Lawsuit Filed Against Zillow Alleging Fraud and Stolen Trade Secrets

Allison Tussey —  October 27, 2014 — Leave a comment

Top Agent Network, Inc. filed a lawsuit against leading online real estate company Zillow alleging theft of its proprietary trade secrets to create the highly touted “Coming Soon” feature.

The lawsuit alleges that Zillow gained access to TAN’s confidential information by feigning interest in investing in the company when, in fact, it was simply interested in tapping into TANs proprietary information and industry know-how to launch a competing product.

TAN is a private, member-only online community where the verified top 10% of real estate agents in local markets collaborate and exchange information. TAN agents exchange information relating to a broad range of real estate issues, including upcoming listings (commonly referred to as “pre-MLS” or “Coming Soon” listings), buyer needs, service provider recommendations, agent referrals and other industry matters. TAN has a wide reach within the industry, as their agents typically sell between 75% and 90% of the homes in their areas. TAN’s collaborative model increases the flow of information, benefiting informed sellers by ensuring that their properties get broad pre-MLS exposure and leading to smoother transactions and better prices for clients. TAN is a national leader in this type of exchange.

The lawsuit alleges that beginning in early 2014, under the guise of a potential investment by Zillow, Zillow was granted access to TAN’s confidential and proprietary information as well as its business strategy, metrics and model. This included access to the proprietary system developed by TAN over many years related to the presentation and dissemination of pre-MLS listings. The lawsuit further alleges that TAN provided this information under the assurance that it would be kept confidential and would be used solely for evaluating a potential investment in TAN.

After months of accessing TAN’s confidential information, in May 2014, Zillow passed on the investment opportunity, informing TAN that this was “just not what we do nor have ever done.” Then, just four weeks later, Zillow rolled out—to great fanfare—what TAN alleges is a copycat product that incorporated much of the confidential and proprietary information taken from TAN.

“TAN is based on the principle that collaboration among trusted participants is the key to success and we approached this transaction in that spirit,” said TAN CEO David Faudman. “We believe that Zillow broke this trust by misusing trade secrets that we spent years developing and perfecting.”

“Although many systems offer some version of a ‘Coming Soon’ tool to allow agents to announce pre-MLS listings, our particular version was developed and perfected over many years,” said Faudman. “Our proprietary system, the strategy behind it and the particular features and tools offered to our members are unique to TAN. They collectively explain why we have succeeded where other industry players have not.”

“We would never have met with Zillow and shared sensitive information about our business had they disclosed that they were working on a competing product or that they would use our knowledge and proprietary information to launch one,” said Faudman.

Zillow’s “Coming Soon” product, which has been described as the “talk of the industry,” was an instant hit for the company. In the weeks immediately following its launch, Zillow’s share price increased by over eighteen percent, and the company’s market capitalization increased by hundreds of millions of dollars.

“The lawsuit contains serious allegations against Zillow, which we believe reflect a willingness to put corporate profits over business ethics,” said Paul Llewellyn, attorney for TAN. “We are filing this lawsuit to hold Zillow accountable for its actions.”

 

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Allison Tussey

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