Image: Heritage

Towards the end of 2016, Christie’s “sent an email to its customers inviting them to subscribe to an innovative and easy-to-use database,” one that would revolutionize the age-old art of auctions. Thanks to the highly secure database service, called “Collectrium Market Data Beta,” Christie’s clients could search, track, and manage “more than 10 million” auction items – from Prince’s electric yellow guitar and record-breaking exotic croc-skinned Hermès Birkin bags to Old Masters paintings and buzzy modern works of art – like never before. They could do it in real time, from anywhere in the world, and right from their smartphones.

The problem with the ground-breaking new tool that Christie’s was busy touting to wealthy collectors across the globe? According to rival Heritage Auctions, the data upon which the Collectrium service was based had been stolen, and it had been stolen from them.

“The only thing ‘exceptional’ about the content being provided by Collectrium – the now-defunct tech startup that Christie’s acquired in 2015 for a reported $16 million to $25 million – is the manner in which Christie’s compiled it,” Heritage declared in the $50 million lawsuit it filed in a Texas federal court in December 2016.

“Through surreptitious and unlawful theft,” Christie’s – the world’s largest fine arts auction house – and its subsidiary Collectrium “stole huge volumes of proprietary and copyrighted auction data, photographs and text from [Heritage’s] servers,” the nearly 45-year old Heritage alleged. To be exact, Heritage put the number of stolen data points at nearly 3 million, and characterized the scheme as part of a larger effort to raid Heritage of its competitive edge.

In light of a dearth of interest among younger generations in auctions, Christie’s was looking for new ways to entice new consumers to its website, and thus, its auctions, and Heritage had it. “Every time Christie’s sees that Heritage has a good thing going, they decide to steal it for themselves,” counsel for Heritage, Armen Vartian, said at the time.

Vartian was not only referring to the case at hand. The comment was also a nod to an already-underway case between the two auction houses that Heritage filed not even two years prior, accusing Christie’s – which is owned by Groupe Artémis, the holding company of François-Henri Pinault, the chairman of Kering, the luxury goods conglomerate that owns Gucci, Balenciaga, and Saint – of poaching its entire luxury accessories team to launch its own copycat division. In doing so, Christie’s allegedly co-opted upwards of $40 million in propriety – and highly confidential – information. (That case settled following the first day of trial in September 2018).

In the more recently-filed case, Heritage claimed that Christie’s and Collectrium, seeking a way to engage modern-day collectors, dreamt up a database, one that would require them to compile millions of auction listings to make available to Christie’s customers. So, they concocted an elaborate plan to hack Heritage’s website and install “spider” software to access, copy, and steal the millions of listings that Heritage displays at a superhuman speed without anyone at Heritage even noticing, and that is precisely what the defendants did beginning in March 2016.

However, their ploy did not go exactly as they had hoped, as in late 2016, a spike in traffic to Heritage’s website – an influx of hundreds of thousands of page views in mere hours over the course of a week – raised a red flag for Heritage’s IT team.  While Dallas-based Heritage initially experienced difficulty discerning the sources of the sheer flood of activity, it eventually identified the nature of the behavior and traced it to specific accounts: spiders were “stealing the copyrighted descriptions and images of items sold in past [Heritage] auctions” – and those spiders originated from 31 different accounts.

In an 18-hour period, an account registered to Jason Bourne from Kathmandu, Nepal accessed the website more than 131,000 times. Another account, which was registered to Leanne Wise of Boiling Springs, South Carolina, “accessed the website over 186,000 times” over a similar period of time, Heritage asserted in its complaint.

Unlike the account of Mr. Bourne, though, a clear reference to the main character in Robert Ludlum’s The Bourne Trilogy series, not all of the accounts being used to steal information from Heritage’s site were purely fictional. Leanne Wise, for instance, is a real person. The defendants were utilizing the name of a middle-aged woman with direct ties to Boiling Springs, South Carolina, who – by all accounts – had no knowledge that her name and location were being used for such nefarious purposes.

After pin-pointing the individual accounts at issue, Heritage’s team discovered something striking: all of the 31 spider-infested accounts “had been set up from the same computer as another [existing Heritage Auctions] account,” an account created in the name of David La Cross. Like Ms. Wise, that was also not a fictional name. It was the name of the Director of Product Development at Collectrium. A bit more digging revealed that the La Cross account was “accessing [Heritage’s website] using an IP address associated with Christie’s.”

According to Heritage’s 2016 complaint, Christie’s and Collectrium were on the hook for unfair competition, conspiracy, trespassing, “harmful access by computer” (a Texas state law claim), federal copyright infringement, and violations of the Digital Millennium Copyright Act and the Computer Fraud and Abuse Act in connection with its quest to steal the proprietary content, which Heritage had “invested substantial time and more than $20 million over many years in developing.”

Citing a provision in Heritage’s website user agreement, which states that any dispute arising from use of the website “shall be presented in confidential binding arbitration,” Christie’s and Collectrium wasted no time demanding that the matter be handled by way of private arbitration, and the court agreed, dismissing the case in early 2017.

