Legal
Do MLSs Really Own Their Database?by Robert D. Butters
Many MLS Chief Executives may be shocked that this question could even be asked--particularly since many MLSs have entered into agreements with Website operators, automated property valuation software companies, and others to license access to their respective MLS databases. Notwithstanding the assumption of most MLSs (and the National Association of REALTORS®) that the MLSs "own" their databases, this ownership interest is hardly free from doubt. Others who may have claims of "ownership" in an MLS database include listing brokers, sellers, computer software vendors, and the general public.
In a sense, all of these persons or organizations have legitimate claims of "ownership" to some component that is necessary for an MLS to function. Sellers own the real estate that is offered for sale through the MLS. Data about a property for sale cannot be entered into an MLS database unless a seller gives consent in the listing agreement.
Listing brokers in turn own the listing agreement that entitles them to earn a fee if the property is sold during the listing term. As the seller’s designated exclusive marketing agent, listing brokers have the right and duty to determine how the property will be promoted to the market, including placing data about the property in an MLS database. Furthermore, it is the listing brokers, or their staff, who actually enter the data into the MLS database and update the data as listing prices change, listings expire, are sold, or are extended.
Most MLSs actually "own" very little in terms of tangible assets. They therefore depend upon vendors to supply the computer hardware on which the data in a central computer database is stored. These vendors also create software that instructs the computer hardware how to store the data, and retrieve and display the data when a user requests a data search. As a result, MLS data cannot be entered into or extracted from a database except by accessing the computer hardware and software owned by these vendors. Some vendors have been heard to assert that they "own" the MLS database because it is stored on hardware, and is manipulated by software, that these vendors own.
The actual "data" in the MLS database is, however, primarily data about the physical characteristics of the property for sale. The same data is typically available from records of government agencies such as tax assessors. Data compiled by government agencies is considered to be in the public domain, and, therefore, not owned by anyone, or, alternative, equally available to everyone.
Despite not owning any of the elements necessary to create a functioning MLS, an association of REALTORS® or an MLS corporation does indeed own a valuable asset in its MLS database. While others may own the individual components that must exist for an MLS to function, the MLS organization expended the time and money to create and operate the MLS. By having done this, the MLS has the right to control access to its "asset," i.e., its database.
This power to control access can be exercised by entering into access agreements (or contracts) with others that can be enforced if breached. By having a product or service that others want, the MLS can set the terms on which the product or services will be made available. These terms are enforceable contracts that establish price, and, if properly drafted, can limit the user’s access to the database, and prohibit the user from granting unauthorized access to others.
MLSs also have proprietary rights in their databases that are protectible by the federal Copyright Act. The federal Copyright Act grants exclusive rights to "authors" of "works" to control the copying and distribution of their works. A "work" must reflect "creativity" and "originality" to be protectible under the Copyright Act.
An MLS must make decisions about what data about a property will be included in its database. These decisions are acts of "creativity" that the federal Copyright Act will protect. A copyright right in turn entitles its owner to decide who may, and who may not, copy the copyrighted "work."
MLS Chief Executives, therefore, need not update their resumes. MLSs really do have an economic asset in their MLS databases that they can exploit through licensing agreements with third parties. They have this asset even though the MLS does not own the real estate for sale, the listing agreement through which the property is offered for sale, the computer hardware and software that operate the database, or the individual pieces of data that are stored in the database.
But this asset, like any other asset, can be lost if not properly protected. MLSs must be vigilant that all vendor contracts, licensing agreements, and other contracts granting access to the MLS database properly define the proprietary rights that the MLS actually possesses in its database. MLSs must further insure that the contract provisions that assert their proprietary rights in their databases are fully enforceable under applicable state and federal law.
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Robert D..Butters. All right reserved. For information contact Frog Pond at 800.704.FROG(3764) or email susie@frogpond.com.
