Zillow v. Compass (Fed.)

Case 2:19-cv-00592 Document 1 Filed 04/19/19 Page 1 of 29
7 UNITED STATES DISTRICT COURT

WESTERN DISTRICT OF WASHINGTON
8 AT SEATTLE
9 ZILLOW, INC., a Washington corporation,

No.:
10 Plaintiff,
COMPLAINT
11 v.
12 URBAN COMPASS, INC., a Delaware

corporation, COMPASS WASHINGTON,
13 LLC, a Delaware limited liability company,
and ROBERT MING-YU CHEN, an
14 individual,
15 Defendants.
16
17 Plaintiff Zillow, Inc. ("Plaintiff" or "Zillow") by and through its attorneys, and for its
18 Complaint against Urban Compass, Inc.; Compass Washington, LLC (collectively, "Compass");
19 and Robert Ming-Yu Chen, hereby alleges as follows:
20 I. INTRODUCTION
21 1. This is an action for trade secret misappropriation and breach of contract relating
22 to several of Zillow’s highly sophisticated technology innovations. As a technology pioneer,
23 Zillow strongly believes in the benefits of fair and active competition in the technology-driven
24 residential real estate industry to drive innovation and to transform the ability of millions of
25 people to access information that historically was only available to a select few. However, what
26 happened here goes well beyond competition and instead constitutes unlawful business practices.
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1 2. Compass incited Robert Chen to breach his employment agreement with Zillow to
2 work for Compass so Compass could then use him to obtain Zillow's proprietary trade secret
3 information. This calculated theft was designed by Compass to help it better compete with
4 Zillow in the marketplace, at Zillow's expense, and so Compass could avoid the expense of
5 independently developing valuable machine learning and other technologies.
6 3. This is not the first time Compass implemented this business model of luring
7 employees away from competitors in violation of their employment contracts and then extracting
8 proprietary information from them. In fact, this is a well-trodden path for Compass. There have
9 been over a dozen lawsuits filed against Compass within the past five years that contain
10 allegations of Compass's efforts to incite theft of proprietary trade secret information. Compass
11 allegedly has gone so far as to: (a) hack into the databases of competing real estate companies;
12 (b) conscript its competitors' employees to act as double agents; and (c) falsely express interest in
13 purchasing its competitors to gain access to proprietary information.
14 4. Emerging from this trail of lawsuits, Compass now directs its attention to Zillow's
15 revolutionary machine learning and user preference prediction and customization technology in
16 an effort to improve its website’s search relevance capabilities. In December 2018, Compass
17 publicly announced the launch of a product and engineering hub in Seattle to directly compete
18 with Zillow in the highly competitive technology sector focused on simplifying the home buying
19 and selling process. It then initiated a campaign to recruit Zillow employees.
20 5. A limited number of important Zillow employees left Zillow to join Compass,
21 taking Zillow trade secrets in the months, days and hours before their departure in violation of
22 their employment agreements. These secrets included confidential, highly technical information
23 which reflects the results of years of resource-intensive work. Compass actively recruited these
24 employees to obtain this proprietary trade secret information. Defendant Chen is one of these
25 employees.
26
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1 6. Chen used improper means to take proprietary trade secret information from
2 Zillow prior to his departure and for the benefit of Compass. He acted in violation of his
3 employment agreement with Zillow by initiating work at Compass. Compass hired him because
4 the nature of his job, and the proprietary information he gained at Zillow renders it inevitable
5 that he will disclose this proprietary information to Compass in his role.
6 7. Compass and Chen stole Zillow's proprietary trade secret information and
7 continue in their efforts to steal this information, so Compass can avoid the effort and expense of
8 building its own technology. This is yet another example in Compass’s long history of making
9 systematic efforts to compete through misappropriation.
10 8. In light of Defendants' misconduct, Zillow brings this Complaint to prevent any
11 further misuse and misappropriation of Zillow's confidential, proprietary and trade secret
12 information and to obtain compensation for its damages and for Defendants' unjust enrichment
13 resulting from their unlawful conduct.
14 II. PARTIES
15 9. Plaintiff Zillow is a Washington corporation with its principal place of business
16 in Seattle, Washington. Zillow operates the website, www.zillow.com (the "Zillow Website"),
17 and the Zillow mobile application (the "Zillow App"), which provide a real estate marketplace
18 dedicated to helping homeowners, home buyers, sellers, renters, real estate agents, mortgage
19 professionals, landlords and property managers find vital information about residential real
20 estate, including homes for sale, rental properties and mortgages. Zillow also offers a range of
21 direct services to help consumers buy, sell, rent or finance their home, among other products and
22 services.
23 10. Defendant Compass Washington, LLC, is a Delaware limited liability company
24 with a principal place of business in Seattle, Washington. Compass Washington, LLC, like
25 Zillow, operates online real estate services. In an effort to better compete with Zillow, Compass
26 offered employment to Defendant Chen, knowing that he would be in breach of his Confidential
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1 Information, Inventions, Non-Solicitation, and Non-Competition Agreement ("CIINNA") with
2 Zillow.
3 11. Defendant Urban Compass, Inc., is a Delaware corporation with a principal place
4 of business in New York, New York. Urban Compass, Inc., like Zillow, operates an online real
5 estate service, and has recently sought to expand its business, in part, by offering employment to
6 employees of its competitors, including Defendant Chen.
7 12. Defendant Robert Ming-yu Chen, on information and belief, is a resident and
8 citizen of Washington State. Until March 2019, Mr. Chen served as the Senior Director of
9 Machine Learning at Zillow and was primarily responsible for the development and
10 implementation of Zillow's machine learning technology. He now accepted a position at
11 Compass as its Director of Engineering in Seattle, Washington, with largely identical
12 responsibilities to those he had at Zillow.
13 III. JURISDICTION AND VENUE
14 13. This Court has subject matter jurisdiction over Zillow's federal trade secret claim
15 pursuant to 18 U.S.C. §§ 1836-39 et seq., 28 U.S.C. §§ 1331 and 1343. The Court has
16 supplemental jurisdiction over the state law claims alleged in this Complaint pursuant to 28
17 U.S.C. § 1367.
18 14. This Court has personal jurisdiction over Defendant Compass Washington, LLC
19 because it has engaged in substantial business activities in and directed to this district, is
20 registered to do business in this district and because the misappropriation of trade secrets alleged
21 herein took place, in substantial part, in this district.
22 15. This Court has personal jurisdiction over Defendant Urban Compass, Inc. because
23 it has engaged in substantial business activities in and directed to this district, and is responsible
24 for and/or has directed the activities of Defendant Compass Washington, LLC, which is
25 registered to do business in this district.
26
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1 16. This Court has personal jurisdiction over Defendant Chen because he consented
2 to jurisdiction in this district by executing and agreeing to the terms of Zillow's CIINNA,
3 engaged in substantial activities in and directed to this district during his term of employment
4 with Zillow, and because the breach of contract, breach of fiduciary duty and misappropriation of
5 trade secrets alleged herein took place, in substantial part, in this district.
6 17. As set forth above, at least one Defendant resides in this judicial district. In
7 addition, a substantial part of the events or omissions giving rise to the claims alleged in this
8 Complaint occurred in this judicial district. Venue therefore properly lies in this Court and the
9 Western District of Washington, pursuant to 28 U.S.C. §§ 1391(b)(1) and (2).
10 18. Moreover, the Court has jurisdiction over this matter and venue is appropriate in
11 this district because Zillow's business is located in and operated from this district and a
12 substantial portion of the events giving rise to the present suit took place in this district.
13 IV. FACTS AND BACKGROUND
14 A. Zillow Transforms the Real Estate Marketplace
15 19. Zillow was founded in Seattle, Washington in 2004 and quickly transformed the
16 real estate marketplace. It was the first company to recognize the transformative potential and
17 commercial value of democratizing consumer access to information related to real estate. It has
18 retained its status as an industry leader through its investment in its highly sophisticated
19 technology innovations such that it is known across the country for its state-of-the art real estate
20 marketplace, available through the Zillow Website and the Zillow App.
21 20. The Zillow Website and Zillow App provide users with information and data
22 related to real estate that previously was available to only a select few. This information includes
23 available home sales, rentals, real property transaction history, current price estimates, home
24 details, relevant matches, similar home sales data, neighborhood information and tax
25 information, among other categories.
26
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1 21. Zillow's portfolio of websites and mobile applications displays information on
2 over 100 million homes in the United States and receives nearly 180 million unique visitors per
3 month. Zillow distinguishes itself in the real estate technology industry by offering an
4 unparalleled user experience, driven in part by the company's commitment to effective search
5 relevance engineering.
6 22. Search relevance and user personalization engineering is a critical component of
7 the machine learning that has been responsible for the success of the Zillow Website and the
8 Zillow App because it is the vehicle through which users receive search results and related
9 information which may be of interest to them. Zillow has invested and continues to invest
10 considerable resources in developing this technology due to the complexity of the algorithms
11 needed to accommodate the multitude of variables impacting residential real estate search,
12 including price, size, house type, bedroom counts, bathroom counts and neighborhood features.
13 23. Notably, Zillow developed search relevance and user personalization
14 technologies, including Personalization Algorithms, to vastly improve the consumer experience
15 by tailoring search results and related information presented to users. This work resulted in a user
16 experience that is vastly superior to that of any Zillow competitor. The Personalization and
17 Relevance team within Zillow's Artificial Intelligence group (formally known as Data Science
18 and Engineering) is responsible for developing and implementing the Personalization Algorithms
19 across various products. Defendant Chen was a member of this team and was involved in the
20 development of these confidential, proprietary and trade secret technologies for Zillow.
21 24. Zillow's Similar Home Recommendation System uses Personalization
22 Algorithms, in part, to obtain user-item engagement data, such as implicit user feedback (e.g.,
23 clicks and saves), to determine whether two homes are similar and to make recommendations to
24 Zillow users regarding homes in which they might be interested.
25
26
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1 25. As such, Zillow's confidential and proprietary machine learning algorithms and
2 models, used to analyze, organize and effectively provide market data to Zillow's clients, form
3 the cornerstone of Zillow's success.
4 26. Zillow has made substantial financial investments in the development and
5 confidentiality of these machine learning algorithms and its other trade secrets. Zillow also has
6 taken significant measures to maintain the confidentiality of its proprietary trade secret
7 information. For example, in addition to well-developed internal policies designed to ensure that
8 Zillow's proprietary technologies remain confidential, Zillow employees with access to
9 confidential information are required to sign a CIINNA, precluding them from: (1) using,
10 disclosing, publishing or distributing any confidential Zillow information; (2) removing any
11 confidential materials from Zillow; (3) otherwise disclosing any Zillow confidential information;
12 and/or (4) seeking similar employment with competing businesses for a period of at least twelve
13 months after the conclusion of their employment with Zillow.
14 27. Zillow implemented its machine learning and search relevance technology across
15 a variety of tools available on the Zillow Website and the Zillow App including: (a) Claim Your
16 Home and Personalization; (b) Similar Home Recommendation; (c) Zestimate®; and (d) Premier
17 Agent® Analytics.
18 1. Claim Your Home and Personalization
19 28. Zillow maintains a database of 110 million homes in the United States, which
20 includes information regarding financial data, architectural data and available photos or videos of
21 the home. In order to provide and update that information, Zillow relies on data imported from
22 county record-keeping entities, brokers, multiple listing services and homeowners themselves
23 through a feature known as Claim Your Home. This feature allows a homeowner, after
24 verification, to update information about their home as shown below:
25
26
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8 The Claim Your Home feature is used to improve the accuracy of the Zillow estimated home
9 value, or Zestimate®.
10 29. The Claim Your Home feature implements Zillow's proprietary trade secret
11 machine learning application to: (1) predict the likely owner of a home; (2) ask that the
12 homeowner claim their home with Zillow; and (3) allow them to update property information
13 with additional information about their home. The result has been an increase in homes claimed
14 by homeowners across the United States, as well as unique property content unavailable to
15 Zillow's competitors.
16 2. Similar Home Recommendation
17 30. Zillow also offers its users access to its unique and proprietary Similar Home
18 Recommendation system, which alerts users to homes of interest. When a user selects a home of
19 interest, the Zillow Similar Home Carousel enables users to directly explore related listings on
20 Zillow as illustrated below:
21
22
23
24
31. Zillow invested considerable resources in machine learning to develop this search
25
feature. A home can be compared to another by location, price, size, house type, bedroom
26
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1 counts, bathroom counts and neighborhood features. Homes also can be compared by listing
2 description or by photograph. Moreover, each of these comparison factors may be of varying
3 import based upon the individual comparing the home or their location. For example, an
4 additional 200 square feet of living space may be more significant in a densely populated urban
5 area versus a less-densely populated suburban area. To provide a meaningful comparison of each
6 of these elements, Zillow implemented a machine-learning based model that has vastly increased
7 user engagement in comparison to the less sophisticated systems of its competitors.
8 3. Zestimate®
9 32. Zillow's Zestimate® service is a real estate valuation tool that provides users with
10 an estimate of a home's value. The valuation is computed using Zillow's proprietary formula
11 which was one of Zillow's first-ever implementations of machine learning technology. Zillow's
12 development of the Zestimate® service was innovative and helped to democratize the real estate
13 market. It allows consumers to access data which previously was reserved only for real estate
14 professionals.
15 33. Prior to Zillow's implementation of the Zestimate® service, consumers could only
16 assess home value based on a single data source, the seller's sale price. At that time, only
17 industry professionals could access additional, independent valuation data. Zillow uses hundreds
18 of models, including linear models, decision trees and deep learning, to evaluate economic data,
19 housing data and property characteristics. Using these models, Zillow is able to predict values for
20 nearly every home in the country with a current median error rate of approximately five percent.
21 34. The sophistication and accuracy of the Zestimate® feature made it the industry
22 leader and provided Zillow with a number of competitive advantages. It increased traffic to the
23 Zillow website and provided Zillow with a first-mover advantage such that Zillow can, for
24 example, use data previously collected through the Zestimate® service to assess the likely change
25 in an individual property's Zestimate® over the next 12 months.
26
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1 4. Premier Agent® Analytics
2 35. Zillow's implementation of its machine learning and search relevance
3 technologies is not limited to the consumer-facing portions of its platform. Zillow also offers a
4 number of services to and for real estate agents through its Premier Agent® Analytics service.
5 36. Agents who advertise with Zillow are called Premier Agents. They receive access
6 to multiple integrated tools to increase productivity and foster client relationships. They also
7 receive branding and exposure across Zillow's online and mobile real estate network and appear
8 prominently when home shoppers are searching. An example of the Premier Agent® services
9 function is provided below:
10
11
12
13
14
15
16
17
18 37. The Premier Agent® service uses artificial intelligence and Zillow's machine
19 learning algorithms to allow agents to make home recommendations to their potential customers
20 based on past search activity. Zillow's Premier Agent® service provides critical technical and
21 competitive advantages to Zillow.
22 38. The cornerstone of Zillow's success has been its disruptive and innovative use of
23 machine learning algorithms and search relevance engineering. In fact, Zillow is considered a
24 case study on the power of machine learning models and digital innovation.1 Compass is not.
25
1
Michael Krigsman, Zillow: Machine learning and data disrupt real estate, ZDNet (July 30, 2017),
26 https://www.zdnet.com/article/zillow-machine-learning-and-data-in-real-estate/.
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1 B. Compass Competes With Zillow In The Niche Technology-Driven Residential

