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A Pennsylvania federal court has considered whether a patent infringement lawsuit filed against a real estate broker was appropriate for class certification.
The Real Estate Alliance, Ltd. (“REAL”) filed a patent infringement lawsuit in 2005 against Diane Sarkisian (“Broker”) and other unnamed defendants. The lawsuit claimed that the Broker and the others infringed one of REAL’s two patented methods for creating databases that zoom in on maps, displaying a higher level of detail, to help locate properties. The lawsuit also alleged that the Broker induced others to breach REAL’s patent.
In 2006, the Broker filed a separate lawsuit against REAL and its investors. The lawsuit claimed that REAL’s publicity activities and lawsuit violated antitrust law, federal racketeering laws, and various torts. The trial court dismissed some of the tort counts from this lawsuit and then stayed it, pending resolution of REAL’s lawsuit.
In 2007, REAL filed a motion seeking class certification for its lawsuit. REAL sought to have two separate classes created: one class for the 15,000 subscribers to the TREND MLS and another class composed of the “Enhanced Listing Subscribers” of realtor.com. REAL argued that the Broker would be an appropriate representative of these classes because her activities and defenses would be similar to the members of those classes. The Broker filed a motion opposing the class certification, and the court considered whether to certify the lawsuit as a class action.
The United States District Court for the Eastern District of Pennsylvania denied the class certification motion. The requirements for class certification are: first, the class is so large that joinder of all the members is impractical; second, there are questions of law or fact common to the class; third, the claims or defenses of the representative parties are typical of the claims or defenses of the class; and fourth, the representative parties will fairly and adequately protect the interests of the class.
In addition to meeting the above requirements, a party must also fall into one of three subcategories for a class action, two of which are relevant to this action. The first subcategory requires a showing that actions brought against individual class members could create inconsistent rulings or such a ruling could impair the interests of all class members. The other subcategory requires a finding that common questions of law or fact dominate over any issues particular to individual class members and so a class action is the most efficient vehicle to resolve the claims. Issues for a court to consider in making this determination include: interests of individual class members in controlling the outcome of the litigation; the extent and nature of the litigation already pending or commenced by individual class members; desirability or undesirability of a class action; and difficulties encountered in the management of a class action.
The court found that the broker’s defenses were not typical of the proposed class and so she was not an appropriate representative for a class action. The Broker raised defenses of prior art which were based on her own knowledge, and this defense could not be presumed to be known by other members of the class. The court also had not found any cases where a court had certified a class of defendants in a patent infringement case. Because the infringement allegations against each member of the proposed class would involved highly factual defenses, each individual defense would not be typical of the class. Thus, the court ruled that the typicality requirement was not met.
Next, the court determined that the proposed class action did not fulfill any of the class action subcategory requirements. First, the court found that there was no danger of inconsistent rulings because REAL was the patent holder and so the class members would not be subject to “incompatible standards of conduct”. Second, the court had already stated that the class members had an interest in controlling their own defenses and so a class action would not be the best form to resolve this litigation. Finally, the court noted that because there were two pending lawsuits against REAL (the Broker’s lawsuit and a declaratory judgment action filed by Move, Inc.), certifying a class in this action would not produce a superior method for resolving the litigation. Therefore, the court denied REAL’s motion for class certification.
Real Estate Alliance, Ltd. v. Sarkisian, No. 05-cv-3573, 2007 WL 2814591 (E.D. Pa. Sept. 24, 2007). [This is a citation to a Westlaw document. Westlaw is a subscription, online legal research service. If an official reporter citation should become available for this case, the citation will be updated to reflect this information].
Editor’s Note: NAR contributed financial support to the Broker, per the recommendation of NAR's Legal Action Committee.