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San Francisco online real estate company Trulia has filed its initial response to Zillow’s patent lawsuit, arguing that the case should be dismissed because the business method in question — Zillow’s online home valuation tool known as the Zestimate — is not patentable.

The Zestimate utilizes multiple factors in order to assign automated home values to millions of homes across the U.S., with many disputing the accuracy of the results. In June of last year, Zillow received patent number 7,970,674 on the technology. But Trulia is now calling into question the patent itself in the latest squabble between the two rivals.

“Abstract ideas and principles are not patentable…” Trulia wrote in its motion filed December 19th.  “An abstract idea is exactly, and exclusively, what is claimed in the ’674 patent…. Asking a homeowner for information about the home and using it to refine a valuation consists entirely of mental processes, which the Supreme Court and Federal Circuit have maintained do not meet the eligibility requirements of Section 101.” That section sets guidelines on what is and what is not patentable, and Trulia’s attorneys are of the belief that the Zestimate patent doesn’t meet the bar.

Citing previous case law, Trulia argues that business methods are unpatentable if the “method steps can be performed in the human mind, or by a human using a pen and paper.”

“Methods which can be performed entirely in the human mind are unpatentable not because there is anything wrong with claiming mental steps as part of a process containing non-mental steps but rather because computational methods which  can be performed entirely in the human mind are the types of methods that embody the ‘basic tools of scientific and technological work’ that are free to all men and reserved exclusively to none.’”

The case has taken on added meaning since Zillow filed the suit just a few days after Trulia started meeting with institutional investors as part of the “road show” leading up to an initial public offering, which Trulia completed in September. In fact, the timing of the suit was called out in Trulia’s motion, with the company noting that the home valuation tool in question had already been in use on Trulia’s Web site for more than a year.

Bitter rivals for years, the suit marks the first time that the heated competition has spilled into a federal courtroom. In its September 12th complaint, Seattle-based Zillow labeled Trulia a copycat.

“Trulia’s blatant and ongoing copying of Zillow’s innovative approach to home valuation infringes Zillow’s patent and Zillow is entitled to damages and an injunction against further infringement,” attorneys for Zillow wrote.

Zillow has until January 7th to respond to Trulia’s motion to dismiss, though attorneys for both sides have requested extending the deadline to January 21st in order to accommodate holiday and vacation schedules. A joint status report and discovery plan is due January 29th, though an extended deadline also has been requested in that matter to February 12th.

Meanwhile, the shares of both companies have been hammered in recent weeks. Trulia is off 33 percent since going public, while shares of Zillow have fallen 39 percent in the past three months. (Shares of Zillow, now at $28, are still trading above its $20 IPO price from July 2011).

A spokeswoman for Zillow declined to comment on Trulia’s motion to dismiss.

Here’s the full motion as filed by Trulia:

Trulia motion to dismiss Zillow suit

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