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Real Estate

Move wants $2 billion in damages from Zillow for alleged trade secret theft

Can this cripple or destroy Zillow and Trulia?

(Update: This article is updated with a statement from Move.)

One of the most contentious fights in the history of real estate listings is going nuclear, thanks to a “staggering” claim of damages from Move in its trade secret theft lawsuit against Zillow.

According to legal documents obtained by HousingWire, Move, which operates for the National Association of Realtors, is claiming that Zillow owes the company $2 billion in damages over allegations of trade secret theft involving Errol Samuelson, who was once Move's chief strategy officer.

Move, which is now owned by News Corp, sued Zillow in 2014 after Samuelson resigned from Move on March 5, 2014, and joined Zillow as the company's second-highest paid executive on the same day.

Move filed suit against Zillow after Samuelson left, alleging that Samuelson and Zillow stole trade secrets and proprietary information, and that they then made efforts to cover up the alleged theft.

The original lawsuit alleged breach of contract, breach of fiduciary duty and misappropriation of trade secrets and accused Samuelson of misappropriating trade secret information by acquiring it using improper means, and by copying it without authorization.

Move further alleged that Zillow was hiding or deleting evidence.

Since then, there has been extensive and exhausting legal wrangling between the two online real estate giants, including the release and then sealing of an anonymous whistleblower letter that claimed that Zillow stole proprietary intellectual property from and accused Samuelson of violating court order limiting his work. 

Now, for the first time, Move is acknowledging just how damaging the alleged theft was to the company – $2 billion, to be exact.

The sheer dollar amount is shocking and, if awarded, could be crippling or even destructive to Zillow.

According to Zillow’s most recent 10-K yearly filing with the Securities and Exchange Commission, the company has $523.35 million on hand in “cash, cash equivalents, restricted cash, and investments.

And according to Yahoo Finance, Zillow has a current market cap of $4.11 billion, so an award of $2 billion in damages would undoubtedly be, well, damaging, to Zillow.

But, it’s unlikely that Move will be awarded the full amount, especially considering that Samsung was only required to pay $548 million to Apple in a somewhat similar case from 2012.

As Fortune reported earlier this year, Samsung was initially ordered to pay more than $1 billion to Apple, after Apple also initially sought $2 billion in damages, but that amount has been reduced by various court rulings since then.

As for the Move-Zillow lawsuit and the $2 billion claim of damages, Zillow calls the amount “staggering” in the court filing.

“The scope of this case – and damages claim – is staggering,” Zillow said in the court filing.

While no damages have been metered out yet, Zillow’s business has already suffered because of the lawsuit, as the company disclosed when it released its 2015 earnings earlier this year.

Zillow stated in February that it took a net loss of $91.1 million in 2015, a large portion of which was driven by the legal expenses associated with the battle with Move.

Zillow stated that it spent $8.1 million in legal fees related to the Move/News Corp lawsuit in the fourth quarter of 2015, and $27.1 million for all of 2015, with those fees dragging down Zillow’s total financial results.

During a call with investors, Zillow’s chief financial officer, Kathleen Phillips, said that the costs related to Zillow’s “necessary defense” against Move’s claims are projected to rise from $27.1 million in 2015 to $36 million in 2016.

Move, on the other hand, noted in a recent earnings release that in the fourth quarter, it spent $7 million in legal fees related to the Zillow lawsuit.

Zillow’s filing, which publicly discloses Move’s damage request for the first time, states that Move is trying to use a “laundry list of broad, publicly known concepts, and an array of claims touching on multiple and disparate impacts of the business” to justify its claims for damages.

“Plaintiffs (Move) have asserted a huge case,” Zillow notes in the legal filing. “They claim $2 billion in damages, assert 46 separate trade secrets (not including the 1000-plus documents claimed as trade secrets in their entirety) and have assigned at least 29 different lawyers to prosecute their claims.”

Later in Zillow’s filing, its lawyers claim that Move is attempting to have Zillow’s ability to respond to Move’s various claims limited by the court, which Zillow calls “patently prejudicial.”

According to the legal filing, Move is requesting “grossly disproportionate” page limits to be placed on Zillow’s filings.

“To suggest that defendants (Zillow) should be deprived of their ability to fully litigate their defenses to these sweeping claims is reprehensible,” Zillow states.

“Plaintiffs would like to go trial and throw as many claims as possible against the wall so as to increase the probability of jury confusion so one or two might win,” Zillow continues.

“However, the sheer volume and breadth of trade secrets asserted, and the absence of evidence to support them, demonstrates the need for the multiple motions and the Court’s need to weigh them carefully against the applicable legal standards for each trade secret alleged, so that only those with any conceivable merit go to the jury,” Zillow continues. “Without such a rigorous analysis, the trial, like the Plaintiffs’ trade secret list, will be chaos.”

When reached by HousingWire, a representative from Zillow said the company feels Move's lawsuit is without merit.

“As we’ve said, we believe the claims in this case are without merit and News Corp.’s calculations of damages are baseless,” Zillow said in a statement to HousingWire.

“Within the past month, the court dismissed several claims and is currently considering our motions for summary judgment, which request that the bulk of plaintiffs’ other claims also be dismissed,” Zillow continued. “We will continue to vigorously defend ourselves in this litigation.”

Move, on the other hand, said that it is looking forward to its day in court.

"Zillow's claim that the litigation is 'baseless' is proven false by a mountain of evidence of Himalayan proportions, including proof that numerous documents, texts and emails were destroyed and computers, smartphones and other storage devices were intentionally wiped or destroyed," a representative from Move said in a statement to HousingWire.

"We look forward to presenting the facts in court and achieving justice for these gross acts of corporate espionage and other wrongdoing," Move continued. "In the end, this may prove to be, for Zillow, a very regrettable act of executive poaching."

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