Real Estate Industry
2
39. Compass was founded in 2012 when Urban Compass, Inc. began operations in
3
New York as a real estate technology company launched by Ori Allon and Robert Reffkin.
4
40. Originally, Compass only focused on rentals in New York City. But within two
5
years, in an apparent course correction, it re-focused on home sales, engaged in multiple rounds
6
of funding and expanded to Washington, DC; Miami, Florida; Boston, Massachusetts; the
7
Hamptons, New York; Cambridge, Massachusetts; Beverly Hills, California; Malibu, California;
8
Pasadena, California; Santa Barbara, California; and Aspen, Colorado. To date, it currently
9
offers its services in 22 cities.
10
41. Compass competes with Zillow in the niche online and mobile technology-driven
11
residential real estate industry. Like Zillow, Compass is a real estate technology company that,
12
among other services, provides real-time national data to potential home buyers and renters both
13
online and through its mobile application.
14
42. Moreover, Compass competes with Zillow in offering productivity tools for use
15
by real estate agents. The effectiveness of these tools is increased by reliance on machine
16
learning and search relevance technologies.
17
43. Like Zillow, Compass's applications assemble data from a wide variety of sources
18
and merges it into one central database, where its algorithms analyze, process and present the
19
information to users. Screen-shots of a Compass application are provided below:
20
21
22
23
24
25
26
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10 44. Like the Zillow Website and Zillow App, Compass's website and mobile
11 application allow users to search real estate listings by neighborhood, number of bedrooms and
12 price range, and also provides more advanced metrics like year-over-year analysis of median
13 price per square foot, days on the market and negotiability.
14 45. A side-by-side comparison of the consumer services offered by Zillow's and
15 Compass's applications is provided below:
16
17
18
19
20
21
22
23 46. Media outlets openly refer to Zillow and Compass as competitors in the online
24 real estate market.2
25 2
Nat Levy, Compass hiring 100 engineers for West Coast hub in Seattle, invading Zillow and Redfin's turf,
GEEKWIRE (Dec. 12, 2018), https://www.geekwire.com/2018/compass-hiring-100-engineers-west-coast-hub-
26 seattle-invading-zillow-redfins-turf/ (referring to the Parties as “real estate rivals”); E.B. Solomont, Who’s
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1 47. Moreover, Compass CEO Reffkin openly refers to Zillow as a competitor,
2 including in meetings with Compass's brokerage teams.
3 48. According to industry reports and the public record, Compass's growth resulted
4 from its unlawful tactics, not from the development of in-house talent or technological
5 innovation.3 In fact, Compass's tactics have given rise to at least a dozen lawsuits containing
6 disturbing allegations of Compass's efforts to incite theft.4 Compass allegedly has gone so far as
7 to: (a) hack into the databases of its competitors; (b) conscript its competitors' employees to act
8 as double agents; and (c) falsely express interest in purchasing its competitors to gain access to
9 proprietary information, among other allegations.
10 49. Notwithstanding this trail of lawsuits alleging misconduct, Compass has now
11 directed its strategic focus to Washington State and Zillow; and, again, it has seemingly
12 determined that the cheapest and fastest way to build its business is by unlawfully poaching
13 competitors' employees to obtain access to proprietary trade secret information.
14 C. Compass's Late Entry Into Machine Learning
15 50. Compass admits, as it must, that it is late to use the power of machine learning
16 models and digital innovation in the real estate marketplace. It has publicly underscored its need
17 to better its machine learning and search relevance tools. Compass's efforts to develop its own
18 machine learning and search relevance technologies to integrate into its products for consumers
19
20 disrupting brokerage? A breakdown by the numbers, THE REAL DEAL (May 31, 2018),
https://therealdeal.com/2018/05/31/quantifying-brokerages-biggest-disruptors/ (noting that “Redfin, Zillow and
21 Compass have fueled a tech arms race and taken competition to a new level”).
3
E.B. Solomont, Covert Poaching Operations, THE REAL DEAL (Jan. 1, 2017),
22 https://therealdeal.com/issues_articles/covert-poaching-operations/; E.B. Solomont, Modern Spaces slaps Compass
with agent-poaching suit, THE REAL DEAL (Feb. 7, 2018), https://therealdeal.com/2018/02/07/modern-spaces-
23 slaps-compass-with-agent-poaching-suit/.
4
See, e.g., NRT New York LLC d/b/a Citi Habitats v. Urban Compass, Inc., Case No. 652462-2014 (Aug. 12, 2014,
24 N.Y. Sup. Ct.); NRT New York LLC d/b/a The Corcoran Group v. Urban Compass, Inc., Case No. 0650912-2015
(Oct. 13, 2015, N.Y. Sup. Ct.); Brown Harris Stevens of the Hamptons, LLC v. Reale and Urban Compass, Inc.,
25 Case No. 653693-2015 (Nov. 6, 2015, N.Y. Sup. Ct.); Saunders Ventures, Inc. v. Salem and Urban Compass, Inc.,
Case No. 2:15-cv-06925 (Dec. 6, 2015, E.D.N.Y.); Schwartz v. Urban Compass, Inc., Case No. 1:19-cv-340 (Feb.
26 11, 2019, D.D.C.).
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1 and agents, whether through organic development or acquisition, failed. In particular, Compass's
2 introduction of new tools for use by agents, including search features, was fraught with errors.
3 51. On December 4, 2018, Compass announced the appointment of Joseph Sirosh as
4 Chief Technology Officer, formerly Microsoft's Chief Technology Officer of Artificial
5 Intelligence, for the company's artificial intelligence efforts and to lead the build out of the
6 product and engineering hub in Seattle. With this addition, Compass announced it would become
7 the first-ever end-to-end platform for real estate.
8 D. The Compass Poach and Extract Model Against Zillow
9 52. Over the past two years, Compass has unlawfully hired a limited number of
10 important employees from Zillow, including Robert Chen, Zillow's Senior Director of Machine
11 Learning.
12 53. Compass has engaged in a systematic, unlawful campaign to target Zillow
13 employees to obtain Zillow trade secrets. On January 24, 2019, Compass hosted a private dinner
14 and reception in Seattle titled "The Future of Real Estate Technology" to recruit Zillow
15 employees with knowledge of artificial intelligence, machine learning and cloud computing.
16 54. Defendant Robert Chen, a high-level Zillow employee, worked at Zillow as its
17 Senior Director of Machine Learning Engineering before leaving Zillow for Compass in March
18 2019 to work with the Search Relevance Engineering team at Compass.
19 55. At Zillow, Mr. Chen signed a CIINNA containing confidentiality, non-
20 competition and non-disclosure clauses. This agreement remains in full force and effect, and
21 there has been no waiver requested by Mr. Chen or granted by Zillow. A copy is attached as
22 Exhibit A.
23 56. Also at Zillow, Mr. Chen was primarily responsible for the development and
24 implementation of Zillow's machine learning, including Zillow's Claim Your Home and
25 Personalization, Similar Home Recommendation, Zestimate® and Premier Agent® analytics
26 products. A central component of his role in the Machine Learning group was the
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1 implementation of AI to optimize the foregoing personalization and search functions. In order to
2 facilitate his work on these projects, Mr. Chen had intimate and extensive access to Zillow's
3 confidential information, proprietary technologies, strategic plans and other trade secrets.
4 57. Following Mr. Chen’s resignation, Zillow learned that Mr. Chen took screen shots
5 of proprietary trade secret information and deleted this information in the weeks before his
6 departure from Zillow, including proprietary wireframes and a proposed regional launch timeline
7 related to certain Zillow services. Moreover, on information and belief, Mr. Chen cleared his
8 browsing history on his last day at Zillow and then viewed the job posting for Machine Learning
9 Engineers at Compass. The Compass job description expressly included "platform and
10 infrastructure development in supporting machine learning applications in . . . Search." On
11 information and belief, Mr. Chen misappropriated Zillow’s proprietary trade secret information
12 for the benefit of Compass by, among other things, using this information in his new role at
13 Compass to provide Compass with valuable machine learning technologies that it could not
14 develop, purchase or lawfully gain by engaging in lawful business practices.
15 58. Upon information and belief, Mr. Chen used improper means to acquire this
16 information. Mr. Chen was aware that he acquired this information by improper means and that
17 Zillow would not consent to this disclosure because of the express terms of his CIINNA with
18 Zillow. Mr. Chen knew that his actions would constitute theft.
19 59. Moreover, even if Mr. Chen had never stolen from Zillow, because of the similar
20 (and potentially identical) nature of his work at Zillow and Compass, and the highly confidential
21 and proprietary nature of the Zillow information acquired by Mr. Chen in his role as Senior
22 Director of Machine Learning Engineering at Zillow, it is inevitable that Mr. Chen will use or
23 disclose Zillow's confidential, proprietary and trade secret information for the benefit of
24 Compass and to the detriment of Zillow. Specifically, Mr. Chen will be unable to perform even
25 the basic requirements of his job as a Search Relevance Engineer at Compass without making
26
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1 use of the know-how, Personal Algorithms, machine learning, and other confidential, proprietary
2 and trade secret technologies he developed and implemented at Zillow.
3 60. Compass knew that Defendant Chen was bound by the terms of his CIINNA with
4 Zillow, and that this agreement contained confidentiality and non-competition clauses. Compass
5 nevertheless induced him to violate these provisions to obtain Zillow's confidential machine
6 learning technologies, including search technologies and/or other trade secrets. Defendant Chen
7 unlawfully took Zillow trade secrets in the months, days and hours before his departure to
8 Compass in violation of his employment agreement and to benefit Compass. In so doing,
9 Compass successfully avoided the time and expense of developing its own technology.
10 61. It is readily evident that Compass acquired and sought to acquire Zillow
11 proprietary trade secret technology from Defendant Chen even though it knew that he would be
12 in breach of his employment agreement with Zillow and would acquire and/or had acquired
13 proprietary trade secret information by improper means and without the consent of Zillow. On
14 information and belief, Compass did not have a job description for his position when hiring Mr.
15 Chen and sought to hire him because of the nature of his role at Zillow.
16 62. Defendants' exploitation of stolen intellectual property greatly harms Zillow and
17 deforms what is a fair and competitive industry that provides increasing transparency in the real
18 estate market to consumers. Allowing Defendants' conduct to continue, and awarding monetary
19 compensation after the fact, may not sufficiently unravel the harm caused to Zillow directly and
20 indirectly by Defendants' conduct.
21 63. With respect to Zillow's trade secrets, there is also the threat that Zillow's
22 confidential and proprietary information will be disclosed by Defendant Chen, which will
23 destroy the trade secret value of the technology.
24 64. With this action, Zillow seeks to vindicate its rights, prevent any further misuse of
25 its confidential, proprietary and trade secret information, and obtain compensation for its
26 damages and for Defendants' unjust enrichment resulting from their unlawful conduct.
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1 V. CLAIMS FOR RELIEF
2 FIRST CLAIM FOR RELIEF

