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In a complaint, filed Friday, one company is alleging a former employee took screen shots of trade secrets, including proprietary wireframes and a proposed regional launch timeline of its services, before leaving for another real estate technology competitor.
We may not hear much about the real estate technology industry in day-to-day life but that doesn’t mean its any less cut-throat than the real estate industry itself.
As realtors compete in a constantly in flux market, many companies have embraced technology to take some of the legwork out of the experience for buyers and sellers alike. While some apps allow house hunters to do virtual walk throughs of homes, other apps are based around personalization schemes that allow companies to key in on what clients are really looking for in a home.
None of this is possible without confidential, proprietary trade secret information however; complex personalization algorithms and machine learning technology used to analyze and organize housing market data. Tools like this can considerably aid in a company’s competitive advantage.
Zillow Group, a leader in the field, alongside services like Realtor.com and Redfin, is alleging one of its own, Robert Chen, at one point a high-level machine learning employee, recently stole some of this data - proprietary wireframes and a regional launch timeline regarding some of its services - before resigning and eventually joining a competitor, Compass.
The company filed two complaints - one in federal court and another in The United States District Court for the Western District of Washington - against the company, Urban Compass, Inc., on Friday.
Chen, who served as the company's Senior Director of Machine Learning until just last month, was responsible for developing the technology until accepting a role at Compass, another service that specializes in real estate listings for buyers, sellers, and renters online. While Chen's LinkedIn profile hasn't been updated to reflect his employment at Compass, that runs counter to the lawsuit, which claims he's one of several of Zillow employees to leave the company to join Compass, "taking Zillow trade secrets in the months, days and hours before their departure."
According to the complaint, which calls the incident "calculated theft," Chen took screen shots of data, then deleted it in the weeks before his departure from the company. On his last day at Zillow, Chen purportedly deleted his browser history, then viewed a job posting for Machine Learning Engineers at Compass.
"On information and belief, Mr. Chen misappropriated Zillow’s proprietary trade secret information for the benefit of Compass by, among other things, using this information in his new role at Compass to provide Compass with valuable machine learning technologies that it could not develop, purchase or lawfully gain by engaging in lawful business practices,” the complaint reads.
The company says in the complaint that its put valuable resources into its machine learning and search relevance technology. Some of its services, like "Claim Your Home and Personalization" and "Zestimate®" rely on an extensive database of 110 million homes in the U.S. From this, the Zestimate tool, for example, computes a valuation of a home via a proprietary formula, something which can be used to inform models and other values the company uses.
The complaint hinges on what Zillow claims is a direct violation of an agreement, a Confidential Information, Inventions, Non-Solicitation and Non-Competition Agreement (CIINNA), that Chen signed. When Chen took data from Zillow's servers and transferred it to his personal email without permission, Chen broke that agreement, the company alleges.
Zillow claims it has "well-developed internal policies" designed to ensure that its proprietary technologies remain confidential but didn't elaborate in the complaint what those might be. While there are data protection solutions that allow network admins to prevent suspicious behavior, like capturing of screen shots, from being carried out, it's unclear if they were deployed at Zillow. In any case, it appears the CIINNA alone wasn't enough to prevent Chen from taking sensitive data from the company.
Zillow alleges this is the latest in a "systematic, unlawful campaign" by Compass to target its trade secrets. Aside from the data theft, the complaint claims Compass has been poaching talent, including the recent hires of Michael Hania, an enterprise sales executive; and Chester Millisock Jr., a software engineer. Zillow claims the hirings came as a result of Compass' recent expansion to Seattle, home to Zillow's headquarters.
“Compass actively recruited these employees in order to avoid the costs associated with open and honest competition and to obtain Zillow’s confidential and proprietary information,” court filings allege.
Compass, for what its worth, rebuked the lawsuits. In a statement it provided to publications following the news Friday, it denied it even competes with Zillow:
“You cannot break a non-compete by leaving to go to a company that does not compete with you. With hundreds of engineers and hundreds of sales people, it’s unfortunate that losing three individual contributors would result in using scare tactics to intimidate current employees from leaving. Compass has never asked and would never accept any trade secrets. A number of years ago Compass abolished non-competes for anyone that we hired as we believe that people should work at Compass because they want to, not because they are forced to.”
It's not the first trade secrets case to involve Zillow. The company paid Move, Inc., a real estate listing company that owns Realtor.com, $130M in 2016 to settle a lawsuit that Errol Samuelson, formerly Move's chief strategy officer, stole trade secrets before joining Zillow in 2013. Zillow never admitted liability and both parties went on record at the time that they were content to have the litigation behind them.