[Update 5:52 p.m. ET - Statement from Zillow added]
San Francisco-based Top Agent Network filed suit Monday in U.S. District Court for the Northern District of California against Zillow (Z), alleging theft of its proprietary trade secrets to create the highly touted “Coming Soon” feature.
The lawsuit claims that the online listing giant 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 TAN's proprietary data and systems to launch a competing product.
A spokesperson for Zillow told HousingWire, “We have not been served with a complaint, and we do not comment on pending litigation."
A copy of the lawsuit filing can be read here.
“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 in a written statement. “We believe that Zillow broke this trust by misusing trade secrets that we spent years developing and perfecting.”
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.
As the company describes it, TAN is a private, member-only online community where the verified top 10% of real estate agents in local markets collaborate and exchange information.
On the site, TAN agents exchange information relating to a broad range of real estate issues, including upcoming listings, trends among buyers, buyer needs, recommendations for service provider, agent referrals and other industry issues.
The company claims that TAN has a wide reach within the industry, as their agents typically sell between 75% and 90% of the homes in their areas.
They say that 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.
“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,” Faudman said. “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.”
Faudman says that they would never have allowed Zillow’s people access to the information if they knew Zillow was working on a competing product.
“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,” Faudman says.
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.”
Not long after in June, Zillow rolled out what TAN alleges is a copycat product that incorporated much of the confidential and proprietary information taken from TAN.
“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.”
In March, Realtor.com filed suit against Zillow for for breach of contract and misappopriation of trade secrets.