CoStar Has Long History of Copyright Infringement Lawsuits

CoStar Group’s lawsuit against Zillow over alleged copyright infringement may have caught some by surprise.

In recent months, CEO Andy Florance has been more caught up in the debate over private listings and his long-running feud with Realtor.com, the third-largest residential listing platform in the country (or second-largest, depending on who you ask).

But the lawsuit against Zillow, in which CoStar alleged the listing platform improperly used over 46,000 proprietary photographs from CoStar for rental listings on its website, is the latest installment taken from a key part of CoStar’s playbook.

Founded in 1986, the data giant has filed more than 30 lawsuits alleging copyright infringement or similar tactics, according to a 2018 analysis by The Real Deal.

It filed its first copyright infringement lawsuit in 1999 against LoopNet, another commercial real estate data platform. Like its current case against Zillow, CoStar targeted LoopNet’s use of proprietary photographs in its suit and the two companies ultimately settled in 2003.

In 2015, CoStar sued RealMassive, a Texas-based commercial real estate listing and data platform. The allegations were similar to its case against LoopNet: that the site was displaying CoStar-copyrighted photographs on commercial properties on its website.

RealMassive agreed to settle for $1 million and Florance pronounced that “RealMassive’s systematic theft of CoStar intellectual property had been conducted on, for lack of a better phrase, a real massive scale.”

CoStar has also filed a number of anti-piracy lawsuits alleging data theft against individuals and companies, including nine just between 2008 and 2009.

But its largest case — and victory — came in another copyright infringement case against what at the time was its largest competitor, Xceligent.

In 2012, LoopNet’s board agreed to sell the company to CoStar for $860 million, which the Federal Trade Commission approved on the condition that Loopnet sell Xceligent, a real estate information firm in which LoopNet had a stake.

CoStar filed a lawsuit against Xceligent in 2016, alleging that its competitor had committed copyright infringement on an “industrial scale.” CoStar claimed that Xceligent had used “offshore researchers” to steal and repurpose thousands of images from its servers.

The next year, Xceligent filed for bankruptcy and in 2019, CoStar obtained a $500 million judgment against its bankruptcy estate.

In 2020, CoStar filed yet another lawsuit against a commercial real estate competitor, CREXi, alleging that the company stole tens of thousands of copyrighted images and misappropriated other content, including listing information from LoopNet.

The residential horse race

While CoStar has built a stranglehold on the commercial real estate listing space over the past nearly four decades, it has been slowly expanding into other segments of the real estate market.

In 2014, the data giant had scooped up Apartments.com for $585 million, a rental search platform, and in 2017 it added ForRent.com for $385 million in a bid to list “every single apartment in the U.S. being marketed, whether it’s someone’s garage apartment up to the largest institutional property,” according to Florance.

In 2020, it made the leap into the residential market when it bought Homesnap for $250 million in cash. One year later, it added Homes.com for $156 million in another all-cash deal, later integrating the two listing platforms under the Homes.com banner.

Since then, CoStar has pushed over $3 billion in investment into its bid to compete with Zillow and Realtor.com, who have long held the pole positions in the residential listing space.

Only two years later, CoStar claimed that it hit 84 million average monthly unique visitors across its residential platform in the second quarter of 2023, vaulting it into second place behind Zillow in terms of site visits.

The company has continued to tout its growing user base, all while taking jabs at Realtor.com.

“In less than one year, the Homes.com network became the second-largest real estate portal in the United States,” Florance said during a February earnings call. “I think that’s remarkable. Realtor.com launched 30 years ago in its predecessor form back in 1995, and we passed them in apples-to-apples traffic in our first year of the relaunch.”

Eyes on the gold

In recent months, Florance has turned his sights to Zillow, which has already become embroiled with the residential industry’s other goliath, Compass, over who controls how listings are marketed.

In a July 16 LinkedIn post, Florance issued a withering critique of Zillow’s new listing policy, which requires agents to submit their listings to the MLS and Zillow within 24 hours of publicly marketing it or risk the listing being banned from Zillow.

Florance claimed that despite the language of the policy, homes submitted to only the MLS have received violations from Zillow, while homes submitted to only Zillow have not been dinged.

“While Zillow preaches they are protecting the industry by requiring submission of listings to the MLS within 24 hours of public marketing, in fact their new rule does not apply to listings directly submitted to Zillow, and Zillow alone,” he wrote on LinkedIn.

Agents have been receiving notifications of infractions since May 28. Starting on June 30, Zillow began banning noncompliant listings once an agent had received their third notification.

Florance has made a name for himself in the residential space as a pugilist, but the lawsuit against Zillow is the first time his company has gone to the courts against a top residential competitor like it has in the commercial space.

While CoStar is the clear second fiddle to Zillow in the residential space, it brings more financial heft than nearly any of the publicly traded residential platforms or brokerages.

Its market capitalization of over $40 billion is more than double that of Zillow’s $16.6 billion, and CoStar also has $3.7 billion in cash on hand, also more than double that of Zillow.

But some investors have raised concerns about CoStar’s expansion into the residential space. Hedge fund CEO Daniel Loeb, whose firm Third Point is an investor in CoStar, questioned the company’s continued investment in Homes.com in a letter to investors earlier this year.

“Expanding losses at Homes.com have obscured rapid growth in the core business and reduced consolidated EBITDA by approximately 80 percent,” Loeb wrote, adding that improving the company’s existing “capital allocation” would get it back on track.