Federal Defense of Trade Secrets Act, 18 U.S.C. § 1836
3 (Against All Defendants)
4 65. Zillow re-alleges and incorporates by reference, as if fully set forth herein, all of
5 the preceding paragraphs.
6 66. Zillow owns and possesses certain confidential, proprietary and trade secret
7 information, as alleged above. The disputed trade secrets in this litigation include the machine
8 learning, search relevance and user personalization technologies related to Zillow's Claim Your
9 Home and Personalization, Similar Home Recommendation, Zestimate® and Premier Agent®
10 analytics and other algorithms, technological capabilities, financial data, initiatives, strategies
11 and know-how. Defendant Chen gained access to this proprietary trade secret information as a
12 result of his role as a high-level technologist at Zillow.
13 67. Defendants unlawfully misappropriated trade secrets owned by Zillow and used in
14 interstate commerce. Defendants knew that there was a requirement to maintain the
15 confidentiality of the disputed trade secrets and knew that they acquired the misappropriated
16 trade secrets by improper means including misrepresentation, theft and unfair business practices.
17 68. Specifically, Compass knowingly sought to acquire Zillow's trade secrets from
18 Defendant Chen even though it knew that it was acquiring the trade secrets through improper
19 means. Compass also knew that Defendant Chen used improper means to acquire confidential,
20 proprietary trade secret information from Zillow. Moreover, Compass induced Defendant Chen
21 to breach his contractual obligations to Zillow to maintain secrecy, with knowledge that it was
22 inducing this breach.
23 69. Defendant Chen unlawfully transferred proprietary trade secret information from
24 Zillow including, on information and belief, to his own private email account and to Compass in
25 direct violation of his CIINNA with Zillow.
26
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1 70. Zillow has taken reasonable and extensive measures to maintain the secrecy of its
2 confidential and proprietary trade secret information. Those measures include extensive
3 corporate policies limiting access to sensitive information; Zillow's use of confidential password
4 logins for company computers; and Zillow's requirement that all employees abide by the
5 confidentiality provisions included in their CIINNA with Zillow, among others.
6 71. Due to these security measures, Zillow's confidential and proprietary trade secret
7 information is not available for others in the real estate technology industry, or any other
8 industry, to use through any legitimate means. Moreover, Zillow's trade secrets are not generally
9 known, or readily ascertainable; nor could they be properly acquired or duplicated by others.
10 72. Zillow's confidential and proprietary trade secret information derives independent
11 economic value from not being generally known to, and not being readily ascertainable through
12 proper means by, another person who can obtain economic value from the disclosure or use of
13 the information. The confidentiality of these trade secrets has been critical to the success and
14 competitiveness of Zillow's business and products in the real estate market. Zillow has invested
15 and continues to invest significant economic resources into developing and refining its trade
16 secrets.
17 73. In addition to misappropriating Zillow's confidential, proprietary and trade secret
18 information, Defendant Chen has disclosed and/or will inevitably disclose Zillow's confidential,
19 proprietary and trade secret information, to Compass without Zillow's consent and to Zillow's
20 detriment due to the similar (and potentially identical) nature of his position at Zillow and
21 Compass and the nature of the disputed information. Zillow and Compass are direct competitors
22 in the niche real estate technology industry and both seek to simplify the home buying and
23 selling process. Compass expressly sought out Defendant Chen for a position he cannot perform
24 without using or disclosing Zillow's trade secrets. In so doing, Compass engaged in a calculated
25 strategy to obtain Zillow's confidential, proprietary trade secret information without its consent.
26
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1 74. At no time did Zillow consent to Defendants' improper acquisition, use or
2 disclosure of its trade secrets or confidential information for any purpose.
3 75. Moreover, Compass's act of hiring Defendant Chen to serve in a position that he
4 cannot perform without using or disclosing Zillow's trade secrets constitutes a threatened
5 misappropriation of Zillow's trade secrets.
6 76. Defendants' misappropriation of Zillow's confidential, proprietary and trade secret
7 information was intentional, knowing, willful, malicious, fraudulent and oppressive. Defendants
8 have also attempted and continue to attempt to conceal their misappropriation.
9 77. On information and belief, if Defendants are not enjoined, Defendants will
10 continue to misappropriate and use Zillow's trade secret information for their own unjust
11 enrichment and to Zillow's detriment.
12 78. As the direct and proximate result of Defendants' conduct, Zillow has suffered
13 and, if Defendants' conduct is not stopped, will continue to suffer severe harm, irreparable injury
14 and significant damages, in an amount to be proven at trial.
15 79. Because Zillow's remedy at law is inadequate, Zillow seeks, in addition to
16 damages, preliminary and permanent injunctive relief to recover and protect its confidential,
17 proprietary and trade secret information and to protect other legitimate business interests.
18 Zillow's business operates in a competitive industry and will continue suffering irreparable harm
19 absent injunctive relief.
20 80. Zillow has been damaged by all of the foregoing and is entitled to an award of
21 exemplary damages and attorney's fees.
22 SECOND CLAIM FOR RELIEF

