CoStar Sues CREXi Alleging 'Massive' Copyright Infringement, IP Theft
CoStar Group is bringing another competitor to court over claims it stole the commercial real estate data giant's intellectual property.
Friday morning, CoStar filed suit in federal court against CREXi, a Los Angeles-based company that operates an online commercial real estate marketplace, claiming "flagrant and widespread theft of CoStar's intellectual property."
The lawsuit, filed in U.S. District Court for the Central District of California, alleges six claims including copyright infringement, misappropriation and breach of contract. It seeks a series of damages from CREXi for what it claims was a scheme to build its business using stolen content from CoStar. CREXi declined to comment.
CoStar sued Xceligent, a former competitor, in December 2016 for copyright infringement. Xceligent filed for bankruptcy in December 2017, and CoStar won a judgment in December 2019 that found Xceligent liable for $500M in damages. Xceligent didn't have the assets to fulfill the entire ruling, and the parties reached a settlement through which its insurers agreed to pay CoStar $10.75M.
CREXi was founded in 2015 by Michael DeGiorgio, a former executive at Ten-X. It has raised at least $40M in multiple funding rounds, with backers such as Jackson Square Ventures, Mitsubishi Estate Co., Industry Ventures and Prudence Holdings. CoStar bought Ten-X in a $190M deal in June.
CREXi has more than 400,000 properties on its platform, which features lease and sale listings, provides price comparisons and hosts property auctions. Last year, it was retained by the Clark County, Nevada, government to auction 161 acres of property. It also uses artificial intelligence to analyze patterns in its property data.
In April 2016, Ten-X filed a lawsuit against CREXi claiming that DeGiorgio used trade secrets from his former firm at his new company. The companies reached a settlement in May 2017 through which CREXi agreed to pay $1.6M, and DeGiorgio released a statement apologizing for his actions.
Florance said the company is always monitoring its systems for theft. He said CoStar recognized patterns of CREXi employees creating fake identities to access CoStar's platform.
The lawsuit claims that CREXi accessed CoStar's database over 1 million times and that CoStar found more than 10,000 instances of its images on CREXi's website. The complaint includes a series of side-by-side photographs of buildings, with one on CoStar's listing website, LoopNet, and the same picture on CREXi's listing platform, with the CoStar watermark removed in some instances.
The suit names several CREXi employees that it alleges used fake names to create CoStar accounts, and it says some used accounts from previous employers that are CoStar clients. It claims CREXi has uploaded copyrighted images that it stole from CoStar onto its own website.
"CREXi's attempt to clone CoStar's business is brazen," said the lawsuit, signed by Latham & Watkins attorneys Jessica Stebbins Bina, Nicholas Boyle and Sarah Tomkowiak.
Florance said the activity started shortly after CREXi's settlement with Ten-X, and continued while CoStar was litigating the case against Xceligent. A source involved in the lawsuit said CoStar's team detected some suspicious activity starting in 2018.
"They tried it with Ten-X, it was illegal behavior there, they certainly read about the fact that we successfully pursued Xceligent for this kind of behavior," Florance said. "It's a level of narcissism or arrogance to try to do it at scale while you're reading about the Xceligent case."
CoStar has filed more than 30 lawsuits since 1999, many of them for similar copyright infringement claims. A judge in 2017 ordered Apartment Hunters to pay CoStar for stealing its listings, and in 2016 RealMassive agreed to pay $1M in a settlement for a copyright infringement suit.
Florance said he doesn't worry about a perception in the industry that he is litigious, because he has prevailed in many of the suits and forced companies to admit to illegal activity.
"We have been in front of judges in multiple countries, federal, state, local, and we have prevailed in virtually every single case we've brought," Florance said. "When we go to court, we win."
Florance said he has no limit to how much he is willing to spend to pursue the case against CREXi, and he said CoStar's shareholders will understand the cost is necessary to protect its intellectual property.
"Cost is not going to be a factor in defending our content, and we have such an overwhelming body of evidence that OJ's dream team couldn't get them off the hook here," Florance said.
UPDATE, SEPT. 25, 10:05 A.M. ET: This story has been updated to include more information on when CoStar's team first detected suspicious activity from CREXi.