In a lawsuit filed in February 2008 at US District Court in Manhattan, Bethesda, MD-based CoStar charged that LoopNet "has engaged in a systematic--and successful--campaign to communicate the false impression that it has a vast, and constantly growing, number of users." Attorney Steven Zalesin, representing CoStar at a hearing last week, told Daniels that LoopNet's figure of 3.2 million registered members is a cumulative number representing all who have signed up for the San Francisco-based company's database since it began in 1995, and that LoopNet's monthly web traffic is considerably smaller.
These 3.2 million members, Zalesin said, "are not users of their website. They're overstating their user base" by as much as 10 to one. However, Daniels questioned whether this statement was misleading enough to cause irreparable injury to CoStar and noted that the company had not conducted a survey quantifying how many would-be users were persuaded by the statement to opt for its competitor.
Zalesin, a trial attorney with the New York office of Patterson, Belknap, Webb & Tyler, argued that "registered member" was a term coined by LoopNet and is not synonymous with "active user." Many of the registered members may have signed up years ago and not visited the website since, he said. "I have no problem saying to you that someone who hasn't been there in six months is not a user," Zalesin told Daniels.
In a release issued after last week's hearings, CoStar says that the record of LoopNet log-ins, which Daniels ordered the company to produce, "is believed to be the first time LoopNet has ever disclosed the log-in activity of its registered users." The record showed that the LoopNet website had 206,544 log-ins from mid-December '08 and mid-January of this year, or about 6% of the registered members.
For its part, LoopNet filed a counter-claim against CoStar in June '08, alleging that its rival made deceptive claims of its own. Attorney Eliot Brown of the Los Angeles office of Irell & Manella, representing LoopNet, argued last week that CoStar's claim of "900,000 free listings" on its CoStar Showcase product was overstated because most of the listings require a subscription to browse. He said CoStar has similarly exaggerated the number of unique visitors it receives each quarter and the number of users who do not also visit LoopNet. In CoStar's response to the counterclaim last July, attorneys for the company denied these allegations.
Brown said several CoStar claims of deceptive practices by LoopNet were based on materials that are no longer in use. He also disputed Zalesin's statement that CoStar and LoopNet have been in direct competition only since the launch of CoStar Showcase last June. "The truth is these companies have been competitors for years"" he said. "I believe this is the fourth lawsuit between these two companies."
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Paul Bubny
Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.
