PRESS RELEASE DETAIL


Mar 05, 2009

Using Sophisticated Theft and Fraud-Detection Tools, CoStar Group Protects Legitimate Customers by Catching and Prosecuting Passcode Sharers, Recovering Just Under $2 Million in 2008

2009-03-05 2009 Using Sophisticated Theft and Fraud-Detection Tools, CoStar Group Protects Legitimate Customers by Catching and Prosecuting Passcode Sharers, Recovering Just Under $2 M...</h4> <p><root> <ReleaseDate>2009-03-05</ReleaseDate> <archiveYear>2009</archiveYear> <Title>Using Sophisticated Theft and Fraud-Detection Tools, CoStar Group Protects Legitimate Customers by Catching and Prosecuting Passcode Sharers, Recovering Just Under $2 Million in 2008

Print Release (pdf) 

BETHESDA, Md., March 5, 2009 -- CoStar Group, Inc. (Nasdaq:CSGP), the number one provider of information/marketing services to the commercial real estate industry, announced today that its ongoing efforts to detect and prosecute unscrupulous firms and individuals who attempt to access CoStar's copyright-protected information and images illegally have proven highly effective. In 2008 alone, CoStar filed seven lawsuits and recovered approximately $1.8 million in back fees and new licensing revenues from more than 100 different companies engaged in passcode misuse and data theft.

"CoStar is committed to protecting our properly licensed subscribers from those who engage in this illegal activity," said Jonathan Coleman, CoStar's General Counsel. "Allowing an unauthorized person to use your passcode to obtain access to CoStar's subscription-based services is not 'sharing,' it's a crime."

Data theft remains one of the biggest obstacles that information companies such as CoStar face in controlling costs. "Unfortunately, dealing with losses from theft is something that every business must address," continued Coleman. "Rather than passing on that cost to the thousands of legitimate customers who license our products, we prefer to prosecute those few who resort to theft in an attempt to illegally benefit from CoStar's information. Fortunately, the technology available today makes it increasingly easy to detect theft and identify those who engage in illegal passcode sharing."

CoStar Group established its antipiracy team in 2007 and developed state-of-the-art software technology to monitor its online information products for passcode misuse and unauthorized access. When unlawful activity is detected, the antipiracy unit conducts investigations and brings legal action against those engaged in illegal practices. CoStar has also begun to work cooperatively with federal law enforcement agencies seeking to prosecute data theft.

According to Coleman, "Just as Wal-Mart and other bricks-and-mortar stores prosecute shoplifters, we will aggressively pursue criminal penalties against individuals who steal CoStar's data. Indeed, certain violations of both the Computer Fraud and Abuse Act as well as federal copyright law are felonies punishable by hefty fines as well as imprisonment for up to 10 years."

In March 2008, CoStar filed the first of several lawsuits based on evidence gathered by its antipiracy team. In that action, CoStar Realty Information, Inc. et al. v. Mark Field d/b/a Alliance Valuation et al., CoStar sought to break up a multi-year, multi-state conspiracy led by Mark Field. CoStar alleges that Mr. Field, doing business as Alliance Valuation based in San Clemente, CA, created what was, in effect, an organization whose entire business was dedicated to the purpose of obtaining and re-selling CoStar access to many different parties, including co-defendants Pathfinder Mortgage and Lawson Valuation Group. In addition, one of the defendants, Russell Gressett, also faces allegations that he resold access to CoStar's highly valuable information on nationwide comparable sales.

"Due to the extent and egregious nature of the fraud perpetrated by Mr. Field and his co-defendants, CoStar's complaint includes alleged violations of the Computer Fraud and Abuse Act, in addition to breach of contract, copyright infringement, and fraud claims," stated Coleman. As a result, CoStar is seeking more than $10 million in statutory damages, an amount that may increase as the full extent of the defendants' unlawful activities are uncovered.

Following the filing of the Alliance Valuation lawsuit, CoStar filed a number of additional lawsuits, keeping up a pace of aggressive enforcement. In all, CoStar filed seven different lawsuits during 2008, including the following:

1. CoStar Realty Information, Inc. et al. v. ADS Construction and Polimeni International, LLC.  In this lawsuit, CoStar alleged that Polimeni International, LLC, a Long Island, NY-based commercial real estate firm and a previous CoStar subscriber, had one of its employees pose as a representative of ADS Construction in order to obtain a single-user CoStar license at a fraction of the cost Polimeni would pay. CoStar further alleged that Polimeni immediately began using this fraudulently obtained license for its own benefit in violation of CoStar's standard license terms and conditions as well as in violation of the copyright law.

