a small CoStar corner watermark, and only 1 that bears a RealMassive watermark. Id. at ¶¶ 56-61. CoStar alleges no facts that would have put the Defendants on notice that it claims to own the copyright in the remaining images. Id.

CoStar’s dramatic claim that RealMassive’s business plan is “to steal and profit from CoStar’s copyrighted content” is not borne out by these allegations. RealMassive obtains the images in its database from various sources, including original photography and customer uploads. RealMassive does not need or want images owned by CoStar, and it promptly removed the challenged images when it received CoStar’s complaint (the first and only notice CoStar gave RealMassive of its claims). Likewise, CoStar’s claim that “RealMassive’s website prominently displays CoStar’s copyrighted photographs,” id. ¶ 11, is simply false. As shown by the Complaint itself, the disputed images are pictures of buildings associated with particular commercial real estate listings that would only be displayed to individual visitors to the website in response to searches. See Comp. Ex. A.

Sections I through IV of CoStar’s Complaint, although overblown and vigorously contested, set out the facts on which CoStar bases its claim of copyright infringement. Comp. ¶¶ 27-65. The Defendants are filing their Answer to those allegations today. Section V of CoStar’s Complaint, however, is something altogether different. Clearly written for public consumption and promoted in CoStar’s press release and www.realmassivecase.com website, Section V is a full-bore attempt to use this lawsuit and this Court as a platform to smear one Defendant based on his alleged past, and to tag the other Defendants with guilt by association. Id. ¶¶ 66-80.

Defendants’ Rule 12(f) Motion to Strike – Page 4

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In Section V, CoStar purports to describe Defendant Josh McClure’s “history” of “disregarding others’ intellectual property rights, and seeking to profit from them.” Comp. ¶ 66. CoStar first alleges, “upon information and belief,” that “in or around 2008,” McClure “became involved with” a software company called EasyAd. Comp. ¶ 67. The Complaint alleges that craigslist sued EasyAd and its principal, Kevin Mesiab, and that during the case, McClure gave a deposition in which he “testified about EasyAd and its unlawful software.” Id. ¶ 68. CoStar alleges that “at the conclusion of the case,” craigslist won a $6.1 judgment, but CoStar fails to mention that it was a default judgment, not a ruling on the merits.2 Id. ¶¶ 68-69.

CoStar next alleges that McClure’s deposition “revealed his affiliation with” another

company, Troopal, that “trafficked” in software designed to post advertisements on craigslist.

Comp. ¶ 70. The Complaint recounts a lawsuit craigslist brought against Troopal and others,

including McClure individually, and the default judgment craiglist obtained because the

defendants could not afford to defend the lawsuit. Id. ¶¶ 69-80. CoStar alleges – as if it was

relevant to proving a copyright infringement claim against RealMassive – and again “on

information and belief” – that McClure “has not paid a cent” of the judgment. Id. ¶ 78. CoStar

alleges that this default judgment entered four years ago and two years before RealMassive was

formed proves that McClure somehow knew the 115 disputed images infringed CoStar’s

copyright. Id. ¶ 80.

III. A party is entitled to have “immaterial, impertinent or scandalous matter” struck from a pleading under Rule 12(f).

The Court may strike any “immaterial, impertinent, or scandalous matter” from a pleading. Fed. R. Civ. P. 12(f). “Immaterial” allegations are those with “no essential or important relationship to the claim for relief or the defenses being pleaded,” while “impertinent”

2 See craigslist, Inc. v. Mesiab, No. C 08-05064 (N.D. Cal. Nov. 15, 2010) [Dk. No. 84]. Defendants’ Rule 12(f) Motion to Strike – Page 5

Case 1:15-cv-00440-RP Document 17 Filed 06/17/15 Page 6 of 10

allegations “do not pertain, and are not necessary, to the issues in question.” Wright, Miller & Kane, 5A Federal Practice & Procedure § 1382 at 458, 463. “Scandalous” allegations “improperly casts a derogatory light on someone, most typically on a party to the action.” Id. at 465.

Rule 12(f) is “designed to reinforce the requirement in Rule 8(e)(1) that pleadings be simple, concise, and direct.” Sefton v. Jew, 204 F.R.D. 104, 106 (W.D. Tex. 2000). Striking irrelevant allegations “avoid[s] the expenditure of time and money that must arise from litigating spurious issues,” such as prior disputes and lawsuits. Fantasy, Inc. v. Fogerty, 984 F.2d 1524, 1527 (9th Cir. 1993), rev’d on other grounds, 510 U.S. 517 (1994).

The front-man for the band CCR, John Fogerty, has provided a great example of Rule 12(f)’s importance. Fogerty was sued by his former publishing company for copyright infringement based on his song “The Old Man Down the Road.” Fogerty then filed a counterclaim that included extensive allegations about a shareholder and director of Fantasy, Inc., who Fogerty claimed had fraudulently induced him into “an unwise and illegal tax shelter scheme.” 984 F.2d at 1526. The tax shelter allegations were not relevant to Fogerty’s counterclaim, and the Ninth Circuit held the district court properly struck them under Rule 12(f). Id. at 1527-28. The court recognized that Fogerty’s tax shelter claims “created serious risks of prejudice to Fantasy, delay, and confusion of the issues” because they “did not involve the parties to the copyright infringement action” and they raised “stale and barred charges that had already been extensively litigated and would have been burdensome for Fantasy to answer.” Id. The allegations posed a “strong likelihood” of causing “unwarranted and prejudicial inferences against Fantasy,” and would have “unnecessarily complicated the trial of the copyright claim by requiring the introduction of extensive evidence of the tax plan agreements and a mass of related

Defendants’ Rule 12(f) Motion to Strike – Page 6

Case 1:15-cv-00440-RP Document 17 Filed 06/17/15 Page 7 of 10

documents, potentially adding weeks to the trial.” Id.
Section V of CoStar’s Complaint – with its allegations about years-old litigation brought

by a different party over an entirely different business – poses even greater problems than John

Fogerty’s counterclaim, and should likewise be struck.