Washington's Uniform Trade Secrets Act, RCW 19.108
26
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1 82. The trade secrets at issue in this cause of action consist of the confidential
2 information, compilations, programs, methods, techniques, know-how, technical information,
3 designs and processes known to Defendant Chen as a result of the role that he held as an
4 employee at Zillow.
5 83. Those trade secrets include, but are not limited to, information about Zillow's
6 machine learning services, products, algorithms, finances, budget, technological capabilities,
7 data content, products, initiatives, strategies, customer information, marketing and other aspects
8 of Zillow's business. None of these trade secrets have been disclosed to the public.
9 84. Each of these trade secrets derives independent economic value for Zillow from
10 the fact that they are not generally known to competitors of Zillow, including Defendant
11 Compass. Defendant Compass is one of Zillow's competitors because both Zillow and Compass
12 conduct business in the highly competitive real estate technology industry, and provide similar
13 app-based real estate services that seek to simplify the home buying and selling process.
14 Moreover, both companies are also involved in similar research and development efforts, most
15 notably in the fields of machine learning and artificial intelligence.
16 85. The trade secrets described above further guide Zillow's competitive efforts. Its
17 trade secrets are not reasonably ascertainable through proper means because they cannot be
18 determined through the reasonable examination of public knowledge. The fact that they are not
19 known to competitors provides Zillow with competitive advantages that translate into revenue
20 that would not be realized or would be decreased if the competitive actions of competitors like
21 Defendant Compass were also guided by the trade secrets.
22 86. These trade secrets are the subject of measures that are reasonable under the
23 circumstances to maintain their secrecy. Those measures include, but are not limited to, Zillow's
24 policy of limiting access to sensitive information; Zillow's use of confidential password logins
25 for company computers; and Zillow's requirement that all employees abide by the confidentiality
26 provisions included in their CIINNAs with Zillow.
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1 87. Defendant Chen misappropriated Zillow's trade secrets because he acquired them
2 by improper means. Through his actions, including his agreement to abide by the terms of his
3 CIINNA with Zillow, Defendant Chen led Zillow to believe that he would safeguard its trade
4 secrets. Because Zillow was misled by Defendant Chen, Zillow continued to supply him with
5 trade secrets.
6 88. Defendant Chen has further misappropriated Zillow's trade secrets because of the
7 nature of his employment with Compass, which is similar (and potentially identical) to his
8 employment with Zillow and will necessarily require that he disclose Zillow's trade secrets to
9 Compass and use them on Compass's behalf without express or implied consent from Zillow. If
10 Defendant Chen undertakes the tasks for which he was hired by Compass, the unauthorized
11 disclosure or use of Zillow's trade secrets, by Defendant Chen, is inevitable.
12 89. Defendant Chen acquired Zillow's trade secrets under circumstances giving rise to
13 a duty to maintain their secrecy. His duty to maintain secrecy arises from the fact that at the time
14 he acquired the trade secrets, he was an employee at Zillow, and a signatory to Zillow's CIINNA.
15 90. Compass also misappropriated Zillow's trade secrets because it acquired them
16 knowing, or with reason to know, that they were acquired by Defendant Chen through improper
17 means.
18 91. Defendants knew or should have known under the circumstances that the
19 information misappropriated by Defendants constituted trade secrets.
20 92. Defendants misappropriated and threaten to further misappropriate trade secrets at
21 least by acquiring trade secrets with knowledge of, or reason to know that, the trade secrets were
22 acquired by improper means, and Defendants are using and threatening to use the trade secrets
23 acquired by improper means without Zillow's knowledge or consent.
24 93. Moreover, Compass's act of hiring Defendant Chen to serve in a position that he
25 cannot perform without using or disclosing Zillow's trade secrets constitutes a threatened
26 misappropriation of Zillow's trade secrets.
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1 94. The misappropriation of trade secrets by Defendants has harmed and will
2 continue to harm Zillow because it provides Compass with a competitive advantage it would not
3 have in the absence of the misappropriation.
4 95. This advantage damages Zillow's reputation, goodwill and relationships with
5 customers and vendors, and financially damages Zillow.
6 96. As a direct and proximate result of Defendants' conduct, Zillow is threatened with
7 injury and has been injured in an amount in excess of the jurisdictional minimum of this Court
8 and that will be proven at trial. Zillow has also incurred, and will continue to incur, additional
9 damages, costs and expenses, including attorney's fees, as a result of Defendants'
10 misappropriation.
11 97. The aforementioned acts of Defendants were willful, malicious and fraudulent.
12 Zillow is therefore entitled to exemplary damages pursuant to RCW 19.108.030.
13 98. Defendants' conduct constitutes transgressions of a continuing nature for which
14 Zillow has no adequate remedy at law. Unless and until enjoined and restrained by order of this
15 Court, Defendants will continue to retain and use Zillow's trade secret information to unjustly
16 enrich themselves and divert business from Zillow.
17 99. Pursuant to RCW 19.108.020, Zillow is entitled to an injunction against the use,
18 misappropriation and continued threatened misappropriation of trade secrets as alleged herein
19 and further asks the Court to restrain Defendants from continuing an employment relationship
20 and/or using all trade secret information misappropriated from Zillow in any way.
21 100. Pursuant to RCW 19.108.040 and related laws, Zillow is entitled to an award of
22 attorney's fees for Defendants' misappropriation of trade secrets.
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1 THIRD CLAIM FOR RELIEF

