Technology: 2018 Yearly Update

Technological issues of interest to real estate professionals cover a wide array of topics, such as cyber fraud, data breaches, and copyright and trademark issues. Over the past twelve months, a number of cases and legislative materials have addressed these technology-related issues. The technology cases retrieved over the past year focused on the unlawful use of intellectual property owned by others, with courts imposing large penalties for such unlawful use. In the first case discussed below, the court considered whether the licensee’s use of the trademarked name of a real estate brokerage company constituted trademark infringement. Another notable case pertained to cyber fraud. In that case, a real estate representative was found liable for allegedly sending false wire instructions to the buyer, leading the purchaser to wire funds to an incorrect account.

A. Cases

Claims that a trademark was procured by fraud was barred by the statute of limitations.

1. Royal Palm Properties, LLC v. Pink Palm Properties, LLC, No. 9:17-CV-80476-ROSENBERG, 2018 WL 1138304 (S.D. Fl. March 2, 2018)

Royal Palm Properties, LLC, a real estate brokerage company, utilizes a trademark: “Royal Palm Properties.” After learning that another real estate company, Pink Palm Properties, LLC, was using the “Royal Palm Properties” trademark on its website, Royal Palm Properties, LLC brought suit, seeking to enforce its trademark rights. Pink Palm Properties responded with counter-claims, alleging that the trademark should be cancelled because Royal Palm Properties procured it by fraud.

The court held that Pink Palm’s fraud allegations were time-barred, as the limitations period began the date the trademark was registered. Because the trademark was registered on November 27, 2012, Pink Palm Properties had until 2016 to pursue a fraud claim. Thus, the court dismissed Pink Palm Properties’ claims that the trademark should be cancelled because it was procured by fraud.

2. iShow.com v. Lennar Corp., No. 2:15-cv-01550, 2017 WL 4222716 (W.D. Wa. July 31, 2017)

Real estate construction company found liable for trademark infringement.

iShow.com, a real estate home-design and construction company, alleged it adopted the trademark NEXTGEN in 2002, built a demonstration home which used the mark in 2003, and obtained federal trademark registration for NEXTGEN HOME EXPERIENCE in 2008. Lennar Corporation, a real estate construction company, owned federal trademark registration for NEXT GEN, which primarily focused on real estate management and brokering services, financial services. Upon learning about Lennar Corporation’s registered trademark, iShow.com brought claims asserting trademark infringement and false designation of origin, and sought a declaration that any claims of trademark infringement by Lennar Corporation were barred.

Lennar Corporation claimed that iShow.com never sold a home other than demonstration home, whereas Lennar sold over 4,200 homes with the NEXT GEN mark. Lennar further claimed that that after learning of iShow.com’s desire to expand and compete with Lennar, they sent a cease and desist letter explaining that they were not preventing iShow.com from using the trademark at trade shows and in the demonstration home market. The case proceeded to trial where a jury found Lennar Corporation liable for trademark infringement and awarded iShow.com $5,494,615 in damages.

3. Stross v. Redfin Corporation, 730 Fed. Appx. 198, (5th Cir. April 9, 2018)

Photographer’s infringement allegations against brokerage are remanded to trial court for additional proceedings.

Plaintiff, a professional photographer and licensed real estate broker, brought action against an online real estate brokerage company, alleging that the real estate brokerage company infringed on photographer’s copyrights when it used over 1,800 photographs uploaded by the photographer to an MLS forum used for posting real estate property listings.

The trial court granted summary judgment for the brokerage firm on the basis that photographer’s infringement claim was barred because the photographer was not a party to, nor a third-party beneficiary of, the agreement in which MLS granted the brokerage company license to use the content uploaded to the MLS forum. On appeal, the court held that the photographer’s copyright infringement claims were distinct from any contractual claims under the agreement between the MLS and the brokerage company, and therefore were not barred. The appellate court reversed and remanded the case back to trial court.

4. Bain v. Platinum Realty, LLC, No. 16-2326-JWL, 2018 WL 3105376 (D. Kan. Jun. 25, 2018)

Court held real estate representative liable for allegedly sending false wiring instructions to purchasers.

Purchasers wired money to a bank account controlled by an unknown party based on an email received from the real estate representative containing the wiring instructions. Purchasers asserted claims against the real estate representative for breach of fiduciary duty, negligence, and negligent misrepresentation, and sought to recover damages in the amount of $196,622.67, the amount wired to the wrong account.

The court rejected the real estate representative’s argument that she did not email the fake wiring instructions and therefore did not make the false representation, noting that there was at least some evidence that the real estate representative sent the email. After completion of trial, the jury awarded damages based on an assignment of 85% fault to real estate representative and 15% fault to the purchasers. Following the jury verdict, the real estate representative sought judgment as a matter of law. Finding the evidence sufficient to support the verdict, the court denied the real estate representatives request for judgment as a matter of law.

B. Statutes and Regulations

Data Breach – Alabama, Arkansas, Colorado and Louisiana

Alabama enacted the Data Breach Notification Act of 2018 which contains thorough and detailed measures required to secure data, defines the types of sensitive data that falls under the Act, details how to report a data breach and identifies the entities that are required to conform to the Act.1

A recently enacted Arkansas law limits an employer’s access to an employee’s social media accounts for official work-related investigations only.2

A Colorado regulation provides requirements the destruction of personal data and the reporting of data breaches. Covered entities that maintain paper or electronic documents during the course of business that contain personal identifying information must develop a written policy for the destruction or proper disposal of those paper and electronic documents containing personal identifying information. Further, a covered entity that maintains, owns, or licenses computerized data that includes personal information about a resident of Colorado must, when it becomes aware that a security breach may have occurred, conduct in good faith a prompt investigation to determine the likelihood that personal information has been or will be misused. The covered entity must provide notice to the affected Colorado residents unless the investigation determines that the misuse of information about a Colorado resident has not occurred and is not reasonably likely to occur.3

Louisiana has enacted regulations similar to those enacted in Colorado relating to maintaining and destroying personal data and the steps to be taken in case of a data breach.4

Drones – Connecticut and Louisiana

As more and more individuals own and use drones (also referred to as unmanned aircraft), for both professional and personal purposes, a number of states have passed laws in the past year relating to the use of drones. Some of the laws address general requirements for use of drones. For instance, the Connecticut statute provides that each municipality must enact or enforce an ordinance or resolution that regulates the ownership, possession, purchase, sale, use, transportation or operation of any commercial unmanned aircraft.5

The Louisiana legislature also passed laws regulating the operation of drone aircraft and providing the state with the exclusive jurisdiction to regulate all unmanned aircraft systems and all unmanned aerial systems.6

Cyberfraud

No cyber fraud statutes or regulations were retrieved.

C. Volume of Materials Retrieved

No Technology issues were identified in this quarter.  Over the past twelve months, Technology issues were identified 14 times in 14 cases (see Table 4 and 5). Six statutes and 5 regulations regarding Technology issues were retrieved in the past twelve months (see Table 4).

Ala. Code 1975 §§ 8-39-1 through 12

A.C.A. § 11-2-124

C.R.S.A 6-1-713, 716

LSA-R.S. 51: 3073, 3074

5 Conn. Public Act No. 17-52

6 LSA-R.S. 2:2

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State Law Based Changes

Read a summary of this quarter's additions to the State Law Based Changes.