CoStar Sues Longtime Competitor Xceligent, Alleging Data Theft

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CoStar employees amass a huge amount of data on properties by interviewing brokers and landlords, checking building rosters and taking photos. Photo: Mladen Antonov/Agence France-Presse/Getty Images

CoStar Group Inc., one of the world’s largest commercial real-estate data companies, has taken direct aim at longtime competitor Xceligent with a lawsuit alleging Xceligent has been involved in “brazen and widespread theft” of its data and photos, according to legal papers filed Monday night.

In a lawsuit filed in federal court in Kansas City, Mo., CoStar alleged it has found thousands of examples of its copyrighted photos and data on publicly accessible portions of Xceligent’s site. It also alleges that Xceligent contractors in India and the Philippines “bombard” one of CoStar’s sites to copy CoStar’s content “despite technological blocking and repeated notice…that such conduct is prohibited.”

In a written statement issued Tuesday, Xceligent denied the charges and said the firm has controls in place to ensure “protection of intellectual property rights” and that the data it publishes is collected “within the scope of those rights.”

Doug Curry, chief executive of Kansas City-based Xceligent, said in the statement: “The lawsuit fits a pattern of action by CoStar of filing lawsuits against its competitors to protect its dominant market position.” Xceligent is owned by an affiliate of Daily Mail & General Trust PLC, which also publishes the Daily Mail newspaper in the U.K.

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The lawsuit seeks unspecified damages and a court order “to ensure that Xceligent stops stealing,” according to court papers.

The lawsuit marks the latest battle in the fiercely competitive business of providing data on commercial real estate to landlords, brokers, investors and others. CoStar, the biggest player in the business, has a market capitalization of $6.26 billion.

CoStar’s move could draw scrutiny from regulators because Xceligent played a key role in the decision by the Federal Trade Commission in 2012 to approve CoStar’s $860 million acquisition of LoopNet. At the time of that deal, Xceligent was a unit of LoopNet.

To appease the FTC’s antitrust concerns, LoopNet sold Xceligent to the Daily Mail affiliate. CoStar also signed a consent decree that it wouldn’t restrict its customers from providing any competitor with commercial real estate information obtained from a source other than CoStar.

An FTC spokeswoman declined to comment.

The filing of CoStar’s lawsuit was timed with the execution of a search-and-seizure order issued by a regional trial court in the Philippines that was requested by CoStar. That order, which was issued Dec. 7 in Pasig City, instructed sheriffs to raid offices of Avion BPO Corp., a Filipino company that CoStar alleges has been a contractor to Xceligent.

According to the search-and-seizure order, the Filipino court found “probable cause” that “Avion is committing contributory infringement by…stealing Costar Realty copyrighted photographs for the benefit of Xceligent, a client of Avion.”

Under Filipino law, the order was granted without any input from Avion, Xceligent or its representatives. CoStar posted a two million peso bond ($40,200) as part of the process to pay for any damages Avion might sustain. A representative for Avion declined to comment.

CoStar was founded in 1987, when information on such things as commercial rents, building tenancies and occupancy rates was held mostly by owners and brokers. CoStar employees amassed a huge amount of data on properties by interviewing brokers and landlords, checking building rosters and taking photos.

But others have also recognized the potential in this market. Xceligent has offered a similar service since 1999. The firm in 2007 began its alliance with LoopNet, which provides an online marketplace for commercial real-estate sales and leasing transactions.

Xceligent and CoStar have different price scales for different customers. But some big clients pay tens of thousands of dollars for annual subscription to the services, which increasingly are becoming a necessity in the modern real-estate industry.

In its lawsuit, CoStar alleges that Xceligent is able to charge lower prices because it “integrates the stolen intellectual property” into its own product.

In its written statement Xceligent said its service is a “strong, price-effective alternative to CoStar” and alleged that CoStar has launched the lawsuit to “distract” Xceligent in its recent efforts to expand into the New York market.

Write to Peter Grant at peter.grant@wsj.com

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