CoStar could spend up to $20M on Xceligent suit this year

In the ongoing copyright battle between CoStar and its arch rival Xceligent, there’s already one clear winner: the lawyers.

CoStar expects to spend up to $20 million in 2017 on litigation related to the lawsuit it brought against Xceligent in December.

The real estate data giant already spent about $3 million in legal fees in the first quarter, and expects costs to top $4 million in the second quarter, Scott Wheeler, the company’s CFO, said during a first-quarter earnings call last week. To put that number in perspective, the company’s total EBITDA (earnings before interest, tax, depreciation and amortization) in the first quarter were $55 million.

In the suit, CoStar claimed that Xceligent’s researchers routinely stole data and images from CoStar’s databases. Xceligent has rubbished the charges and accused CoStar of anti-competitive behavior.

“We believe it is a vital and prudent investment,” CoStar CEO Andrew Florance said on the earnings call about the legal expenditure. “We believe that the evidence clearly shows that Xceligent and its agents willfully and illegally stole massive volumes of valuable content from CoStar and LoopNet… We anticipate incurring significant costs in connection with this litigation over the course of the next two years.”

Florance referenced an April court ruling that apartment listing service RadPad must pay $60.5 million to Craigslist after being found liable for illegally scraping the online classified’s apartment listings and spamming its users.  He said it proved that “the courts continue to come down pretty harshly on data stealers.”

“RadPad had hired scrappers in India to harvest listings and contact data from Craigslist,” he said. “After litigation began, RadPad wound up ceasing operations. We believe that there are similarities with cases we are involved in.”

He noted that CoStar has also brought lawsuits against its two companies that work with Xceligent in India and the Philippines. “We have collected more than 100 terabytes of evidence in connection with the case,” he said.

Doug Curry, CEO of Xceligent, did not immediately respond to a request for comment. The firm, which was a subsidiary of Loopnet until it was spun off as a condition of the CoStar-Loopnet merger, is preparing to launch in New York City. The firm is now owned by DMGI, a subsidiary of the U.K.’s Daily Mail Group.

In January, Xceligent filed a motion to dismiss the lawsuit, saying it violated a Federal Trade Commission order barring anti-competitive behavior. It has denied all of CoStar’s charges.

A source in the real estate tech space unconnected to the dispute said the suit was a classic CoStar gambit.

“They have always tried to use litigation as a tool to intimidate customers or potential customers of their competitors,” said the source, who added that discussing it on the earnings call in such detail was a calculated move.

“He [Florance] knows everyone’s watching,” the source said.

Hiten Samtani contributed reporting.