When the coronavirus pandemic arrived in North America two years ago, door-to-door sellers and their agents had to pivot harshly.
Because in-person home visits suddenly became banned in many places, the industry collectively began to invest in virtual technology that would give consumers a glimpse of homes without actually setting foot inside. And one of the big winners of this pivot was floor plans. They were suddenly all over the real estate ads.
But now, even as this pivot becomes entrenched in the fabric of the industry, an ongoing lawsuit poses a provocative question: What if the floor plans were copyrighted, meaning the owners and their agents could be prosecuted for sharing them?
This issue gained new urgency last year thanks to a decision by the 8th US Circuit Court of Appeals. The case began in 2018 when home designer Charles James and his company Designworks Homes sued several real estate companies that created and shared floor plans for a home he designed. A judge in 2019 ruled in favor of the real estate companies, but last year the Circuit Court of Appeals reversed that ruling and sided with James. The decision indicated that the design of a house should be treated much like a hit pop song; you can’t just record your own copy of a hit song without giving credit and money to the original artist, because it’s protected intellectual property.
Now, however, a handful of players in the real estate industry are backtracking. Among them, the National Association of Realtors released a brief statement late last week suggesting the case could ultimately lead to lawsuits “against homeowners who make or display floor plans of their own homes.”
NAR General Counsel Katie Johnson added that the “court ruling not only exposes countless consumers to costly and time-consuming litigation for drawing up a floor plan of their clean home, but it’s also straining a key sector of the US economy and threatening an essential tool of transparency for potential homebuyers.
The argument in NAR’s brief – which has also been joined by other industry players such as Redfin, Zillow, CoreLogic and other trade groups – is based on a 1976 copyright law that allows people to make images or pictorial representations of architectural works without being prosecuted. The brief goes on to note that many homebuyers rely on floor plans when making decisions about a sale, and that other real estate services such as appraisals sometimes rely on developing a floor plan.
“After buying a home, landlords often make floor plans to help them tackle fixtures, organize furniture, and complete DIY projects,” notes Briefly. “[And] many jurisdictions require owners to submit floor plans before renovating their property.
The Council of Multiple Listing Services (CMLS) filed a similar brief last week opposing the Circuit Court of Appeals decision. In a statement, CMLS argued that the court’s decision to treat floor plans as copyrighted material could impose “millions of dollars in additional costs on consumers and their realtors.” The ruling could also require people to “find the designers or architects of their homes to purchase a license if they want to make informal floor plans of homes part of a listing,” the statement added.
The case has not yet been settled, but it touches on the delicate landscape of intellectual property in the age of digital tools and the Internet. When lawmakers passed the current law in 1976, after all, there was no internet, 3D cameras or real estate portals. This meant that anyone wanting a floor plan would have to hire an architect or draftsman, and then have a limited ability to share that document.
Today, however, anyone with a 3D camera and an hour of free time can create an interactive floor plan. And thanks to sites like Zillow and Redfin, people can share their floor plans with a potential pool of hundreds of millions of people.
In this way, real estate intellectual property can be on the cusp of a moment that took place a decade or two ago in other disciplines. In the late 1990s, for example, websites such as Napster took the concept of creating mixtapes – technically illegal, but widely accepted – and launched it on the Internet. The moment revolutionized music sharing, but ultimately led to lawsuits, crackdowns, and finally a world where most people pay for their music.
Similarly, in the early days of Netflix, there were questions about whether or not streaming a movie online was like offering a physical copy of that tape for rent at a physical store. Netflix wanted to make the global film library available online, but the film industry backed down and won. Today, online streaming services have to pay high license fees for content, or just create their own. Some movies — as Inman recently learned — just aren’t available to stream anywhere.
The point here is that the past few decades have raised many questions about what should and should not be protected by intellectual property in the age of the Internet. And in particular, these questions were not resolved at the start of the various disputes.
Real estate could be hitting a similar inflection point right now, with new technologies raising new questions about what should and shouldn’t be considered protected intellectual property.
Despite last year’s decision, the case is still unresolved and NAR and other industry players are asking the US Supreme Court to overturn the lower court’s decision. They say floor plans are just too important to real estate consumers, with NAR’s statement pointing to a report that “about two-thirds of homebuyers rated floor plans as ‘very helpful’ in the online home buying process, ranking behind only ‘photos’ and ‘detailed property information’ as their most valuable resources.”
“In fact, floor plans are so important to the average American consumer making one of the most important decisions of a lifetime,” the statement added, “that this category ranks ahead of other resources. key educational events and disclosures such as ‘neighborhood information’, ‘virtual open houses’ and price data on recently sold local homes.
Read NAR’s full brief here:
Update: This post has been updated after posting with additional information from submissions filed by entities in the real estate industry.
Email Jim Dalrymple II