Breach of Contract
2 (Against Defendant Chen)
5 102. As a condition of his employment with Zillow, Defendant Chen entered into a
6 valid and binding CIINNA with Zillow in which he promised that he would not compete with
7 Zillow or engage in employment with Zillow's competitors for a period of 12 months following
8 termination of his employment with Zillow, or disclose or use Zillow's confidential, proprietary
9 and/or trade secret information at any time other than for authorized Zillow business purposes.
10 103. Defendant Chen's agreement to the terms of Zillow's CIINNA created a binding
11 contract between Defendant Chen and Zillow.
12 104. Defendant Chen received sufficient consideration in exchange for entering into
13 his CIINNA with Zillow.
14 105. Zillow has fully performed its obligations under the terms of the CIINNA.
15 106. Defendant Chen's contract included the above-described non-competition clause
16 and non-disclosure clause.
17 107. Defendant Chen breached and will continue to breach his contractual obligations
18 under the CIINNA.
19 108. Defendant Chen breached his agreement with Zillow when he accepted
20 employment with Zillow's competitor—Defendant Compass—less than a year after resigning
21 from Zillow.
22 109. Defendant Chen further breached his contract with Zillow by accepting a position
23 at Compass which will necessitate the inevitable disclosure and use of Zillow's trade secrets and
24 confidential information.
25 110. On information and belief, Defendant Chen further breached his contract with
26 Zillow by transferring confidential and trade secret information from Zillow's servers, computers
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1 and/or records to his personal email without permission or license to do so, and proceeding to
2 use that confidential and trade secret information to Zillow's detriment by disclosing it to
3 Compass, Zillow's competitor.
4 111. Defendant Chen's breach of his contract has harmed and will continue to harm
5 Zillow because his breach provides Compass with a competitive advantage it would not have in
6 the absence of his breach. This advantage damages Zillow's reputation, goodwill and
7 relationships with customers and vendors, and damages Zillow financially.
8 112. Defendant Chen's conduct constitutes transgressions of a continuing nature for
9 which Zillow has no adequate remedy at law. Unless and until enjoined and restrained by order
10 of this Court, Defendant Chen will continue to violate the terms of his CIINNA to the detriment
11 of Zillow.
12 113. As a result of the foregoing, Zillow has been damaged in an amount to be
13 determined at trial, including, without limitation, the amounts that Zillow would have made but
14 for Defendant's misconduct, disgorgement of the compensation paid by Compass to Defendant
15 Chen, and disgorgement or compensatory damages in the amount of Defendant Compass's ill-
16 gotten gains.
17 FOURTH CLAIM FOR RELIEF