IV. Section V’s allegations are wholly irrelevant to this lawsuit and prejudice the Defendants.

In sum total, Section V alleges that one Defendant in this case was, years before RealMassive was formed, sued by a giant company and suffered a default judgment. The Complaint does not claim that the craigslist lawsuits involved allegations of copyright infringement, let alone photos of commercial buildings, let alone any of CoStar’s rights. CoStar does not, and cannot, allege that RealMassive is related to EasyAd or Troopal; the only connection is a single co-founder’s prior work history. The craigslist lawsuits were not even decided on their merits, but rather as defaults. Section V is simply an attempt to raise (and then publicize) purported “other acts” evidence that are clearly inadmissible under Rule 404(b), Fed. R. Evid.

Although, as a general matter, Rule 12(f) motions are not favored, courts routinely strike allegations from pleadings that recite a history of unrelated claims and litigation. The Fantasy, Inc. v. Fogerty case is the most prominent example, but there are many others. See, e.g., Reiter’s Beer Distributors, Inc. v. Christian Schmidt Brewing Co., 657 F. Supp. 136, 145 (E.D.N.Y. 1987) (striking allegations that defendant had “been the subject of considerable other litigation revealing a pattern of disregard for the antitrust laws”); Galindo v. Southwest Texas Telephone Co., No. DR-84-CA-19, 1984 WL 48919 (W.D. Tex. Jul. 19, 1984) (striking “allegations of discrimination other than the single event of unlawful discharge,” because they “serve no purpose as part of plaintiff’s complaint”); Sefton v. Jew, 204 F.R.D. 104, 107 n.3 (W.D. Tex.

Defendants’ Rule 12(f) Motion to Strike – Page 7

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2000) (Nowlin, J.) (striking complaint alleging, among other things, that the defendants’ “entire business model is based on providing content belonging to others”). Cf. Frank Betz Associates, Inc. v. Jim Walter Homes, Inc., 226 F.R.D. 533, 536-37 (D.S.C. 2005) (declining to strike allegation that defendant had copied other designs owned by the plaintiff because it may tend to show a “plan, pattern or practice” by the defendant to copy the plaintiff’s designs).

If a plaintiff could prove a defendant’s current “intent” by re-litigating allegations made by other parties in past cases about different conduct, lawsuits would never end. The witnesses and evidence necessary to respond to the allegations would multiply exponentially as defendants were forced to defend not just the allegations in suit, but every alleged “bad act” in their past. Rule 12(f) exists to prevent such misuse of the judicial system. The allegations in Section V are irrelevant and potentially highly prejudicial to all of the Defendants, and therefore should be struck.
V. Conclusion and Prayer.

For the foregoing reasons, Defendants ask that this Court enter an order pursuant to Rule 12(f), Fed. R. Civ. P., striking Paragraphs 66 through 78 of the Plaintiff’s Complaint and granting such other and further relief to which Defendants may be justly entitled.

Defendants’ Rule 12(f) Motion to Strike – Page 8

Case 1:15-cv-00440-RP

Document 17 Filed 06/17/15 Page 9 of 10

Respectfully submitted,

/s/ Matthew C. Powers

Matthew C. Powers
State Bar No. 24046650
mpowers@gdhm.com
Peter D. Kennedy
State Bar No. 11296650
pkennedy@gdhm.com
GRAVES, DOUGHERTY, HEARON & MOODY, P.C. 401 Congress Avenue, Suite 2200
Austin, Texas 78701
(512) 480-5600 Telephone
(512) 480-5853 Telecopier

ATTORNEYS FOR DEFENDANT REALMASSIVE, INC.

Defendants’ Rule 12(f) Motion to Strike – Page 9

Case 1:15-cv-00440-RP Document 17 Filed 06/17/15 Page 10 of 10

CERTIFICATE OF SERVICE

I hereby certify that on June 17, 2015, I electronically filed the foregoing with the Clerk of Court using the CM/ECF system which will send notification of such filing to the following:

Christopher D. Sileo
SCOTT DOUGLASS & MCCONNICO, LLP 303 Colorado Street, Suite 2400 Austin, TX 78701
(512) 495-6300
(512) 495-6399 (Fax) csileo@scottdoug.com

Nicholas J. Boyle (pro hac vice pending) David Randall J. Riskin (pro hac vice pending) Eric J. Hamilton (pro hac vice pending) WILLIAMS & CONNOLLY, LLP
725 12th Street, N.W.
Washington, D.C. 20005
(202) 434-5000
(202) 434-5029 (Fax)
nboyle@wc.com
driskin@wc.com
ehamilton@wc.com

ATTORNEYS FOR COSTAR REALTY INFORMATION, INC.

/s/ Matthew C. Powers

Matthew C. Powers

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  • Jim Tucker

    “Hyperbole” is the operative word in this response. CoStar does have a rep for trying to make every infringement, real or imagined, a federal case and cause for public execution of the guilty party. In this case, they overstepped by publishing the death of the perpetrator before it occurred (re: Mark Twain). The fact that this is being adjudicated in a Texas court is not the best news for CoStar. Obama learned that lesson the hard way too.

  • Lol thanks for alerting me to the existence of RealMassive. I think this backfired CoStar.