2. CoStar Realty Information, Inc. et al. v. Copier Country and Dumann Realty.  In a case similar to ADS Construction, CoStar alleged that Dumann Realty, a New York City real estate services company, cancelled its multiple-user CoStar subscription, but then surreptitiously arranged for Copier Country to obtain a low-cost two-user CoStar license, which Dumann Realty then used for its own benefit.

3. CoStar Realty Information, Inc. v. Klein & Heuchan, Inc. et al. Klein & Heuchan, Inc., a Florida-based real estate firm, allegedly used the CoStar passcode of an employee who previously worked for a legitimate CoStar subscriber to access CoStar's information illegally after the employee was hired by Klein & Heuchan and repeatedly used CoStar's information for Klein & Heuchan's benefit.

4. CoStar Realty Information, Inc. v. Robin Meissner d/b/a Twinkle Appraisal et al.  In this action, CoStar alleges that Robin Meissner, a commercial appraiser based in the Tucson, Arizona area, acquired a CoStar single-user license under false pretenses and then proceeded to share her user name and passcode with one or more third parties.

5. CoStar Realty Information, Inc. v. Bill Jackson Associates, Inc. et al.  CoStar alleges that Bill Jackson, on behalf of his real estate appraisal firms, obtained unlawful access to a CoStar user name and passcode assigned to a third party, Bolton & Baer, and then used that CoStar access for his own gain.

According to Coleman, all of the above cases were discovered and, ultimately, filed as a direct result of the extensive fraud-detection technology CoStar deploys to continually monitor its online information products and to detect and prevent unauthorized access.

In addition, CoStar has enlisted its customers' help in reporting suspected cases of data theft by establishing a sizable reward program for anyone who reports unlawful sharing of passcodes or access to CoStar's information services that results in successful prosecution.

Under the reward program, CoStar is prepared to share up to 25% of any net monetary settlement agreement resulting from that prosecution. CoStar has set up a web site, www.costar.com/SpecialPrograms/Antipiracy.aspx , aimed at educating customers about the use of CoStar data and photographs as part of their online subscription service, as well as offering them the chance to report anonymously any theft or fraud they observe.

Finally, CoStar announced today that it had received a favorable ruling in an arbitration proceeding against a former CoStar account executive, Fran Youngstrom, who attempted to license CoStar's services to one of CoStar's competitors. The ruling requires Ms. Youngstrom, who was terminated as a result of her conduct, to disgorge the commission she received on the sale and pay back the salary she earned during the time she was making the sale, as well as pay interest and CoStar's attorney's fees incurred as a result of pursuing its claims against her.

"CoStar's vigorous prosecution of its case against Ms. Youngstrom shows the depth of CoStar's commitment to protecting and preserving the value of its proprietary database," Coleman said. "CoStar will not hesitate to prosecute those who steal or allow others to steal CoStar's data."

About CoStar Group, Inc.

CoStar Group, Inc. (Nasdaq:CSGP) is the number one provider of information/marketing services to commercial real estate professionals in the United States as well as the United Kingdom. CoStar's suite of services offers customers access via the Internet to the most comprehensive database of commercial real estate information throughout the U.S. as well as in the United Kingdom and France. Headquartered in Bethesda, MD, CoStar has approximately 1,300 people working for the company worldwide, including the largest professional research organization in the industry. For more information, visit http://www.costar.com .

This news release includes "forward-looking statements" including, without limitation, statements regarding CoStar's expectations, beliefs, intentions or strategies regarding the future. These statements are subject to many risks and uncertainties that could cause actual results to differ materially from these statements. More information about potential factors that could cause actual results to differ materially from those discussed in the forward-looking statements include, but are not limited to, those stated in CoStar's filings from time to time with the Securities and Exchange Commission, including CoStar's Form 10-K for the year ended December 31, 2008, under the heading "Risk Factors." In addition to these statements, there can be no assurance that CoStar will be able to continue to recover amounts equal to or on par with those recovered in 2008; that the costs of data theft will not be passed on to legitimate customers; that technology will enable CoStar to detect and identify all illegal passcode sharing; that CoStar will always aggressively pursue criminal penalties against individuals that steal its data or be able to keep up its pace of aggressive enforcement; that CoStar will be successful in the Alliance Valuation lawsuit or other lawsuits mentioned in this release; that CoStar will be awarded the damages it seeks in each of the lawsuits mentioned in this release or in any future lawsuit filed to protect CoStar's data; and that CoStar will successfully prosecute all persons who steal or allow others to steal CoStar's data. All forward-looking statements are based on information available to CoStar on the date hereof, and CoStar assumes no obligation to update such statements.
'