Imagine being told the patents on which your business is based are not valid.
That’s the situation Charlotte-based LendingTree, created in the early days of the Internet to help consumers comparison shop for mortgages, found itself in 18 years after the company was started.
Four years ago, LendingTree sued a handful of competitors, including real estate website Zillow, claiming they infringed on patents for the method of matching borrowers with lenders over the Internet. In a setback for LendingTree, last month a federal jury said not only are its patents invalid, but also that the competitors did not infringe on them.
LendingTree has said it believes it has “strong grounds” to appeal. Doug Lebda, the 44-year-old CEO of parent company Tree.com, said appeals can’t be filed until the judge in the case issues final rulings.
Lebda founded LendingTree in 1996. He said he got the idea to make it easier for borrowers to shop around for mortgage rates when he bought a condominium in Pittsburgh and saw how hard it was to compare rates.
In 2002 and 2003, two patents for “Method and Computer Network for Co-Ordinating a Loan over the Internet” were awarded to LendingTree. The patents listed Lebda and his former chief technology officer, Richard Stiegler, as the inventors.
LendingTree filed its lawsuit in 2010. It has settled with defendants Quinstreet and LeadPoint. Besides Zillow, the two remaining defendants in the suit are Adchemy and NexTag.
Industry observers say if LendingTree loses the legal fight, it will face more competitors. If that happens, Lebda said, he’s confident the strength of LendingTree’s brand name and service will help it keep winning business. He also said the patents are set to expire in four years, anyway.
Tree.com has expanded over the years to match consumers with other types of lenders, such as ones offering auto loans. Last year, the company began allowing consumers to shop for reverse mortgages on Lendingtree.com, added the ability to comparison shop for credit cards and relaunched its personal loan product. Tree.com makes money from selling leads to various lenders.
The company employs 189 between its offices in Burlingame, Calif., its headquarters in Ballantyne and people working remotely. The company had as many as 900 employees in 2010, but that has fallen in part after it sold its mortgage origination operation in 2012.
Lebda, who lives in Dilworth, spoke to the Observer this week about defending patents and how the company is doing overall. He said he could not discuss specifics about the pending litigation. His comments have been edited for brevity and clarity.
Know that a patent is ... a useful shield but it’s not the end-all-be-all. At the end of the day, running your business is a more important factor than having a patent. Even if you get a patent, you still have to defend a patent. It’s not necessarily something that can keep people out of your business forever, and there’s ways to design around it. You can design around a patent and do it slightly differently.
In addition to that, the other market dynamic that we’re seeing is credit is starting to loosen a little bit. We’re seeing average credit scores going from 720 to 680. The pendulum really swung to the point of credit standards being too strict, and now I think they’re swinging back.
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