Technology: 2017 Yearly Update

Technological advances impact all industries, including the real estate industry. 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 cases retrieved over the past year concentrate on copyright and trademark issues. In the first case discussed below, the court considered whether the licensee’s use of the trademarked name of a housing subdivision constituted trademark infringement. The other cases raise similar claims relating to real estate professionals’ use of copyrighted photographs in real estate listings.

1. Alyn v. Southern Land Co., LLC, No. 3:15-CV-000596, 2016 WL 7451546 (M.D. Tenn. Dec 28, 2016)

The licensee, who lives and sells property in a subdivision called Westhaven, promotes her business through domain names and a newsletter that include the word Westhaven. She brought a claim against the company that developed the subdivision, which operates a division of its business called “Westhaven Realty” and has a trademark in the term Westhaven, seeking to cancel trademark registrations on the word Westhaven. The licensee also sought a declaration that her use of the word Westhaven did not infringe the Westhaven trademark, and alleged additional claims for tortious interference, unfair competition, and defamation. The development company raised counterclaims for cybersquatting, trademark infringement, false designation, and violation of the state consumer fraud law.

Licensee and broker were liable for infringement of copyrighted photographs included in MLS listing.

In this decision, the court considered motions for summary judgment brought by both parties. The court entered judgment for the development company on the trademark-registration claim because there was no evidence that the company engaged in fraud in obtaining the trademark. The court also concluded that there was a likelihood of confusion between the marks, and that the licensee’s use of the Westhaven term did not constitute a fair use. Thus, the court granted judgment in favor of the development company on its trademark-infringement claims against

the licensee, and denied the licensee’s request for a declaration that her use did not infringe the trademark. Furthermore, the court granted judgment in favor of the development company on the licensee’s additional claims against the development company. However, the company’s claims against the licensee for cybersquatting and violation of the state consumer fraud law could proceed.

2. Adams v. Agrusa, No. 2:15-CV-7270-SVW-RAO, 2016 WL 7665410 (C.D. Cal. July 1, 2016); Adams v. Agrusa, No. 2:15-CV-7270-SVW-RAO, 2016 WL 7665411 (C.D. Cal. July 19, 2016); Adams v. Agrusa, No. 2:15-CV-7270-SVW-RAO, 2016 WL 7665767 (C.D. Cal. July 20, 2016)

The plaintiffs, a licensee and his broker, entered into a listing agreement for a property. The licensee published twenty photographs of the property with the MLS listing. The licensee and broker obtained a copyright for the photographs, and placed a copyright symbol on each of the photographs attached to the listing. Plaintiffs allege that seller transferred the listing to another firm and the other firm displayed sixteen of the copyrighted photographs with the copyright symbol removed. The seller also displayed the photos on its website. Plaintiffs brought claims against the defendants for copyright infringement.

Photographer properly stated a claim for copyright infringement against real estate defendants for their use of his copyrighted photographs.

With respect to the claim against the salesperson who input the listing into the MLS, the court determined that the salesperson did infringe the copyright in those photographs but the salesperson was an innocent infringer. Although the salesperson had failed to obtain authorization to use the photographs, the licensee had a good faith belief that authorization was not required. The defendant salesperson had received the cropped photographs from the broker. Plaintiffs were entitled to $250 in statutory damages for the salesperson’s innocent infringement. In the claim against the seller, the court granted default judgment for Plaintiffs and awarded $2,000 in statutory damages.

3. Affordable Aerial Photography, Inc. v. Illustrated Properties Real Estate, Inc. , No. 9:16-CV-80109-Dimitrouleas/Snow, 2016 WL 8786785 (S.D. Fla. May 3, 2016)

Plaintiff, a professional photographer, provides real estate photography services to real estate licensees and brokers. The photographer alleges that the defendant real estate professionals copied his copyrighted photographs from prior listings and impermissibly used those photographs in their real estate listings. The photographer brought claims for copyright infringement and removal of copyright management information. The defendants brought a motion to dismiss the claims.

The court concluded that the photographer sufficiently stated a claim for copyright infringement. The photographer alleged that he was the owner of the photographs and his complaint indicated which defendants allegedly used which photographs. The complaint also alleged that the photographer applied copyright management information to some of the material at issue in the case. Thus, the court denied the defendants’ motion to dismiss the claims.