But the case was hardly over.

Heritage refiled its complaint against Christie’s and Collectrium with alternative dispute resolution service JAMS, and the parties embarked upon arbitration proceedings – during which Christie’s and Collctrium did not deny that Collectrium posted Heritage listing images and descriptions on its website, but argued that such use did not run afoul of the law. The defendants attempted to rebut the validity of Heritage’s copyright registrations, and further argued that even if its registrations were, in fact, above-board, their use of the copyright-protected information fell under the fair use defense.

Arbitrator James Ware’s February 2019 decision was a mixed bag. In an 81-page Partial Final Award, the retired federal judge-turned-arbitrator found that Collectrium had “acted in ‘bad faith’ in obtaining the copyrighted works of Heritage,” and asserted that “Collectrium’s purpose in copying Heritage materials was for commercial gain.” Indeed, he asserted, “the evidence shows that Collectrium was able to provide to its sister corporation, Christie’s, some initial scraped data in exchange for money.”

He further determined that Collectrium had “acted in ‘bad faith’ in obtaining the copyrighted works of Heritage,” and asserted that “Collectrium’s purpose in copying Heritage materials was for commercial gain.” Indeed, he asserted, “the evidence shows that Collectrium was able to provide to its sister corporation, Christie’s, some initial scraped data in exchange for money.”

More than that, though, Ware stated that Collectrium engaged in 1,755 violations of the Digital Millennium Copyright Act by way of how it accessed the copyright-protected information on Heritage’s website. Ware asserted that Heritage had in place an array of  measures to try to identify and prevent the use of scraping technology, and Collectrium utilized tactics and technology to specifically bypass those measures in violation of the DMCA, and “Collectrium’s efforts to circumvent Heritage’s technological barriers were ‘willful,’” the arbitrator determined.

Heritage did not prevail on all of its DMCA claims, though. The arbitrator rejected its claim that the defendants removed or falsified Heritage’s copyright management information from the stolen imagery, text, and other copyright-protected materials, and replaced it with their own copyright notice information. Heritage argued that every “scraped” page maintained Heritage copyright notice, but Judge Ware was not persuaded, concluding that the copyright notice not specific enough about what exact parts of the individual Heritage website pages were protected by copyright.

In terms of violations of the Copyright Act for infringement, Judge Ware found that Heritage maintains copyright protection its listing – albeit “thin” protection because the imagery and text is primarily factual as opposed to creative or expressive, and “has valid copyright registrations [for the content at issue].” However, while “Collectrium infringed upon those registrations,” per Ware, he pointed to the transformative use that Collectrium made of the stolen data (namely, its incorporation of the images and text it into a larger database that was indexed, sortable, and useful in analyzing sale prices and trends).

Such transformative use of the copyright protected materials, according to Ware, is “protected by the fair use doctrine,” thereby, shielding Collectrium from copyright infringement liability. The company also dodged liability for trespass, unfair competition, and civil conspiracy, which were dismissed.

As for Christie’s liability, the arbitrator asserted that Heritage “failed to prove Christie’s Inc.’s liability either directly or through theories of contributory infringement or vicarious liability or other theories for any of the claims [it] asserted.”

With the foregoing in mind, Judge Ware proposed that Collectrium should pay $1,760,001 to Heritage. That sum – which came mostly from the $1,000 award for each of the 1,755 violations of the Digital Millennium Copyright Act – was relatively low (a fraction of the $50 million or so that Heritage initially sought) because the arbitrator found that in connection with at least one of its claims, Heritage failed to provide proof of specific monetary damages.

Fast forward to March 2019 and Heritage returned to the Texas federal court where it first filed suit to confirm the January arbitration award, in which Judge Ware awarded Heritage damages in the amount of just under $2 million, plus more than $500,000 in attorney’s fees. The damages figure, which comes in the form of a settlement, was confirmed by the federal court in June and key documents, including the arbitrator’s decision, were unsealed in July, thereby bringing the parties 2-year long legal fight to an end.

Given the nuances in the arbitrator’s findings, both parties have claimed victory. The defendants are reveling in Christie’s total avoidance of liability and Collectrium’s large-scale ability to sidestep the majority of Heritage’s claims, despite Ware’s finding that Collectrium knowingly violated Heritage’s user agreement – which explicitly prohibited activities conducted by the spider software program, including database scraping or copying content for commercial purposes – and infringed its copyrights.

Heritage CEO Steve Ivy told Artnet that Heritage walked away with wins of its own: “The arbitrator’s actions, both in finding in favor of Heritage Auctions on the crucial issues and awarding Heritage Auctions most of its attorney’s fees for bringing the case will likely send a strong signal to others with similar bad intentions.”

As of now, Collectrium, despite Heritage’s assertion that its is defunct, appears to still be up-and-running, albeit without the nearly 3 million listings it stole from Heritage.