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Metropolitan Regional Information Systems, Inc. v. American Home Realty Network, Inc.

United States District Court, D. Maryland, Southern Division

November 1, 2013

METROPOLITAN REGIONAL INFORMATION SYSTEMS, INC., Plaintiff,
v.
AMERICAN HOME REALTY NETWORK, INC., et al., Defendants. and AMERICAN HOME REALTY NETWORK, INC., Counterclaim Plaintiff,
v.
METROPOLITAN REGIONAL INFORMATION SYSTEMS, INC., et al., Counterclaim Defendants

Page 663

For Metropolitan Regional Information Systems, Inc., Plaintiff: Margaret Aldona Esquenet, LEAD ATTORNEY, Whitney Devin Cooke, PRO HAC VICE, Finnegan Henderson Farabow Garrett and Dunner LLP, Washington, DC; John T Westermeier, Finnegan Henderson Farabow Garrett and Dunner LLP, Reston, VA.

For American Home Realty Network, Inc., Defendant: Richard Scott Toikka, LEAD ATTORNEY, Farkas Toikka LLP, Washington, DC; Christopher Ralph Miller, PRO HAC VICE, American Home Realty Network Inc, San Francisco, CA; L Peter Farkas, PRO HAC VICE, Russell O Paige, Farkas and Toikka LLP, Washington, DC.

For National Association of Realtors, Defendant: Jack R Bierig, Tacy F Flint, PRO HAC VICE, Sidley Austin LLP, Chicago, IL.

For American Home Realty Network, Inc., Counter Claimant: Richard Scott Toikka, LEAD ATTORNEY, Farkas Toikka LLP, Washington, DC; Christopher Ralph Miller, American Home Realty Network Inc, San Francisco, CA; L Peter Farkas, Farkas and Toikka LLP, Washington, DC.

For Metropolitan Regional Information Systems, Inc., Counter Defendant: Margaret Aldona Esquenet, LEAD ATTORNEY, Whitney Devin Cooke, Finnegan Henderson Farabow Garrett and Dunner LLP, Washington, DC; John T Westermeier, Finnegan Henderson Farabow Garrett and Dunner LLP, Reston, VA.

For National Association of Realtors, Counter Defendant: Brian P Morrissey, Jr, Matthew D Krueger, LEAD ATTORNEYS, Sidley Austin LLP, Washington, DC; Jack R Bierig, Tacy F Flint, PRO HAC VICE, Sidley Austin LLP, Chicago, IL.

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MEMORANDUM OPINION

Alexander Williams, Jr., United States District Judge.

Pending before the Court are Counterclaim-Defendants Metropolitan Regional Information Systems, Inc. (" MRIS" ) and National Association of Realtors (" NAR" )'s Motions to Dismiss the Second Amended Counterclaims of American Home Realty Network, Inc. (" AHRN" ). The procedural background of this case has been covered in extensive detail in the Court's prior Memorandum Opinions, which are incorporated by reference herein. See Doc. Nos. 34, 64, 159, 184, and 186. On June 10, 2013, the Court granted-in-part and denied-in-part MRIS's Motion to Dismiss or Summarily Adjudicate AHRN's First Amended Counterclaims and granted-in-part and denied-in-part NAR's Motion to Dismiss AHRN's First Amended Counterclaims. Doc. Nos. 159-160. The Court dismissed Counts I, V, VI, and VII of the First Amended Counterclaims with prejudice. The Court also dismissed Counts II, III, and IV--which alleged unfair competition under Maryland law and California law as well as violations of § 1 of the Sherman Act--without prejudice, and granted AHRN leave to file second amended counterclaims. Because the Court decided MRIS's Motion under Rule 12(b)(6), not Rule 56, it denied as moot AHRN's

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Motion to Strike the Charron Declaration and request for discovery.

AHRN timely filed its Second Amended Counterclaims on June 24, 2013. Doc. No. 167. MRIS and NAR moved to dismiss these claims with prejudice pursuant to Rule 12(b)(6). Doc. Nos. 181, 193. These Motions are now fully briefed and ripe for the Court's consideration. Based upon its careful review of the Second Amended Counterclaims and motion papers, the Court has determined that it must reconsider a determination from its June 10 Opinion and Order. Although the Court previously held that AHRN had failed to state a claim for fraud on the Copyright Office, it now recognizes that to grant MRIS's Motion to Dismiss, it would be required to rely on evidence outside the pleadings--specifically, the declaration of MRIS CEO David Charron that MRIS uses its own proprietary software, not CoreLogic, to arrange content on the MRIS Database. See Doc. No. 88-1 ¶ 14. As such, MRIS's Motion must be treated as one for summary judgment under Rule 56. See Fed.R.Civ.P. 12(d). Accordingly, the Court will reserve ruling on MRIS's Motion with respect to Count II (Maryland unfair competition) and Count IV (Sherman Act § 1) and will grant AHRN an opportunity, if it wishes, to conduct limited discovery on this issue. However, the Court will grant MRIS's Motion to Dismiss Count III (California unfair competition), as the Second Amended Counterclaims fail to cure the deficiencies identified in the Court's June 10 Opinion.

As for AHRN's claims against NAR, the Court has determined that the Second Amended Counterclaims are sufficient to survive NAR's Motion to Dismiss Counts II and IV. However, AHRN has failed to state a claim against NAR under California law, and Count III will be dismissed with prejudice.

I. FACTUAL ALLEGATIONS IN SECOND AMENDED COUNTERCLAIMS

As before, the crux of AHRN's claims is that MRIS, NAR, and unnamed Does engaged in a series of concerted, anti-competitive conduct, including the industry-wide adoption of a sham copyright registration and enforcement program and refusals to deal with AHRN. Many of the factual allegations from the Second Amended Counterclaims restate the allegations from the First Amended Counterclaims. These allegations were thoroughly documented in the Court's June 10, 2013 Opinion and will not be repeated here. However, the Court will briefly outline the new, relevant allegations from the Second Amended Counterclaims.

A. " Work for hire" representations in copyright registrations and related allegations

AHRN alleges that MRIS, NAR, and other MLSs, pursuant to their fraudulent Copyright Program, misrepresented in their applications to the United States Copyright Office that their copyrighted content constituted " works for hire." Id. ¶ 36. AHRN cites statements from the 2005 and 2006 versions of the Guidance Paper which urged MLSs to claim that the copyrighted works (i.e., photographs and text) in their electronic databases were works for hire by MLS employees. Id. ¶ ¶ 76-77. NAR allegedly conspired in the scheme when it urged MLSs to adopt the practice of making false work for hire statements to the Copyright Office in their compilation copyright applications. Id. ¶ ¶ 70, 78-79. Numerous MLSs followed suit throughout 2006 and 2007 by making such statements. Id. ¶ 79.

AHRN alleges that the work for hire statements are false because MLS employees

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do not take the photographs of residential real estate properties listed in their databases and the MLSs do not specially commission photographers to take such photographs. Id. ¶ 80. AHRN further alleges that the work for hire statements are false because the employees of MRIS and other MLSs do not author the text describing the real estate listed in the databases, nor do they specially commission others to author the text. Id. ¶ 81. Such representations allegedly concealed the fact that MRIS and other MLSs do not maintain records of the photographer, date of creation, and copyright assignment records and/or proof of ownership for the photographic images in the databases. Id. ¶ ¶ 36, 82-84. AHRN further maintains that the agent who uploads the listing photographs and text does not own the copyrights to those works, and that any recordkeeping on the part of MRIS and other MLSs with respect to the content in their databases is ineffective to transfer purported copyright in that content ...


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