Breach of Implied Covenant of Good Faith and Fair Dealing
21 115. Defendant Chen's agreement to the terms of Zillow's CIINNA created a binding
22 contract between Defendant Chen and Zillow.
23 116. Zillow has fully performed its obligations under the CIINNA.
24 117. By virtue of his conduct, set forth above, Defendant Chen has breached, and
25 continues to breach, the covenant of good faith and fair dealing implied in his CIINNA.
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3 for Defendant's misconduct, disgorgement of the compensation paid by Compass to Defendant
5 gotten gains.
6 FIFTH CLAIM FOR RELIEF

Tortious Interference with Contractual Relations
7 (Against Defendant Compass)
10 120. Defendant Chen's agreement to the terms of Zillow's CIINNA created a valid,
11 binding contract between Defendant Chen and Zillow.
12 121. Zillow has fully performed its obligations under the CIINNA.
13 122. Defendant Chen breached and will continue to breach his contractual obligations
14 under the CIINNA.
15 123. Defendant Chen breached his agreement with Zillow when he accepted
16 employment with Zillow's competitor—Defendant Compass—less than a year after resigning his
17 employment with Zillow.
18 124. Defendant Chen further breached his contract with Zillow by accepting a position
19 with Compass, which has already resulted in or will necessitate the inevitable disclosure and use
20 of Zillow's trade secrets and confidential information.
21 125. Upon information and belief, before hiring Defendant Chen, Compass had
22 knowledge of his valid contractual obligations to Zillow. And, further, Compass has continued to
23 employ him even after Zillow informed Compass of the Defendant Chen's obligations under his
24 CIINNA.
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1 126. Notwithstanding that knowledge, Compass, with improper purpose and/or using
2 improper means, intentionally encouraged, induced, collaborated with, and otherwise facilitated
3 Defendant Chen's breach of his obligations under his CIINNA and termination of Defendant
4 Chen’s relationship with Zillow, as described above.
7 for Defendants' misconduct, disgorgement of the compensation paid by Compass to Defendant
9 gotten gains and punitive damages.
10 SIXTH CLAIM FOR RELIEF

Breach of Fiduciary Duty
14 129. As an employee at Zillow, Defendant Chen owed fiduciary duties to Zillow,
15 including duties of good faith and loyalty.
16 130. Defendant Chen acted in a manner inconsistent with his employment with Zillow,
17 and failed to exercise the utmost good faith and loyalty in the performance of his duties.
18 131. Specifically, Defendant Chen breached his fiduciary duties by seeking
19 employment with Zillow's competitor while still employed by Zillow.
20 132. Defendant Chen breached his fiduciary duties by choosing to damage Zillow and
21 benefit himself by accepting employment with Compass in a capacity that necessarily entails the
22 use and disclosure of Zillow's confidential information and other trade secrets.
23 133. Defendant Chen further breached his fiduciary duties by taking confidential and
24 proprietary information for use after employment with Zillow and in competition with Zillow.
25
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1 134. Defendant Chen's breach of his fiduciary duties has harmed and will continue to
2 harm Zillow because he provided Compass with a competitive advantage it would not have in
3 the absence of the breach. This advantage damages Zillow's reputation, goodwill, relationships
4 with customers and vendors, and damages Zillow financially.
7 for Defendants' misconduct, disgorgement of the compensation paid by Compass to Defendant
9 gotten gains.
10 SEVENTH CLAIM FOR RELIEF

Unjust Enrichment
14 137. By reason of their above-described conduct, Defendants caused damage to Zillow.
15 138. By misappropriating Zillow's confidential and proprietary information and
16 recruiting Zillow's employee in violation of his CIINNA with Zillow, Defendants incurred a
17 benefit from Zillow, to Zillow's detriment.
18 139. Defendants have appreciated that benefit. It has permitted them to make use of
19 and expand upon Zillow's industry know-how and relationships, as well as its innovative
20 advances in machine learning without incurring the expense of independently developing those
21 technologies or relationships themselves, or competing honestly for talented employees.
22 140. Defendants' acceptance and retention of the benefit is inequitable and unjust
23 because the benefit was obtained by Defendants through deceptive, unfair and unlawful means.
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1 141. Equity cannot in good conscience permit Defendants to be economically enriched
2 for its unjust actions at Zillow's expense and in violation of state law. Therefore, restitution or
3 disgorgement, or both, of such economic enrichment is required.
4 VI. PRAYER FOR RELIEF
7 143. Based on the foregoing, Zillow requests the following relief:
8 a. An award of damages in an amount to be determined at trial;
9 b. An award of preliminary injunctive relief to protect Zillow's trade secrets
10 and to prevent further actual, threatened and inevitable trade secret
11 misappropriation, breaches of fiduciary duty, and breaches of contract;
12 c. An award of permanent injunctive relief to protect Zillow's trade secrets
13 and to prevent further actual, threatened and inevitable trade secret
14 misappropriation, breach of fiduciary duty, and breach of contract and to
15 eliminate the commercial advantage that Defendant Chen and Compass
16 would otherwise derive from their unlawful misappropriation of Zillow's
17 trade secrets;
18 d. An award of attorney's fees, expenses and costs; and
19 e. Such other relief as the Court deems just and equitable.
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1 Dated this 19th day of April, 2019.

2 K&L GATES LLP
3 By s/ Pam K. Jacobson
By s/ Mark S. Filipini
4
Pam K. Jacobson, WSBA #31810
5 Mark S. Filipini, WSBA #32501
K&L GATES LLP
6 925 4th Ave., Suite 2900
Seattle, WA 98104
7 Phone: (206) 370-7605
pam.jacobson@klgates.com
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mark.filipini@klgates.com
9
Attorneys for Plaintiff Zillow, Inc.
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Zillow v. Compass (Fed.)

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Zillow v. Compass (Fed.)

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Case 2:19-cv-00592 Document 1 Filed 04/19/19 Page 1 of 29

7 UNITED STATES DISTRICT COURT

9 ZILLOW, INC., a Washington corporation,

12 URBAN COMPASS, INC., a Delaware

19 and Robert Ming-Yu Chen, hereby alleges as follows:

22 to several of Zillow’s highly sophisticated technology innovations. As a technology pioneer,

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5 independently developing valuable machine learning and other technologies.

13 purchasing its competitors to gain access to proprietary information.

19 and selling process. It then initiated a campaign to recruit Zillow employees.

20 5. A limited number of important Zillow employees left Zillow to join Compass,

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5 that he will disclose this proprietary information to Compass in his role.

9 systematic efforts to compete through misappropriation.

10 8. In light of Defendants' misconduct, Zillow brings this Complaint to prevent any

13 resulting from their unlawful conduct.

15 9. Plaintiff Zillow is a Washington corporation with its principal place of business

23 10. Defendant Compass Washington, LLC, is a Delaware limited liability company

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1 Information, Inventions, Non-Solicitation, and Non-Competition Agreement ("CIINNA") with

6 employees of its competitors, including Defendant Chen.

10 implementation of Zillow's machine learning technology. He now accepted a position at

11 Compass as its Director of Engineering in Seattle, Washington, with largely identical

12 responsibilities to those he had at Zillow.

13 III. JURISDICTION AND VENUE

21 herein took place, in substantial part, in this district.

25 registered to do business in this district.

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9 Western District of Washington, pursuant to 28 U.S.C. §§ 1391(b)(1) and (2).

13 IV. FACTS AND BACKGROUND

14 A. Zillow Transforms the Real Estate Marketplace

25 information, among other categories.

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1 21. Zillow's portfolio of websites and mobile applications displays information on

6 22. Search relevance and user personalization engineering is a critical component of

13 23. Notably, Zillow developed search relevance and user personalization

14 technologies, including Personalization Algorithms, to vastly improve the consumer experience

21 24. Zillow's Similar Home Recommendation System uses Personalization

24 Zillow users regarding homes in which they might be interested.

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3 the cornerstone of Zillow's success.

8 Zillow's proprietary technologies remain confidential, Zillow employees with access to

13 months after the conclusion of their employment with Zillow.

18 1. Claim Your Home and Personalization

24 verification, to update information about their home as shown below:

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2 description or by photograph. Moreover, each of these comparison factors may be of varying

7 user engagement in comparison to the less sophisticated systems of its competitors.

25 in an individual property's Zestimate® over the next 12 months.

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1 4. Premier Agent® Analytics

2 35. Zillow's implementation of its machine learning and search relevance

9 function is provided below:

21 competitive advantages to Zillow.

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1 B. Compass Competes With Zillow In The Niche Technology-Driven Residential

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24 real estate market.2

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1 47. Moreover, Compass CEO Reffkin openly refers to Zillow as a competitor,

2 including in meetings with Compass's brokerage teams.

9 proprietary information, among other allegations.

13 competitors' employees to obtain access to proprietary trade secret information.