United States: Zillow Sues Rival Compass Alleging IP Theft And Breach Of Contract Over Its Artificial Intelligence, Machine Learning, And Cloud Computing Real Estate Technologies

Last Updated: October 1 2019
Article by Jonathan Barnard

Switching from defense to offense, Zillow Group, Inc., best known for its residential real estate marketplace technology, recently filed a lawsuit in the U.S. District Court for the Western District of Washington alleging a number of both federal and state legal violations against competitor Urban Compass, Inc., Compass Washington, LLC, and former employee turned current Compass employee Robert Ming-Yu Chen. At the federal level, under the Defend Trade Secrets Act, Zillow alleges trade secret misappropriation of its machine learning, search relevance, and user personalization technologies. At the state level, Zillow alleges trade secret misappropriation, breach of contract, breach of implied covenant of good faith and fair dealing, tortious interference with contractual relations, breach of fiduciary duty, and unjust enrichment arising under the laws of the State of Washington.

In its Complaint filed on April 19, 2019, Zillow alleges Compass engaged in "unlawful business practices" and "calculated theft" by unlawfully hiring Zillow employees using a "poach and extract model" in order to obtain Zillow's trade secrets. (see Complaint, pp. 1-2, 14). In particular, Zillow alleges Compass incited Mr. Chen—Zillow's former Senior Director of Machine Learning and the current Director of Engineering at Compass—to breach his employment agreement containing confidentiality, non-compete, and non-disclosure clauses, in order to obtain Zillow's proprietary machine learning algorithms and models which Mr. Chen helped develop. To support their allegations, Zillow provides in their complaint side-by-side screen shots that highlight the similarities between Zillow's and Compass's online and mobile tool offerings. In addition, Zillow points to evidence that Mr. Chen "took screen shots of propriety trade secret information and deleted this information in the weeks before his departure from Zillow, including proprietary wireframes and a proposed regional launch timeline related to certain Zillow services." (see Complaint, p. 15). In addition to damages, Zillow is also seeking both preliminary and permanent injunctive relief to protect its trade secrets. (see Complaint, p. 28).

Founded thirteen years ago by two former Microsoft executives, Zillow has quickly become an industry leader in providing widespread access to pertinent real estate and mortgage information. With its portfolio of websites and mobile applications including Trulia®, StreetEasy®, HotPads®, Naked Apartments®, RealEstate.com, Out East, and Zillow Homes Loans, Zillow provides information on over 110 million homes in the United States, receives over 180 million unique visitors per month, and controls a commanding ~30% market share in the real estate technology space. Headquartered in Seattle, Washington—endearingly called "Cloud City"—Zillow's success can be linked, at least in part, to its heavy investment in machine learning, artificial intelligence, and cloud-computing technologies directed at improving user preference prediction and website search relevance capabilities. Such investments have led to various online tools, including Claim Your Home and Personalization, Similar Home Recommendation System, Zestimate®, and Premier Agent® Analytics.

Zillow appears to have dominated the online and mobile technology-driven residential real estate industry for some time. However, Compass, a relative newcomer into online real estate, has taken the real-estate technology world by storm. Founded only seven years ago and headquartered in New York City, Compass is the country's fastest-growing luxury real estate technology brokerage company. Valued around $4.4 billion, including receiving the largest real estate investment in U.S. history—a $450 million investment by SoftBank Vision Fund—Compass has set its sight on additional expansive growth with its "2020 By 2020" plan, with hopes of gaining 20% of the real estate market share in the top 20 U.S. cities by 2020. To reach its 2020 goals, Compass continues to invest and develop machine learning and search relevance technologies to integrate into their products for both consumers and agents.

While this litigation is in its early stages and Compass has yet to file a response, neither Zillow nor Compass are new to the litigation sphere. In the past seven years alone, Zillow has been on the defensive in 38 intellectual property, contract, employment, and antitrust lawsuits, including a lawsuit similar to its current lawsuit against Compass in which Zillow settled with Move, Inc. (operator of Realtor.com) for $130 million after Move asserted Zillow hired two of its executives that had allegedly stolen Move trade secrets. Like Zillow, Compass has experienced a large volume of litigation in recent years, including allegations of IP theft and poaching top talent.

This litigation is an interesting example of the use and attempted enforcement of trade secrets to protect valuable intellectual property involving machine learning models and artificial intelligence technology. It's notable that Zillow did not include a claim for patent infringement against Compass. That may be understandable since Zillow's primary goal is to swiftly enjoin Compass from using Zillow's proprietary technology, and a trade secret misappropriation action is likely the most expedient path to achieve that result. And if Zillow can prove its case, i.e., establish that its technology actually constitutes trade secret IP, and that there was indeed misappropriation, that would most certainly exemplify the power of trade secrets. That said, all too often trade secret litigants are unable to establish that they in fact hold "trade secret" IP, in that the owners have not taken all necessary steps to preserve their trade secrets, and/or they cannot adequately articulate exactly what technology comprises a trade secret. That is why securing patents on innovative machine learning and artificial intelligence technologies is a critical strategy in protecting what are often some of the most valuable corporate assets. To the extent a trade secret misappropriation case cannot ultimately be made, IP owners may still win the battle with a patent infringement action.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Practice Guides
by Mondaq Advice Centers
Relevancy Powered by MondaqAI
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions