CoStar is prepared to sic the lawyers on thousands of “freeloaders”

CoStar Group, which brought its vast financial resources to bear in bringing the guillotine down on arch-rival Xceligent, now plans to go after “freeloaders” who access its database without paying.

Company CEO Andrew Florance said CoStar “invested significant legal fees and efforts over the past two years” to bring Xceligent “to a complete stop.”

“We’re now turning our attention to identifying the many people using CoStar without a valid license,” he said on the company’s first-quarter earnings call Monday, according to a transcript on SeekingAlpha.

“We intend to find these freeloaders to strongly encourage them to purchase a valid license,” Florance said, adding he thinks there could be as many as 30,000 people who illegally access CoStar’s commercial real estate database.

Florance said that the vast majority of times, when CoStar confronts someone illegally using the company’s data, the offender concedes they were wrong and pays up. But he said the company is willing to litigate the relatively few cases that warrant legal action in order to make a point.

“Someone that is using CoStar illegally and producing reports and printing out photos, subjecting themselves to potentially hundreds of thousands of dollars of damages under the law,” he said. “So we think it’ll cost a little bit but nothing like we spent last year in Xceligent.”

The notoriously litigious CoStar said last year that it planned to spend up to $20 million on its legal battle with Xceligent. The company reported net income for the first quarter of $52 million – a 136 percent increase from a year earlier.

Xceligent in December shut down operations and filed for Chapter 7 liquidation after a protracted multimillion-dollar lawsuit with CoStar, which claimed Xceligent violated copyright laws by stealing images from CoStar’s database.

When Xceligent finally pulled the plug, the founder of a real estate data startup told The Real Deal that the legal battle with Costar was “the straw that broker the camel’s back,” but not the main reason for the shutdown.

In December, TRD analyzed how smaller data firms are trying to unseat CoStar, which had been accused by Xceligent of maintaining a “decades-long monopoly.”