CompStak forced to reveal users who allegedly misused CoStar data

Amid legal dust-up, startup accuses larger rival of bullying tactics

In the commercial real estate information war, industry giant CoStar Group today struck a blow against relative newcomer CompStak, which will now have to disclose the identities of four of its users who allegedly misused CoStar data.

In a federal suit filed April 2, CoStar alleged that some CompStak users shared CoStar’s proprietary data and photos with CompStak, which is a violation of CoStar’s terms of service. CompStak is not a party in CoStar’s suit, which names ten “John Doe” defendants. The defendants in the suit, however, are identified as CompStak users.

On April 11, Judge Alvin Hellerstein of The United States District Court for the Southern District of New York ordered CompStak to turn over the names and addresses of four of those individuals.

CompStak was given until noon today to comply with the judge’s order. The company, which has leveraged its “crowdsourced comps” model to drive rapid growth, filed a motion for reconsideration yesterday, claiming that the firm didn’t have the time to respond to CoStar’s claims and didn’t have the opportunity to sufficiently investigate them.

Since CompStak is yet to hear back from the court, CEO Michael Mandel told The Real Deal that the company would be giving up the names. “We let those people [the four users] know that CoStar will have their names,” Mandel said. “We’ll work with them in any way we can to make sure that they can defend themselves.”

Mark Klionsky, a senior vice-president of marketing at CoStar, told TRD that “our goal is to protect our data and protect our customers.”

“We deal with hundreds of cases like this,” he added. “Usually, we resolve them discreetly and privately.”

CoStar’s suit hinges on bits of fictitious data that it inserts into its database to protect against privacy. In this case, the data in question was square footage information that CoStar deliberately manipulated. CoStar claims in the suit that some of this data appeared in CompStak’s database, and refers to its appearance in the database as the “proverbial smoking gun.”

Klionsky told TRD that “we can prove that the data in question could have only come from CoStar. There’s about a one in trillion chance that the data is not proprietary CoStar data and we were able to convince the judge of that.”

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But CompStak’s motion states that the “smoking gun” data was also available in public documents, including market reports and in one instance, a press release about a specific deal. The CompStak users in question saw the data in these publicly available documents and then submitted the information to CompStak’s database, according to the company’s motion.

One of the comps in question, for example, is a 10-year, 4,539-square-foot deal at 1700 Pennsylvania Ave. NW. A May 2011 press release from commercial real estate firm West, Lane & Schlager mentions the deal and the square footage.

“Even if the incorrect square footage initially appeared in CoStar, but a broker did a deal based on that square footage and then issued a release about the deal, that square footage becomes a part of the public record,” Mandel said.

The CompStak motion goes on to say that “CoStar’s claims are meritless and that its discovery demands are a heavy-handed attempt to stifle competition.”

CompStak also claims in Its Court filing that it contacted all of the alleged violators of the service, and all but one of them signed affidavits stating that they got the data lawfully from sources not connected to CoStar. But Klionsky said that “if the data was independently derived and was readily available, why doesn’t CompStak disclose the names of the individuals?”

Mandel said that releasing the identities of the individuals accused in the suit would be a breach of their trust in CompStak. “It makes a statement to the world that CoStar can sue you for over something as trivial as square footage,” he said. “Their goal is to intimidate our members and scare them off from contributing to CompStak.”

The CoStar suit states that CompStak “lures” commercial real estate professionals to give it data by offering them free access to other lease comps in return. In response, CompStak’s Mandel told TRD that “we do not lure people, we incentivize them to get information by giving them information in return.”

Mandel claimed that a press release and a newsletter sent out by CoStar to its users was all part of the company’s alleged bullying campaign. “They’ve managed to use our name as many times as possible.”

But Klionsky said it was important to let CoStar’s users know that the company was serious about data privacy. “The people that receive the newsletter are CoStar’s paying customers,” he said, “and they get angry when someone is able to see the data for free.”