A patent appeals court has revived (PDF) one of the nation's most controversial patent lawsuits—one that looked to be over in January 2012. Originally filed in 2007, Move, Inc. v. Real Estate Alliance Ltd. involves a patent that has become infamous in real estate circles: US Patent No. 5,032,989, issued to Mark Tornetta back in 1991. Tornetta and his lawyers say the patent covers just about any use of a real estate map online that has a "graphical interface" and "drill-down features." Since online maps are ubiquitous in the real estate market, Tornetta and his lawyers believe they're owed money by just about every real estate agent or service in the nation.

"It is a very broad-based patent," said Louis Solomon, the attorney representing Tornetta. "We are seeking reasonable royalties that conservatively run into the hundreds of millions, plus interest. Given that the Federal Circuit has significantly expanded the liable parties, the damages will go up significantly."

Litigation involving the '989 patent began back in 1998 when inventor Mark Tornetta sued Microsoft, which at that time owned HomeAdvisor. Tornetta sued MapQuest that same year. Ultimately, he had to drop both lawsuits because he didn't have the money to see the cases through.

In 2002, he joined together with some partners to create Real Estate Advisors, Ltd. (REAL), the patent-holding company that's now doing battle with the nations' one million Realtors. The '989 patent has expired, but the law allows patent holders to sue for several years of back damages.

REAL's early history is colorful. Tornetta cofounded the company in 2002 with a man named Bernard Jay Bagdis, a Pennsylvania attorney and "anti-tax" crusader who served as CEO. Bagdis resigned from the company in 2004, shortly after he found out he was the subject of a federal investigation. He was convicted of a massive tax fraud in 2009 and today is incarcerated in a medium-security prison in central Pennsylvania.

Tornetta's family has been in real estate for generations, according to a 2007 profile in a real estate trade publication. But he got into coding rather than selling property, and he says he produced "dramatic change" in the industry:

I was trying to develop a technology that would turn the location aspect of real estate into a valuable computerized search tool. It was hard back then to get people in the business to believe that this was going to become a standard practice. I believed in it enough to strike out on my own and take a graveyard shift in a local hospital so that I could spend days writing the code for my software, but still have enough money to pay the expenses of filing for my patent.

A lawsuit makes Realtors wonder: “How scared should you be?”

In 2005, REAL filed a lawsuit against a target that got widespread interest: an ordinary real estate agent. Diane Sarkisian, a Pennsylvania Realtor, was a subscriber to a multiple listing service which offered online mapping tools, the same as thousands of other Realtors.

The lawsuit against Sarkisian got the industry's attention in a big way. "Mapping Patent Holder Sues Realtor—How Scared Should You Be?" read a 2005 headline in Realty Times. "They've decided they can't take the big fish to court, they are going after the little fish—the agents," said one industry source in that article. "All it takes is for one agent to write them a check, and they could go after every agent in the country."

That's essentially what is happening now. Rather than wait for REAL to sue agents as it pleased, in 2007 the National Association of Realtors (NAR) filed a lawsuit to invalidate Tornetta's real-estate mapping patent, together with Move.com and the National Association of Home Builders. Tornetta and REAL sued back, initiating the "all-in" patent battle Realtors had been watching for. The lawsuit against Sarkisian was stayed pending resolution of the NAR suit and is still on hold.

REAL not only sued NAR and the home builders—it also sued listing services in multiple states, a few more individual real estate agents, and creators of software tools for Realtors, like iHomefinder and Birdview. The full list of defendants is in this week's order.

Few, if any, of the defendants make their own mapping software. Move.com, for instance, uses maps provided by Microsoft's Bing. But patent laws allow a patent-holder to sue anyone who makes, sells, or uses a patented item. In this case, it's the real estate companies, together with their users, who are alleged to be "jointly infringing" the patent.

Infringing together: “Joint infringement” gives new life to case

After two years of litigation, REAL suffered a setback when the US District Judge George King read the claims of the patent in a way that favored the Realtors. But King's construction was overturned on appeal in 2009. When he got the case back, King ruled again in favor of the Realtors and Move.com, finding that they still didn't infringe under the new construction.

The patent includes language about "selecting" parts of maps and drilling down into them. Since sites like Move.com don't do the "selecting"—that's up to the user—they didn't directly infringe.

