Amrock, the title insurance, settlement services, and valuations provider formerly known as Title Source, “willfully and maliciously” stole trade secrets from HouseCanary and must pay more than $706 million for the theft, a Texas jury ruled this week.
The verdict, which was handed down earlier this week by a Bexar County jury, found that Amrock fraudulently misappropriated HouseCanary’s real estate valuation technology and appraisal analytics and breached both confidentiality and other agreements between the parties.
As a result, Amrock was ordered to pay $706.2 million to HouseCanary, a verdict that Amrock calls “unconscionable” and promises to fight.
Amrock is owned by Rock Holdings, which also owns Quicken Loans.
Court documents show that in 2015, HouseCanary and Title Source (as it was known then) signed a contract under which HouseCanary would provide appraisal and real estate valuations data and information to Title Source.
But HouseCanary claimed that Title Source’s agreement turned out to be merely Trojan horse that allowed the company to access HouseCanary’s intellectual property, formulas, algorithms, models, analytics, products, and proprietary data; use HouseCanary’s products and offerings, like its Automated Valuation Models, without paying for it; collect a “critical mass” of HouseCanary’s proprietary data; and ultimately use all of that information to “secretly replicate” HouseCanary’s protected technology and intellectual property.
After signing that agreement in 2015, the two companies began a relationship that became beset by altered demands, allegations of misrepresentations and outright lies, lawsuits and counter lawsuits.
According to information provided by HouseCanary’s legal representation, after HouseCanary concluded 18 months of work for Title Source, Title Source refused to pay the company for its work. Instead, Title Source sued HouseCanary in Texas court, claiming that HouseCanary’s products that were “completely unusable.”
HouseCanary countersued, and in the course of that lawsuit, claimed that it discovered that Title Source had misappropriated its data and technology to allow Title Source and its related companies, including Quicken Loans, to develop its own competing property analytics and software.
From HouseCanary’s lawsuit (TSI in the excerpt refers to Title Source):
The full truth behind TSI’s scheme is sinister: notwithstanding TSI’s explicit promises to HouseCanary to the contrary, TSI was attempting to reverse engineer, recreate, and mimic HouseCanary’s software, models (including HouseCanary’s AVM, similarity score model and complexity score model), analytics, value reports, and algorithms--using HouseCanary’s software, data, modeling techiniques, data formats, reports and forms in violation of the plain language of the software license and nondisclosure agreements between the parties.
While gathering confidential data and proprietary reports from HouseCanary under the guise of Amendment One to the MSA Agreement, TSI’s primary focus was on using HouseCanary’s data and model outputs to develop TSI’s own AVM. Members of TSI’s data science team quickly realized that HouseCanary’s data and products were far superior than anything that TSI was licensing, and sought to learn what was behind the sophisticated HouseCanary algorithms so that TSI could develop its own “Title Source Automated Valuation Model,” including a Value Report and a similarity score that were direct copies of HouseCanary’s offerings.
Based on internal discussions of TSI employees, they also sought to warehouse and catalogue HouseCanary’s proprietary trade secret data so that it could be used for TSI’s own software, models, analytics, and/or products along with TSI’s own historical appraisal data. Even while improperly using and taking HouseCanary’s data and products in violation of their agreements, TSI also refused to turn over the historical data that it had pledged under the contract so it could unilaterally use it.
After a seven-week trial, a 12-person jury unanimously found that Title Source stole that data, violated the companies’ agreements, and engaged in fraud by assuring HouseCanary that it was not developing its own competing property valuation models.
In total, the jury ordered Amrock to pay $235.4 million in damages for misappropriation of the trade secrets and fraud claims, as well as an additional $471.4 million in punitive damages.
In a statement provided to HousingWire, Amrock CEO Jeff Eisenshtadt called the jury’s decision a “travesty of justice” and said that the company will appeal.
“The facts in this case are clear - HouseCanary made several unkept promises leading Amrock to file a contract claim,” Eisenshtadt said in a statement.
“However, when we asked the court to intervene, a local attorney and professional plaintiff law firm spun a distorted and twisted counterclaim narrative leading a San Antonio jury to an unconscionable result,” Eisenshtadt continued.
“The jury's decision defies logic; Amrock never received any working software from HouseCanary, instead receiving wireframes and half-developed apps that were completely unusable by the company,” Eisenshtadt added.
“After HouseCanary breached its contract, we ended our relationship with the company and were forced to develop our own tool in-house,” Eisenshadt concluded. “Amrock will appeal and explore all avenues to ensure justice and sanity are applied to the facts of this case.”
Unsurprisingly, Jeremy Sicklick, the co-founder and CEO of HouseCanary, said that the company is happy with the jury’s decision.
“We are pleased that the jury recognized the value of our cutting-edge real estate analytics,” Sicklick said in a statement.
“HouseCanary has built industry-leading proprietary models, predictive analytics and valuation technologies to completely disrupt the real estate sector,” Sicklick added. “The verdict validates the value of our trade secrets, and it reflects our commitment to protect our technology and our position as leader in the valuation technology and real estate data analytics market.”
[Update: This article is updated with a statement from HouseCanary.]