Intellectual Property Protections Necessary for Innovation

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Bonnie Arbittier / Rivard Report

Ricardo G. Cedillo writes that last year's jury verdict against Amrock protects a San Antonio company.

On July 1, Councilman Manny Pelaez published a commentary about a verdict against his client, Amrock, formerly known as Title Source. Not only does Pelaez get paid by Amrock – a company based in Michigan – which lost a jury case here in San Antonio to HouseCanary, he omits that the victim of Amrock’s conduct, HouseCanary, sits in his district.

The verdict that a unanimous San Antonio jury returned last year is not a threat to innovation and technology, as Pelaez suggests, but a rejection of Amrock’s fraud and a robust defense of intellectual property protections. Failing to punish fraud and preserve these safeguards would result in far greater costs to the American economy and to entrepreneurs hoping to manifest their dreams. And in this case, the jury’s finding protects a local San Antonio business. 

According to the U.S. Department of Commerce’s International Trade Administration, “intellectual property protection is critical to fostering innovation.” If companies did not have intellectual property protection, they would not have the freedom to focus on research and development and “would not reap the full benefits of their inventions.” Protecting intellectual property is also a cultural issue, as “artists would not be fully compensated for their creations and cultural vitality would suffer” in a society that didn’t prioritize intellectual property protection. Trade secrets are a valuable piece of the intellectual property landscape, allowing companies to rely on the efforts they have made to keep valuable advancements a secret from competitors and protecting those companies from unscrupulous competitors willing to illegally cut corners.

Amrock, a real estate appraisal company that is part of the Quicken Loans family, recognized early on that HouseCanary had valuable trade secrets in the form of automated valuation models to value real estate. Amrock entered into numerous contracts with HouseCanary to use these valuation models and agreed to strict intellectual property protections that included promises not to reverse engineer or build competing products using HouseCanary’s technology. Yet Amrock did all of those things and even tried to cover it up. 

Amrock intentionally kept HouseCanary in the dark about its misconduct and even pressured HouseCanary to accept an amendment that would have given Amrock a get-out-of-jail-free card for all of its prior wrongdoing. HouseCanary refused to buckle to pressure and discovered Amrock’s true motivations during the lawsuit.  

Amrock’s internal emails revealed that Amrock managers instructed employees to copy HouseCanary’s property. Another email with the subject line “The usage of HC data (modeling)” laid out detailed plans on how Amrock would use HouseCanary’s data, including how the company would build their own products once it had “significant enough data” to develop its own home valuation model (HVM), similarity score model, and complexity score model.

For a year of the case, Amrock witnesses testified under oath that the company never built its own automated valuation model (AVM). That changed when HouseCanary found an internal meeting where Amrock employees were promoting an Amrock automated valuation model to other Quicken Loans companies.

The jury saw all of Amrock’s secret documents and heard Amrock’s witnesses stumble as they tried to explain why the company denied the existence of its AVM for months. The jury’s unanimous verdict found willful trade secret misappropriation, fraud, and breach of contract. 

Pelaez’s allegations that HouseCanary had no trade secrets to steal in the first place are plainly false. After the trial, Amrock scrounged up “new” witnesses during the appeals process. (None of these witnesses were actually new; they were all on Amrock’s witness list for the trial, but they were not called to testify.) Each of these individuals also just happened to have financial and professional dependencies on Amrock and its affiliate, Quicken Loan. These “whistleblowers” presented no evidence to support any of their allegations following the trial. And not a single witness came forward to deny that Amrock had stolen HouseCanary’s inventions.  

Pelaez also implies that HouseCanary chose Bexar County as a venue for the trial. Although HouseCanary has had an established office in San Antonio for years — which is helmed by one of the company’s co-founders and is HouseCanary’s headquarters for research — in this case, Amrock filed the lawsuit in San Antonio. Pelaez also refers to “patent trolls,” when the trial involved trade secrets – not patents at all.  

It’s not surprising that Amrock is doing everything it can to evade responsibility for its fraudulent behavior toward HouseCanary and cavalier treatment of intellectual property in general. But the legal system has consistently sided with HouseCanary because intellectual property theft must be taken seriously. 

Our economy is driven by innovative companies that create new products and services that can be developed and marketed – that’s as true for Apple or Microsoft as it is for HouseCanary. Strong intellectual property protections ensure that entrepreneurs and innovators get the benefit of the technologies and products they create and have the ability to continue creating and innovating. To be effective, these intellectual property protections must be backed up by a fair and appropriate judicial process that holds bad actors accountable. The jury in this case did the right thing, and attempting to distort the record after the fact won’t get Amrock off the hook for its behavior.

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