Now the district court judge has been overturned for a second time by a panel of appeals judges, who ordered him to consider whether websites are "inducing" infringement by users. Move.com and a user together might be engaged in what's called "joint infringement," a theory that was recently expanded by the nation's top patent court. In August 2012, about eight months after King's ruling in the REAL case, the Federal Circuit decided Akamai v. Limelight. In that case, the full Federal Circuit decided that patent infringement can occur even in cases where no single party performs all the steps of a patent.

REAL's lawyers also asked for a new judge to hear the case, arguing that Judge King, who has already ruled twice against them, would just reimpose the same claim construction again. "Quite simply, nothing about the District Court’s handling of this case has indicated that the district judge has an open mind and is prepared to consider REAL’s arguments properly on the merits," wrote REAL lawyers on appeal. The appeals judges dismissed that in a few sentences at the end of this week's order, though, finding the accusations "wholly without merit."

Despite losing the argument about reassigning the judge, the appeal ruling is great news for Solomon and his client.

"It used to be that somebody had to do all the steps [of the patent]," explained Solomon in an interview with Ars. "In a case like this—where they've deliberately tried to separate out the steps, so they can avoid infringement—the [appeals] court has said, we're still going to let you sue for inducement."

REAL cofounder: A tax fraudster who hid $24 million from IRS

Tornetta founded Real Estate Alliance together with an attorney named Bernard Jay Bagdis, whom he'd known since the 1980s. Bagdis was installed as CEO when the company was founded in 2002. He owned 17 percent of the company's stock. The lawyer who prosecuted Tornetta's patent at the patent office, Lawrence Husick, was also an investor.

While Bagdis was eager to use the US patent system to get rich, he didn't seem to have any intention of sharing his gains with the IRS.

Bagdis, who had two degrees from Princeton University as well as a law degree from Temple University, stopped filing his own federal tax return in 1990. He started to describe himself as a member of the "anti-tax underground" and helped others avoid taxation too, leading to a federal investigation. At one point, Bagdis allegedly bragged, "I'm working on my new book, it's called Federal Tax Fraud, the User's Guide."

Bagdis ultimately hid more than $23 million from the IRS. In 2007, he was indicted. A jury convicted him in 2009, and he was ultimately sentenced to 10 years in prison.

"This was not a garden-variety case of a taxpayer cheating the government," said a federal prosecutor before his sentencing. "This is a case of an attorney systematically cheating the government, engendering the belief that the tax system is a game."

A few months after he was incarcerated, defense lawyers in the Move v. REAL patent case told the judge they'd need permission to do a jailhouse deposition of Bagdis. In September 2009, Frank Smith, a lawyer representing the Realtors and Move Inc., went down to Northern Neck Regional Jail in Warsaw, Virginia, where he grilled the tax-cheating lawyer for more than six hours about his plans to make money off the real estate "mapping patent."

During the deposition, Bagdis described how he met Tornetta in the 1980s. He helped him publicize his software, then called "WORKPLACE," which included mapping software. Defense attorneys were interested in Workplace because it pre-dated Tornetta's patents and thus could have invalidated them. But Bagdis testified that Workplace was never "fully operational."

As early as 1997, Tornetta was sending out letters to the Realtors' group saying that the Realtor.com website may be infringing his patents. Bagdis testified that in 1998, he actually met with Bill Gates of Microsoft—face to face—to discuss Tornetta's patents. Ultimately that lawsuit was dropped. In Bagdis' view, that was because Microsoft took its HomeAdvisor site down. "I believe they respected the patents and realized they were infringing," said Bagdis.

The lawyer resigned from REAL in 2004, when he was under federal investigation.

REAL attorney Solomon didn't have much to say about Bagdis, who left the company long ago and has never been his client. He remains focused on the fact that his client, who has since moved to Florida, will finally get his day in court.

Tornetta has moved from Pennsylvania to Florida, where "he's still kind of inventing and watching over the inventions he has," according to Solomon.

"The industry had notice of this patent a long time ago," he added. "They're doing everything they can to keep it from getting to trial. Now, we'll hopefully get a jury of our peers to decide whether we're right or they're right."