B. Statutes and Regulations

Drones – Louisiana, Michigan, North Carolina, Oregon, South Dakota, Texas

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 North Carolina statute provides that the permit requirements for the use of drones do not apply to model aircraft that are flown solely for hobby or recreational purposes without compensation. Likewise, a Michigan statute requires drones used for commercial purposes to be used in accordance with federal law, while drones used for recreational purposes must comply with the law for operation of model aircraft.

Many of these statutes implicate property issues and the rights of property owners. In Oregon, a new statute holds that a person may not operate an unmanned aircraft system over the boundaries of privately owned premises in a manner to intentionally, knowingly, or recklessly harass or annoy the owner or occupant of the premises. Texas allows licensed real estate brokers to use a drone to capture property images in connection with the marketing, sale, or financing of real property, and insurance company employees or affiliates may capture images using an unmanned aircraft in connection with an insurance policy or claim regarding real property or a structure on property.14 In Louisiana, the use of a drone for the purpose of spying upon others or otherwise invading the privacy of others is a criminal offense.15 Use of a drone in the space above property with intent to conduct surveillance constitutes “remaining in or upon property” or “entering upon immovable property” under the offense of criminal trespass.16 South Dakota passed a law making it a misdemeanor to land a drone on lands or water of another resident.17 The owner or lessee of the drone is liable for damage resulting from a forced landing of the drone.18 In Oregon, a property owner may bring a claim for invasion of privacy against a drone operator who flies over their property without permission (unless the drone operator complied with FAA requirements).19

Cyber Fraud

In order to assist licensees and brokers, the North Carolina Real Estate Commission posted guidance documents, prepared by another organization, regarding Best Practices to Prevent Interception of Incoming Wires and Best Practices to Avoid Falling Victim to Wire Instruction Fraud.20 These documents provided advice to parties who engage in wire transactions. For instance, professionals are advised that wiring instructions should be sent only to the buyer or the intended recipient, in as secure a manner as possible, and that all wiring receipts should be verified directly with the bank.

Data Breaches

Oregon recently amended its consumer protection statute regarding use and disclosure of customer data. It is an unlawful trade practice for anyone to make a statement or representation in connection with a consumer transaction asserting that the person will use, disclose, collect, maintain, delete, or dispose of information received from the customer in a particular manner, and then use, disclose, collect, maintain, delete, or dispose of information received from the customer in a manner that is not consistent with that statement or representation.21

Electronic Media – South Carolina

Licensee advertising in South Carolina must include the brokerage name. When advertising on the internet or other electronic media, the licensee may include a link to the brokerage firm website in order to satisfy the requirement for identifying the name of the brokerage firm.22

Electronic Signatures - Kansas

The Kansas Real Estate Commission (KREC) rescinded its prohibition on accepting electronic signatures on KREC forms.23

C. Volume of Materials Retrieved

Appraiser owes a duty to lender, and that duty does not extend to purchasers of home.

Technology issues were identified in 3 cases in this quarter. Over the past twelve months, Technology issues were identified 13 times in 13 cases (Table 4 and 5). Twelve statutes and 4 regulations regarding Technology issues were retrieved in the past twelve months (Table 4).

11N.C. Gen. Stat. § 63-94 (2017).

12Mich. Comp. Laws § 259.301-259.323 (2016).

13Or. Rev. Stat. § 837.300, Section 4 (2017).

14Tex. Gov’t Code § 423.002 (2017).

15La. Rev. Stat. Ann. § 14:284 (2016).

16La. Rev. Stat. Ann. § 14:63 (2016).

17S.D. Codified Laws § 22-21-1 (2017).

18Id.

19Or. Rev. Stat. § 837.380 (2017).

20North Carolina Real Estate Commission, Best Practices to Prevent Interception of Incoming Wires (2017); Best Practices to Avoid Falling Victim to Wire Instruction Fraud (2017).

21Or. Rev. Stat. § 646.607 (2017).

22S.C. Code Ann. § 40-57-135(E)(2) (2016).

23Kansas Real Estate Commission, Electronic Signatures.

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ARELLO Archive

The NAR/ARELLO Archive is a compilation of new types of laws collected over the past few years. This resource is helpful to guide states that may want to adopt similar laws in their state.

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Read a summary of this quarter's additions to the ARELLO archive.